Terrance Heath

The Bain of Health Care

Filed By Terrance Heath | July 24, 2012 12:00 PM | comments

Filed in: Politics
Tags: American health care system, Bain Capital, Dana Blum, Mitt Romney, vulture capitalist

Unless you’ve been off the planet for the better part of this year, you’ve heard all about Mitt Romney’s vulture capitalist career at the helm of Bain Capital — the private equity firm founded by Romney, where he gained the experience he touts as his chief qualification for the presidency. Thumbnail image for romney-mitt-caricature.jpgYou’ve heard about how Romney pioneered the practice of offshoring while at Bain, made millions sending more jobs to China than he created here, and made even more money by investing in Chinese firms that benefited from the offshoring of American jobs.

You’ve also heard how the jobs Romney takes credit for creating are low-paying jobs with no pathway to middle class living. You’ve heard about the closed factories and laid-off workers. If you’ve been reading here for a while, you get that private equity sounds like a business play by Tony Soprano: cheat main street and get rich.

Now imagine Bain Capital running your health care, or even your child’s care. Imagine Bain capitalism as the basis for our health care system.

You don’t have to imagine, actually. It turns out that Bain Capital has already got a tentacle or two wrapped around health care. Art Levine has dug into the history of one Bain Capital venture in health care, and has posted a harrowing account of the outcomes for six childen in the care of facilities ultimately owned by Bain Capital. 

Levin begins with the story of Dana Blum, a widowed mother who sent her son Brendan — a 14-year-old boy with Asperger’s Syndrome — to Youth Care, a Salt Lake City residential program for troubled kids. Facility’s name — Youth Care — would become sadly ironic when Blum learned of the conditions and circumstances surrounding her son’s death at Youth Care.

Brendan, a 14-year-old boy with Asperger’s syndrome, had been extremely aggressive for years; he was even arrested a few times after attacking members of his family. Local therapists hadn’t helped, and six months after her husband died, Dana was frantically casting about for solutions. A consultation with UCLA’s neuropsychiatric unit convinced her that Youth Care’s therapeutic and educational program would finally make a difference.

Four months into his stay there, Brendan had earned a reputation as a temper-prone student who tried to shirk his obligations. So on the afternoon of June 27, when he complained to medical staff that he felt very sick, as if something were “crawling around” in his stomach, his concerns were dismissed. After 11 p.m., he woke up, complaining of stomach pain, and defecated in his pants. The on-duty monitors took him to the Purple Room, a makeshift isolation room used to segregate misbehaving students. There, he suffered a long night of agony, howling in pain and repeatedly vomiting and soiling himself. According to court transcripts and police reports, the two poorly paid monitors on duty did little more than offer him water, Sprite and Pepto-Bismol. They never telephoned the on-call nurse and waited until nearly 2 a.m. to contact the on-call supervisor, only to leave a voicemail. There was little else they felt they could do — Youth Care’s protocol on emergency services meant they were too low on the totem pole to call 911 themselves.

“They didn’t trust our judgment in emergency situations,” explains Josh Randall, a former Youth Care residential monitor, who wasn’t on duty that night. “If you’re working for $9.50 an hour on the graveyard shift, you don’t want to buck the system.” At any rate, the monitors had little expertise in how to respond — it was an entry-level job requiring only a GED, plus a CPR and safety course overseen by Youth Care itself.

When the morning staff arrived at 7 a.m., they discovered Brendan facedown on the floor of the Purple Room, his body already stiff with rigor mortis. The state’s chief medical examiner later determined that Blum had died of a twisted-bowel infarction, which requires emergency surgical intervention.

Blum —who paid $15,000 for her son’s care, with the help insurance and the school district — of filed a wrongful death suit against Youth Care and it’s parent company, Aspen Care.

It makes for disturbing reading, even without the private equity angle. 

Levine writes that the failure at Youth Care wasn’t due to a few careless workers, and Salon’s investigation uncovered more allegations of abuse and negligence at 10 treatment centers for adult addicts and “troubled teens,” which largely escaped notice due to lax state regulations.The centers all had one thing in common. They were all owned by Aspen Care’s parent company, CRC.

Court documents and ex-staffers also allege that such incidents reflect, in part, a broader corporate culture at Aspen’s owner, CRC Health Group, a leading national chain of treatment centers. Lawsuits and critics have claimed that CRC prizes profits, and the avoidance of outside scrutiny, over the health and safety of its clients. (We sent specific questions on these basic allegations to CRC and owner Bain Capital. CRC would answer only general questions; Bain did not reply.)

And CRC’s corporate culture, in turn, reflects the attitudes and financial imperatives of Bain Capital, the private equity firm founded by Mitt Romney. (The Romney campaign also did not reply to written questions.) Bain is known for its relentless obsession with maximizing shareholder value and revenues. Indeed, this has become a talking point of late on the Romney campaign trail; he bragged to Fox in late May that “80 percent of them [Bain investments] grew their revenues.” CRC, a fast-growing company then in the lucrative field of drug treatment, was perhaps a natural fit when Bain acquired it for $720 million in 2006. In conversations with staff and patients who spent time at CRC facilities since the takeover, there are suggestions that the Bain approach has had its effects. “If you look at their daily profit numbers compared to what they charge,” Dana Blum said of CRC’s Aspen division in 2009, “it’s obscene.” That point, ironically enough, was underscored by the glowing reports in the trade press about its profitability.

Read the entire article for the full picture of the Bain Capital approach to health care, and what happened when “[t]he CRC acquisition immediately made Bain owner of the largest collection of addiction treatment facilities in the nation,” inspiring Bain to go a revenue-boosting binge, gobbling up treatment centers, raising fees, and expanding its client base while keeping staffing costs as low as possible. 

It’s the same private equity health care model I wrote about after watching a Frontline show about private equity’s 

The private equity recipe is to set up corporate dental clinics in areas where people can’t afford to go to the dentist, staffed by people who are not formally trained dentists, who recommend more work than a patient really needs — like a complete exam for a patient who needs two teeth pulled, or extracting all the teeth of a patient who just had a toothache in one — for more than the patient can possibly pay. Then, the patients are handed off to managers who set them up with special “health-care credit cards.”

That’s when the real trouble starts. Via their “health care credit cards,” patients are charged for procedures they not only didn’t need in the first place, but that haven’t even been done yet. And the interest starts racking up immediately. If you can’t afford to go to a dentist in the first place, you probably can’t afford this either. You can imagine what happens. What was a relatively minor dental problem becomes a massive total-mouth makeover, with a price tag in the thousands, and that gets even bigger as interest racks up.

  1. America, this is your “market-based” health care solution. It’s pretty simple.
  2. Set up shop in an area where people don’t have access to and/or can’t afford dental care
  3. Recommend expensive procedures they don’t even need. (Charge extra for things like toothbrushes and mouthwash.)
  4. Sign them up for credit cards they also can’t afford. (Reassure them that these are “no-interest” credit cards, but don’t tell them about the penalties — nearly 30% interest on the entire amount — if they miss payments.)
  5. Profit.

Think of it as combining dentistry with payday loans and you get the picture. Better yet, think of it as a subprime mortgage for your mouth.
Oh, and it’s entirely unregulated.

And what’s wrong with that? It’s so simple even a congressional Republican can figure if out.

That’s the problem with applying a “market-based solution” to a problem like health care. I can’t explain it any better than Republican Senator Chuck Grassley.

But Sen. Charles Grassley, a Republican from Iowa, questions whether dentists at corporate dental chains are free from corporate pressures to maximize profits. Grassley, the ranking member of the Senate Finance Committee, wouldn’t speak about Aspen Dental specifically, but he’s had committee investigators looking into the company and other private-equity-owned chains for months.

“Because when private equity firms get involved,” Grassley explained, “you got to understand that their motivation is to make money. And they are not dentists. And dentists ought to make the determination ’ of what is good for the teeth.’ Not some private equity manager in Wall Street.”

The problem is that there are populations that need services, but there’s no profit to be made in serving them. There are services that we as a country, at least until recently, have agreed that people should receive whether there’s a profit to be made or not. Health care is one of them. “Market-based” solutions require profit, and the only way to make a profit serving these populations is to overcharge, under-serve, or both.

If you want to know what kind of solutions Republicans have in mind, if the Supreme Court eviscerates the ACA, take a look at this Frontline piece.

Republicans haven’t bothered to present a plan to “replace” the health care reform legislation they’ve voted 33 times to repeal, and have no intention to “replace” it. MItt Romney has no health care plan, other than to let the “free market” work its magic, as it did for the children who were neglected, abused, and sometimes died in treatment centers ultimately owned by Bain Capital, while the private equity firm, its investors, and its founder profited handsomely. 

Will the Bain Capital model of health care become the Bain of America’s health care system? 

Tune in after November 6th, and find out.

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