The Jaws of Private Equity Are Slavering for Canadian Health Service Businesses
International private equity has its eyes on Canadian medical services not covered by the country’s national health care program.
Karl Marx was right. Over time, capital concentrates and centralizes, the effect of which is to produce monopolies. What devotees of the free market expect from their preferred economic system is competition that ensures the best firms survive and the weakest fall off, producing an efficient system that allocates goods and services where they’re needed. If more supply is needed, a firm will emerge to provide it. The market is also meant to keep costs down. Costs too high? A new entrant will compete with the old at a lower rate and displace or correct it. Fairy tales are made of this.
In Canada, private equity (PE) money is busy these days. As the Globe and Mail reports, “major corporate players” are at work in human and nonhuman medicine: “Fuelled by international private equity funds, consolidating firms have been on a tear in other health-professional industries as well, buying up practices in fields such as veterinary medicine, dental care, optometry and pharmacies and assembling them into chains.” Capital scoops up practices, whose practitioners are leaving the field or who stay on to work for their purchaser, enjoying “back-office support through the firm’s technology and staff, help with marketing, and reduced management responsibilities.”
We know what a market monopoly or oligopoly produces: higher prices and poor service, in health care and outside of it. In a constrained field such as the one in which health-professionals work, smaller competitors stand little chance against well-capitalized corporate oligarchs. Chains may battle against one another — at least on the surface they’ll appear to — but monopolies and oligopolies are happy to give the illusion of competition and choice while cornering and exploiting a market.
As a rule, monopoly and oligopoly are bad news across the board for consumers and for workers. As Nicole Aschoff wrote in her Jacobin piece “Ban Private Equity,” private equity is comprised of huge, entrenched, vulture-like firms whose profits are inversely proportional to working-class fortunes. On balance, she notes, “The relationship between private equity firms and workers is zero sum: when they thrive, working-class communities suffer.” They do indeed.
In the case of medical provision, the effects of monopoly and oligopoly are even worse than usual because the service people are “consuming” is essential to their health and well-being (or to that of the pets they care for and love). Across Canada, so-called “universal” health care insurance schemes have been delisting, undercovering, or refusing to cover core health areas for a very long time. Vision care, dental care, and drug plans have been left to individuals to sort out on their own in accord with the survival-of-the-fittest sagacity of the free market (though provincial drug plans do cover some people, to some degree). The federal government claims to be finally moving on dental care with a limited-coverage plan, and there’s talk of pharmacare, too, but nothing is certain. That leaves millions at the mercy of a private market that is increasingly consolidated.
Medical care should not be commodified, full stop. Medical care that is not just commodified but also provided by a handful of chain providers with little to no effective competition is even worse. Private equity must be ejected from medical fields — the market should be deconsolidated.
In Canada, we already have an example of what happens when a behemoth corners a whole sector of the market. Shoppers Drug Mart dominates the pharmacy game. There are over 1,300 locations in the country. The company is a subsidiary of Loblaw, which dominates the grocery market alongside a handful of other oligopolists. It’s also facing a class-action lawsuit in Ontario (alongside another in Quebec) for allegedly manipulating bread prices along with other grocers and producers over the course of a decade and a half to the tune of $5 billion. The company avoided criminal prosecution by striking a deal with the country’s Competition Bureau.
The concentration of industry is one risk of private equity, but it’s not the only one. Indeed, the force of PE may well simply tear companies and industries apart. Take the example of Toys “R” Us in the United States. With a leveraged buyout, PE money took over the publicly traded company and then failed to turn around the flagging retailer — worse, it killed any chance the company had to survive. As Jeff Spross put it in The Week, the three private equity companies that bought Toys “R” Us devoured its component parts — “Basically, the trio took an imperfect-but-functioning company and cannibalized it for cash.”
While private equity can squash market competition, it can also put companies out of business — and workers out of work. The goal of these firms isn’t to run successful businesses that benefit workers and the community. The goal is to make money. If that’s through market dominance, so be it; if it’s through asset-stripping, wage depression, squeezing suppliers, or turning the businesses into tax write-offs, that works for them, too. And it’s always a risky deal for consumers, workers, and suppliers who are caught in the whirlpool of massive capital.
Private equity is too big and too powerful. Its interests, as Aschoff argues, are fundamentally in conflict with those of workers — and consumers too. Private equity exists to profit. It profits by eliminating competition and charging higher prices. As it grows, it becomes too powerful to tame, cowing the state that will refuse to manage it or break its properties apart in any meaningful way. It can thus get away with gouging consumers, treating workers poorly and underpaying them, and delivering lousy service. The only people who benefit from private equity are owners and shareholders. There is no community or worker value produced.
Canada ought to design its national health care programs — dental care, pharmacare, and whatever else — in ways that make it immune to growing private equity depredations. This would forestall both the potential monopolies and oligopolies that may emerge from strategic buyouts and the fate of being sucked dry and left in a desiccated heap. Private equity should not control any industry or field, but there is something particularly sinister and perverted about allowing them to control the health care that is necessary to our lives and well-being. There is still time to reverse the trend of big domestic and foreign capital dominating the country’s market and the intimate spaces of our lives. But there’s no time to wait to get that work started.