Pluralistic: 14 Mar 2022


Today's links


A wealthy man is stabbed by a skeleton while a man weighs coins on the other side of the table; representing the vanity of riches. Engraving by M. Pregel, 1616. Behind them is an Emergency Room sign.

Surprise billing's death-spiral may suck in untold patients (permalink)

The most remarkable thing about the surprise billing crisis is that its architects thought they could get away with it. Back in 2018, KKR (slogan: "Integrity. Trust. Partnership") bought Envision Health with a plan to make billions through Emergency Room fraud.

https://pluralistic.net/2020/04/04/a-mind-forever-voyaging/#prop-bets

Here's how surprise billing works: a company like Envision convinces a hospital to let its emergency room doctors form a private company that doesn't take any insurance (especially not the insurance the hospital accepts). When gravely injured, seriously ill, unconscious and dying people present at the ER, they are tricked into signing paperwork saying they'll pay whatever Envision charges.

Now, the AMA bans non-doctors from owning medical practices, so nominally all of these private "doctors' groups" are run by ER doctors. The true owners, though, are private equity looters – you can tell, because whenever one of these "doctor-owners" objects to an inhumane practice, they're summarily fired:

https://pluralistic.net/2020/05/21/profitable-butchers/#looted

KKR's buyout of Envision followed the private equity playbook: buy a business, load it up with debt, pay the "investors" giant bonuses and management fees, cut wages and service, and raise prices. This left Envision with billions in debts, which it would have to make up by gouging dying people and impoverishing medical personnel.

And that's the amazing part: that KKR really believed that it could destroy the entire national emergency healthcare capacity of the United States of America without running into any kind of public policy response.

I mean, I understand how they came to that conclusion. America is, after all, a country willing to give billions in bailouts to private equity firms that had mismanaged emergency rooms into the ground:

https://pluralistic.net/2020/04/11/socialized-losses/#socialized-losses

But over time, the stories of fully insured sick and injured people who are financially ruined after going to an ER at a hospital that was covered by their insurance became harder and harder to ignore.

Private equity even figured out how to gouge people who weren't having medical emergencies or using their booby-trapped ERs. Take Caitlin Wells Salerno, who went into labor and went to the Poudre Valley Hospital in Ft Collins, CO. The hospital had locked all its doors except for the ER, meaning she had to pass through the ER to get to the maternity ward. The ER insisted on doing her intake, and "upcoded" her as a "Level 5 emergency" and stuck her with a $2,755 bill.

https://pluralistic.net/2021/10/27/crossing-a-line/#zero-fucks-given

Stein's Law predicts that "If something cannot go on forever, it will stop." Even by American standards, the idea that fully insured people can be financially ruined by surprise billing was a bridge too far.

Anti-surprise-billing legislation was introduced in Congress. The surprise billing companies (who'd slashed doctors' pay, claiming they were too broke to maintain a living wage) found millions to spend on astroturf campaigns insisting that surprise billing was good for patients:

https://pluralistic.net/2020/04/21/all-in-it-together/#doctor-patient-unity

(Even more amazing: surprise billing companies were able to scrape together vast fortunes for these campaigns after blowing billions on stock buybacks).

The campaign to establish surprise billing as a permanent fixture in American health-care was viciously fought:

https://pluralistic.net/2020/02/21/pluralist-a-daily-link-adose-21-feb-2020/#sickening

Top Democrats like Richie Neal emerged as easily bought cheerleaders for surprise billing, bravely sticking up for the right of private equity to destroy the lives of sick people:

https://pluralistic.net/2020/07/13/youre-still-the-product/#richie-neal

Despite all this, the No Surprises Act passed in December 2020 and the Biden administration ordered an end to surprise billing in July 2021:

https://pluralistic.net/2021/07/02/spoil-the-surprise/#surprise-billing

The Biden order was a far cry from perfect. It included an arbitration clause that denied patients and their insurers a day in court, though it did require arbitrators to start negotiations from the median in-network rates for disputed procedures.

Last month, a federal judge in Texas struck down this provision, allowing private equity-backed emergency rooms to insist that their hugely inflated prices were a fair starting point:

https://www.healthcaredive.com/news/texas-judge-strikes-down-part-surprise-billing-rule/619357/

Despite this, the surprise billing industry is on the skids. As Eileen Appelbaum and Rosemary Batt write for The American Prospect, Envision Health is circling the drain. Its $5.3b first-lien term loan is now "in distressed-debt territory" at $0.73 on the dollar, and its unsecured debt is trading at $0.53/dollar.

https://prospect.org/health/envision-healthcare-hits-the-skids/

The company narrowly avoided bankruptcy thanks to a $100m CARES Act bailout, but it is in serious trouble. That's long-run good news, because Envision is a fucking abomination, a predator that gorges on the sick and injured.

But as Appelbaum and Batt write, in the short term, it's even more bad news. Envision's debt deals allow it to transfer $2-2.5b in assets to an unrestricted subsidiary. This is the same structure that allowed PE-backed demolitions like Sears, J Crew and Nine West to create a "bad" company that held all the debts and a "good" company that held all the assets.

If that's the plan – and it looks like it, based on Envision's talks with looters like Apollo Global Management – then the company's next move is to slash its ERs even further, starving them of supplies and staff, and starving its medical personnel with rock-bottom wages.

This will make the care in those ERs even worse. It's life-threateningly terrible now, thanks to the punishing metrics that Envision illegally forces on its doctors:

https://www.nbcnews.com/health/health-news/doctors-sue-envision-healthcare-say-private-equity-backed-firm-shouldn-rcna9276

We already know what this looks like. When Carlyle bought and destroyed HCR ManorCare, it pocketed billions, laid off hundreds of nursing home employees, and turned its nursing homes into fatal nightmares:

https://www.washingtonpost.com/business/economy/opioid-overdoses-bedsores-and-broken-bones-what-happened-when-a-private-equity-firm-sought-profits-in-caring-for-societys-most-vulnerable/2018/11/25/09089a4a-ed14-11e8-baac-2a674e91502b_story.html

That's the trajectory of the ERs under Envision's (mis)management. It's going to get worse before it gets better.

(Image: Michael Pregel, modified)


A 'big brain' Talosian alien from 'The Cage,' the 1965 pilot for Star Trek: the original series; the alien's face has been replaced with Mark Zuckerberg's.

Podcasting "Vertically Challenged" (permalink)

This week on my podcast, I read "Vertically Challenged," my latest Locus column, on the "vertical integration" of Big Tech firms, who have merged and acquired their way to dominance:

https://locusmag.com/2022/03/cory-doctorow-vertically-challenged/

While tech firms practice many kinds of vertical integration, the most important one is the business of being a platform and competing on a platform. Platforms – app stores, ad markets, ecommerce – are "two-sided markets," with the platform company mediating between both buyer and seller.

These two-sided marketplaces are high-stakes commercial arenas whose games are refereed by the platform companies. They decide on search-rankings, service charges, and inclusion. A platform company's judgment is the difference between commercial success and failure. If you're banished to the bottom of a search-ranking or locked out of a low-priced commission tier, you will go bust while your rivals thrive.

And yet, platform users want the referee to make these calls: we want spam and dangerous products to be downranked or blocked, we want action on inauthentic reviews and counterfeits; we want the best products to be given advantages that make them easier to find and more successful.

This is where the platform companies' participation in their own marketplaces becomes an irresolvable conflict. When Amazon clones an independent sellers' products and offers their own version ahead of the original in search results, it may be because Amazon's copy is better – but it might just be because Amazon makes more money that way.

Likewise when Apple puts it own music player app ahead of a rival; or Google chooses its own products to display ads on; or Facebook surfaces its on-platform version of an article and buries the version on the open web. Maybe these "self-preferencing" choices are legitimate, based on neutral judgment about what's best for us – and maybe it's self-interested cheating.

There's a reason we don't let referees own one of the teams in the games they oversee – why we don't let judges hear cases involving their relatives, or let lawyers represent both sides of a lawsuit. Even if they are really good at their jobs and very sincere in their promise to be fair, these processes will never feel legitimate.

It's even harder when it comes to the kinds of judgments platforms make all the time. If you search Google for a video and it shows you a Youtube link instead of a Vimeo one, which one is "better"? Unless you have an annual pass to visit Plato's Cave, you'll struggle to come up with an impartial answer to this question.

This is a situation with historical precedent. For decades, antitrust regulators imposed something called "structural separation" on important companies like banks and railroads. Banks were banned from owning businesses, because these business would compete with the firms they made loans to. Railroads were banned from owning freight companies, because these would compete with their freight customers.

The premise of structural separation is that it's impossible to administer a rule requiring platforms to be fair. It's impossible to prove when they're cheating, and even more impossible to convince the losers of contests with their subsidiaries that the call was a fair one.

There are some easy structural separation calls for Big Tech: spin off AWS, Amazon Studios, Kindle and Audible into independent companies. Force Facebook to sell off its VR holdings, Whatsapp and Instagram. Tell Apple it can make apps or run an app store, but not both. Tell Google the same, and for good measure, split off its ad-tech, videos, and office suite. Do the same for Salesforce, Microsoft, and all the other platforms.

But as Ramsi Woodcock has argued, you can't ban all vertical integration. A company is a vertical integration. An office supply company isn't a bookkeeping company or a janitorial company, but we wouldn't force it to buy janitorial and bookkeeping from other, standalone businesses.

That's a pretty good argument. If we let Amazon keep its ecommerce business, do we force it to sell off its warehouse business? That's a source of significant commercial advantage, after all.

As good as this argument is, I don't think the tech giants will make it. They don't want us to think too hard about which businesses they insource and which ones they outsource, because the tech firms use outsourcing to avoid responsibility for the activities that harm the rest of us.

Like, Amazon insists that it must own a publisher, but it can't own the last-mile delivery services whose quota-lashed drivers piss in bottles and kill themselves and others as they struggle to make their deliveries. Apple insists that it must buy 90 companies per year but it can't possibly manufacture its own gadgets, which would let it police slave-labor conditions and suicides in its factories. Facebook insists it must buy every VR company, but can't operate its own moderation boiler-rooms, where overworked, traumatized poor people spend every hour God sends looking at beheading videos, child sex abuse materials, and livestreamed murders.

Whether it's Google, Microsoft or Salesforce, the functions of platform businesses that hurt the rest of us are never part of the vertical integration stack.

Which raises a curious possibility: maybe we need a doctrine of structural integration, forcing companies to own (and assume liability) for the parts of their businesses whose failures impose huge costs on society.

Here's the podcast episode:

https://craphound.com/news/2022/03/13/vertically-challenged/

And here's a direct link to the MP3 (hosting courtesy of the Internet Archive; they'll host your stuff for free, forever):

https://archive.org/download/Cory_Doctorow_Podcast_418/Cory_Doctorow_Podcast_418_-_Vertically_Challenged.mp3

And here's the RSS feed for my podcast:
https://feeds.feedburner.com/doctorow_podcast

(Image: Anthony Quintano; CC BY 2.0, modified; Paramount/Star Trek, modified)

Hey look at this (permalink)


This day in history (permalink)

#20yrsago Saving entertainment from itself https://web.archive.org/web/20020325121611/http://scriban.com/movabletype/2002_03_13.html

#15yrsago Walgreens marks up generics by 975% Walgreens marks up generics by 975% https://freakonomics.com/2007/03/if-crack-dealers-took-lessons-from-walgreens-they-really-would-be-rich/

#15yrsago Viacom: privacy-hating hypocrites https://freedom-to-tinker.com/2007/03/14/viacom-youtube-and-privacy/

#15yrsago EFF reveals plot to hobble European television https://web.archive.org/web/20070315175823/https://www.eff.org/IP/DVB/dvb_briefing_paper.php

#10yrsago Lawblawg commemorates My Cousin Vinny http://abnormaluse.com/2012/03/20th-anniversary-my-cousin-vinny-1992.html

#10yrsago Former NYT CEO paid $23.7M exit package; company netted $3M over the past 4 years https://www.bloomberg.com/news/articles/2012-03-09/new-york-times-s-robinson-s-exit-package-tops-23-million

#10yrsago Lockdown London: how the Olympics will turn London into (more of) a police state https://www.theguardian.com/sport/2012/mar/12/london-olympics-security-lockdown-london

#10yrsago What is a game? https://www.raphkoster.com/2012/03/13/x-isnt-a-game/

#10yrsago Copyright troll stripped of copyrights, which are to be sold to pay off its victims https://arstechnica.com/tech-policy/2012/03/judge-orders-failed-copyright-troll-to-forfeit-all-copyrights/

#5yrsago Mormon church uses bogus copyright claims in attempt to censor Mormonleaks https://archive.sltrib.com/article.php?id=5056058&itype=CMSID

#5yrsago Games and other online communities are societies, owed a duty of care by their owners https://vimeo.com/208372546

#5yrsago Fearing border harassment, Girl Guides of Canada cancel all trips to Trump’s America https://www.theguardian.com/world/2017/mar/13/canada-girl-guides-cancel-us-travel

#5yrsago Woman Texas politician proposes rectal exams, fines, mandatory literature and masturbation ban for men https://www.dallasnews.com/news/politics/2017/03/12/texas-men-would-face-fine-for-masturbating-need-rectal-exam-for-viagra-under-proposed-law/

#5yrsago Just add Guinness: the strange world of prefab “Irish pubs” https://www.eater.com/2017/3/7/14839472/irish-pub-design

#5yrsago America has spent more rebuilding Afghanistan than it spent rebuilding Europe under the Marshall Plan https://www.nytimes.com/2017/03/13/opinion/the-never-ending-war-in-afghanistan.html


Colophon (permalink)

Currently writing:

  • Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. Friday's progress: 510 words (72266 words total).

  • Vigilant, Little Brother short story about remote invigilation. Friday's progress: 253 words (5406 words total)

  • A Little Brother short story about DIY insulin PLANNING

  • Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION

  • Spill, a Little Brother short story about pipeline protests. FINAL DRAFT COMPLETE

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: Vertically Challenged https://craphound.com/news/2022/03/13/vertically-challenged/
Upcoming appearances:

Recent appearances:

Latest book:

Upcoming books:

  • Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022

This work licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to pluralistic.net.

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