Since the 2008 financial crisis, private equity firms have increasingly taken over public services like emergency care and firefighting, often with dire effects.
A Tennessee woman slipped into a coma and died after an ambulance company took so long to assemble a crew that one worker had time for a cigarette break.
Paramedics in New York had to covertly swipe medical supplies from a hospital to restock their depleted ambulances after emergency runs.
A man in the suburban South watched a chimney fire burn his house to the ground as he waited for the fire department, which billed him anyway and then sued him for $15,000 when he did not pay.
In each of these cases, someone dialed 911 and Wall Street answered.
The business of driving ambulances and operating fire brigades represents just one facet of a profound shift on Wall Street and Main Street alike, a New York Times investigation has found. Since the 2008 financial crisis, private equity firms, the “corporate raiders” of an earlier era, have increasingly taken over a wide array of civic and financial services that are central to American life.
Today, people interact with private equity when they dial 911, pay their mortgage, play a round of golf or turn on the kitchen tap for a glass of water.
Private equity put a unique stamp on these businesses. Unlike other for-profit companies, which often have years of experience making a product or offering a service, private equity is primarily skilled in making money. And in many of these businesses, The Times found, private equity firms applied a sophisticated moneymaking playbook: a mix of cost cuts, price increases, lobbying and litigation.
In emergency care and firefighting, this approach creates a fundamental tension: the push to turn a profit while caring for people in their most vulnerable moments. Continue reading the main story Photo A firefighter with Rural/Metro, which operates private fire departments. The company, until recently backed by private equity investors, often bills homeowners thousands of dollars for putting out fires. Credit David Jolkovski for The New York Times
For governments and their citizens, the effects have often been dire. Under private equity ownership, some ambulance response times worsened, heart monitors failed and companies slid into bankruptcy, according to a Times examination of thousands of pages of internal documents and government records, as well as interviews with dozens of former employees. In at least two cases, lawsuits contend, poor service led to patient deaths.
Private equity gained new power and responsibility as a direct result of the 2008 crisis. As cities and towns nationwide struggled to pay for basics like public infrastructure and ambulance services, private equity stepped in. At the same time, as banks scaled back their mortgage operations after the crisis, private equity firms — which face lighter regulation than banks, and none of their rainy-day capital requirements — moved in there as well.
The power shift has happened with relatively little scrutiny, even as federal authorities have tightened rules for banks. Unlike banks, which take deposits and borrow from the government, private equity firms invest money from wealthy individuals and pension funds desperate for returns at a time of historically low interest rates.
Since the 2008 financial crisis, private equity firms have gone from managing $1 trillion to managing $4.3 trillion — more than the value of Germany’s gross domestic product — according to the advisory firm Triago. Retirement nest eggs are fueling the growth and sharing in private equity’s risks and returns: Nearly half of private equity’s invested assets come from pensions.
“There is private equity — a lot of it — and it’s happening everywhere,” said Vikram Pandit, a former Citigroup chief executive who is now head of the Orogen Group, which invests in financial businesses. Across the financial landscape, he said, “New champions will emerge.”
Warburg Pincus, Kohlberg Kravis Roberts & Company, and other major private equity firms have invested in emergency services, a business that routinely holds the lives of customers in its hands. While this represents one small corner of private equity, which traditionally used debt to seize underperforming companies, it captures the industry’s newfound pervasiveness.
K.K.R. — a firm memorialized in “Barbarians at the Gate,” a book that chronicled a defining 1980s Wall Street deal — also invested in public water services. Blackstone is now America’s largest landlord of rental houses. And in the mortgage industry, until recently the province of banks, the Fortress Investment Group controls a huge bill collector.
In many of the fields where private equity now operates, it has not necessarily performed better or worse than the banks and governments it replaced. In some cases it financed projects that others wouldn’t fund and provided crucial public services, including emergency care. And because these firms do not rely on the government for loans, and are much smaller than Wall Street banks, they pose far less risk to the broader economy.
“Over 11 million Americans work for private-equity-backed businesses, and millions more rely on private equity performance for their retirement security,” said James Maloney, a spokesman for the American Investment Council, the industry’s leading lobbying group. Private equity, Mr. Maloney said, helps “advance both our economic and societal well-being.”
But the Times investigation of emergency services shows that hasn’t always been the case.
Of the 12 ambulance companies recently owned by private equity, three filed for bankruptcy in the last three years, according to public filings and S&P Global Market Intelligence, a research service that tracks over 1,100 major ambulance companies in the United States. Those three companies had problems that predated private equity. But no other ambulance company tracked by the research firm filed for bankruptcy during that period. Photo Jessica Perez, an emergency worker at TransCare EMS, peeking inside the company’s closed offices in Brooklyn in February. Credit Chang W. Lee/The New York Times
The latest blowup came in February, when TransCare EMS, controlled by the firm Patriarch Partners, filed for bankruptcy, closing its doors forever. One day, cities and towns up and down the East Coast had TransCare services; the next, they didn’t. Continue reading the main story Recent Comments PaulRo 52 minutes ago
This is what Sanders is talking about. He should be President to deal with these for profit disgusting practices. Remember when the TSA used... Allen 52 minutes ago
NYC's public schools were operated by the government for decades.Classes were chronically over crowded.Supplies were always in short supply... H. Munro 55 minutes ago
This is the toxic combination of "privatization" (blow the dust off that one!) and (I assume) the legislative gift of governmental immunity....
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“Private equity has, in this case, threatened public safety,” said Richard Thomas, the mayor of Mount Vernon, N.Y, which relied on TransCare. “It’s not the way to treat the public.”
Patriarch’s owner and founder, Lynn Tilton, said in a statement that she was “deeply saddened by the unfortunate circumstances that triggered the abrupt end to TransCare’s operations and the heartache it has caused for many of its devoted employees.” She noted that TransCare, like other ambulance companies, “faced the obstacles inherent to its business model.”
Rural/Metro, long one of the nation’s largest ambulance companies and one of the few operators of private fire departments, did a tour through bankruptcy, although it reorganized and stayed in business. One private equity investor took Rural/Metro into bankruptcy, and another helped get it out.
During that period, Rural/Metro’s response times slowed in certain towns and it instituted more aggressive billing practices across the board, records show. While under the control of Warburg, Rural/Metro once sent a $761 collections notice to an infant girl born in an ambulance.
“The matter may be reported to a national credit reporting agency,” the notice read, effectively threatening a baby with a bad credit report.
“Obviously there were problems with Rural/Metro,” said Ron Cunningham, a spokesman for Rural/Metro’s new parent company, Envision Healthcare, which is not a private equity firm. “We are continuing to hire paramedics and E.M.T.s and what you are seeing is that the response times are improving.”
In a statement, Warburg said it “invested in Rural/Metro with the objective of growing and strengthening the company’s business.”
“Despite several initiatives undertaken by the company’s board and management team,” the statement said, the “challenges Rural/Metro faced were too difficult to overcome.” Bottom Line Nation
Articles in this series will examine the growing influence of private equity investors — the “corporate raiders” of an earlier era — in daily American life. What is private equity? It’s an industry that now manages a sum greater than Germany’s G.D.P. Here’s how it works »
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While private equity firms have always invested in a diverse array of companies, including hospitals and nursing homes, their movement into emergency services raises broader questions about the administering of public services. Cities and towns are required to offer citizens a free education, and they generally provide a police force, but almost everything else is fair game for privatization.
“We’re reaching new lows in the public safety services we will help provide, especially in very poor cities,” said Michelle Wilde Anderson, a law professor at Stanford University who specializes in state and local government. Private equity firms, she said, “are not philanthropists.”
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