Trumpcare, Prospect Medical, Purdue Pharma, and Rapping Your Crimes
So! This week, ProPublica published a story about selling junk health insurance plans on Facebook and Google and if you read it you might have noticed a certain someone quoted in the piece:
“It’s a big web and everybody’s interconnected,” Sholes said. “A lot of data just floats around.”
Sounds like a smart guy! Anyhow, I am pleased my industry knowledge helped the intrepid Jeremy Merrill better understand how “leadgen” works.
For many years, unscrupulous marketers have played a cat-and-mouse game with celebrities and advertising platforms, trying to associate their products with recognizable names to drive sales. Trumpcare is a compounding of this problem - it confuses consumers who think they are applying for a government-sanctioned health insurance plan, and it uses Trump’s name to amplify the marketing.
Anecdotally, when I was doing lead generation for ACA plans during the Obama years, we were definitely not able to use the president’s likeness in our ads. It would have risked a lawsuit, and Facebook or Google would probably have flagged our ad accounts for misuse of a celebrity and implied endorsement. Even calling it Obamacare was a no-no, because it wasn’t, technically. The government has rules on marketing regulated products like insurance. Or, rather, it does if it knows who is doing the marketing. Lead generators like the one referenced in the ProPublica story are multiple lengths of arm from a licensed insurance agent, even if they were to sell legitimate plans, and therefore difficult to track down. Merrill himself had a difficult time, since call center agents often refused to give their names or who they worked for.
From a purely capitalist perspective, I decided shortly after the election that Trumpcare was not a winning term for lead generation. An analysis with the SEMRush keyword analysis tool shows why:
No one knows what Trumpcare is, nor do they search for it. It’s a legally dubious marketing strategy, a polarizing brand, and no one actually associates it with health insurance.
However, it appears that some companies embraced it, and built entire ecosystems to generate leads around a thing that doesn’t exist, using consumer confusion to peddle junk insurance. Near as I can tell, they got around Facebook’s restrictions on using Trump’s image in advertising by labeling their ads as political. Which is dumb for another reason!
To briefly explain: Facebook allows political advertising, but only on certain “placements” on its network:
As far as I am aware, this still means your ads only show up in the “News Feed” on Instagram and Facebook - the two most competitive ad placements, and therefore the most expensive. So, by attempting to circumvent rules around using Trump to sell products, the lead generators in question paid significantly more money for the ads to run.
There’s also the issue of narrowing your market - ads are more expensive on Facebook the smaller the size of the audience, because there is less ad “inventory”, or number of potential eyeballs, and ad costs can rise due to scarcity. Advertising something with Trump’s name in it is going to turn off a large swath of the country. So you’ve got smaller and smaller slices of an audience, restricted to only two spots on Facebook’s advertising network. Despite what the lead generator in the article claims, I’d be surprised if the endeavor was a money-maker for him or the upstream buyers.
Paying a premium to pitch a thing that doesn’t exist to the 35% of the public who like the president, which turns out to be junk insurance. Sounds about right.
American politicians like to claim the country has the “best health care in the world”. Despite all evidence to the contrary, it’s been a talking point for decades. Depending on your financial situation, it can be a true statement. The wealthy in America really do receive top notch care, because they can afford it. The rest of the population, generally, receives sub-standard care in the world’s richest nation.
One reason for this is many hospitals that serve the poor and needy are chronically underfunded. Our perverse system of for-profit medicine combined with government programs - like Medicaid - create negative incentives for medical professionals to work in poor communities. Simply put - if you’re a doctor, would you choose to work in a well-funded hospital for good pay, or would you rather work in a decaying medical system for less money?
What if the hospital or doctor’s practice you worked for was actively working against you, cutting every possible cost and endangering your patients? That’d be bad, obviously. What if they were also extracting hundreds of millions of dollars for themselves? Yikes!
Meet Prospect Medical, a private equity-owned chain of hospitals and medical practices across the country. A decade ago, an investment fund decided it wanted to invest in a group of hospitals serving low income patients. As it expanded, it moved aggressively to cut costs - to horrifying effect:
Various Prospect facilities in California have had bedbugs in patient rooms, rampant water leaks from the ceilings and what one hospital manager acknowledged to a state inspector “looks like feces” on the wall. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room.
All but one of Prospect’s hospitals rank below average in the federal government’s annual quality-of-care assessments, with just one or two stars out of five, placing them in the bottom 17% of all U.S. hospitals. The concerns are dire enough that on 14 occasions since 2010, Prospect facilities have been deemed by government inspectors to pose “immediate jeopardy” to their patients
How did this all come about? Back in the 1990s, a guy named Sam Lee got involved in operating a small group of community hospitals in California that serviced low income patients. He had a zeal for starving them of funds, and ran medical facilities like a crooked restaurant owner:
Critical medical equipment and supplies, including drugs and tracheotomy kits, were “routinely unavailable” at Alta’s hospitals because bills hadn’t been paid
According to the suit, the company regularly “changed vendors to avoid payment” and “bounced checks as part of its regular cash management process.”
Emergency room staff in at least one Alta hospital lacked chemical reagents needed to perform critical enzyme tests on heart attack patient
Prior to reading this piece, it hadn’t occurred to me that hospitals would bounce checks for critical medical supplies but, uh, capitalism finds a way. In 2006 Lee convinced a private equity firm to buy Alta by inflating its profits. Enter Prospect Medical, which at the time was a small public company that managed physician groups. Lee and his partner finagled a $50 million buyout for themselves, and gained control of Prospect. The deal went wrong almost immediately:
Just weeks after the deal closed, Prospect’s audit firm, Ernst & Young, discovered inflated revenues and profits on Alta’s books. (The E&Y senior manager assigned to examine Alta’s financials told ProPublica the misstatement was “very easy” to find.) As a result, Prospect was unable to complete its Securities and Exchange Commission filings, forced to cancel its annual shareholder meeting, delisted from the American Stock Exchange and defaulted on its loans, triggering millions in lender penalties.
Somehow Lee emerged from this as the CEO of Prospect and…started buying more hospitals. The cost cutting continued, and Lee churned through executives at Prospect, firing anyone who disagreed with his draconian style.
Then came Leonard Green - a private equity firm looking to get into the hospital business. They took over Prospect Medical, with Lee and his partner keeping a 35% stake in the company. Two years later, Prospect paid Leonard Green and its investors $188 million dollars after issuing junk bonds - risky debt with high interest rates - to pay out dividends. In two years, they’d nearly paid themselves back for their $205 million dollar investment, while saddling Prospect with tons of new debt.
Over the next 7 years, Prospect went on a buying spree - claiming they were rescuing failing hospitals. The reality was they’d take them over, strip them for parts, and sometimes shut them down if they felt like it:
In 2019, after repeatedly promising to keep at least part of the system open, Prospect shut it all, laying off nearly 1,000 employees. The company sold Nix’s downtown building to a hotel chain and exited with a big loss. “It was mismanaged at the corporate level,” Aleman said. “It went from making about $20 million to losing money. It was an absolute disaster.”
Prospect blamed it on…a broken water pipe. Right. Conditions at its other hospitals were so bad I found reading about it upsetting:
But Brotman has continued to deteriorate. In 2015, inspectors shut down all elective surgery at the hospital for eight days, citing a “widespread pattern” of poor infection control and sterility; the problems resulted from inadequate heating and cooling systems. That episode, as well as the death of the ER-overflow patient whose body was found on the beach, resulted in immediate jeopardy findings.
That same year, state health inspectors cited the hospital after a broken refrigeration system in its morgue caused a woman’s corpse to decompose so badly it produced a “noticeable stench,” making it impossible for her family to have an open-casket funeral. Meanwhile, one of the hospital’s elevators has been out of order for 10 months. Patients needing MRI scans must be taken outdoors and down an alley, past dumpsters and into a hospital parking lot, where the scan is done in a rented trailer.
When it rains in Culver City, water drips from ceilings throughout the hospital’s two buildings, forcing staff to relocate patients and plant orange buckets in the hallways. In 2014, a patient’s wife filed suit after soaked ceiling tiles fell and struck her in the head while she was sitting in the hospital lobby. This January, a giant brown mold formation burst through the wall near a fourth-floor nurses’ station. Noted the resulting complaint to the California health department: “There are mushrooms growing out of the wall (which they cut off and patched back up). There is leakage from the ceiling when it rains you can taste the mold in the air.”
A 2018 state inspection found the pharmacy staff at the Culver City hospital had for months ignored findings of “fungal air growth,” “bacterial organisms” and mold in equipment used to mix patient medications in a sterile environment. According to the report, this resulted in the dispensing of about 21,000 doses of “adulterated dangerous drugs” to patients over a nine-month period.
Je. sus. Christ. Oh, and Prospect was also illegally billing the government for millions of dollars, because of course. When they got caught doing Medicare and Medicaid fraud it disrupted an attempted sale to another private equity firm. Meanwhile, Prospect was draining employee pension funds, laying off doctors and nurses, and using truly fucked up tactics to pad admittance numbers:
Andrews said Prospect marketers insisted that elderly mental health patients “from nowhere near Culver City” be admitted through the emergency room even when no psychiatric beds were available in the hospital. He says this routinely resulted in a handful of patients being held for days in a crowded ER “overflow” area with no beds or privacy — just chairs and a single bathroom — serving as a sort of “bootleg inpatient psychiatric unit.” A few years before Andrews got there, one 79-year-old man suffering from dementia disappeared after being left unattended in the overflow area, according to a state inspection report and a lawsuit by his family. His body was later found on a beach 7 miles away; the man had drowned.
Yes, employees of Prospect would round up elderly dementia patients and admit them to Prospect hospitals, where they were held for days at a time in an area with no beds and one bathroom. Depraved does not begin to describe it.
In 2018 Prospect issued a $457 million dividend. Leonard Green, Lee, and its other investors had now cashed out $645 million from a business that provided some of the worst health care in the country to its patients, when it wasn’t killing them outright. In 2019, Prospect was in such bad financial shape it decided to sell all of its real estate holdings - the only real equity it owned - for $1.5 billion dollars. While this allowed Prospect to pay off its existing debt, it now had massive lease payments to the companies who bought the property.
In the end, Leonard Green sold the remainder of its stake in Prospect to Lee and his partner for $12 million in cash. Now, keep in mind the fund had at least doubled its money, cashing out over $400 million on a $200 million investment. Lee had netted over $100 million personally.
So what happens now? Prospect controls 20 hospitals around the country, and employs thousands of medical professionals and support staff. They are embroiled in multiple lawsuits. They’re fighting regulators in half the states they do business in, who may be forced to step in and bail out their failing hospitals. COVID-19 has ravaged their properties - they barely stocked enough protective equipment during good times. The first American doctor to die of the virus was at a Prospect hospital.
Prospect is one of the more egregious stories of what happens when private equity buys up hospitals, but it’s certainly not the only one. Last year, where I live, a private equity asshole closed down a hospital that had served the city of Philadelphia for 171 years. Then, he refused to re-open or rent it to the city during the COVID-19 outbreak because they wouldn’t pay him exorbitant fees. Recently, he gave an interview and said explicitly what these profiteers think of the health care system:
"We were dead in the water the day we got there," Freedman said. "If I could go back and do it again, frankly, I would either not do the deal, get a significant adjustment from Tenet to do the deal, or I would have sold Hahnemann on day one and take the heat then. I can’t imagine it would have been any worse than the heat I've taken since.
"I would have walked away with a massive profit [selling the Hahnemann property immediately] instead of incurring a material loss and lot of heartache," he said.
This is the guy who wouldn’t work with the city to keep the hospital open because, as he admitted, he could make a massive profit selling the building.
When we, as a country, decide that health care should be profitable for the vulture capitalists who can raise enough money to buy hospitals, we all but guarantee that our quality of care will continue to be the worst in the developed world. It’s not a tragedy, it’s a fucking outrage.
On that note, let’s talk about Purdue Pharma, who agreed to plead guilty to criminal charges this week. The federal penalties will be $8.3 billion, and the Sackler family will pay $225 million:
Federal prosecutors said the settlement did not preclude criminal charges against Purdue executives or individual Sacklers.
For once, I don’t think this is too bad? Settling the federal case does not close out the cases brought against Purdue by cities and states, and doesn’t get the Sacklers off the hook criminally. I am pleasantly surprised to see that the Feds didn’t let them fully off the hook, as they tend to do with wealthy, well-connected criminals. The central villains of the opioid epidemic seem to have been so offensive to the public that even the Department of Justice didn’t feel they could get away with a sweetheart deal.
Weirdly, the thing that most state attorneys general seem to object to in the deal is the new business structure Purdue will emerge with:
Purdue has proposed that the company be run as a “public benefit corporation,” with proceeds from continuing limited sales of OxyContin and several overdose-reversing medications under development to go toward opioid abatement. The Justice Department endorses that model.
But in a forceful letter addressed to Attorney General William P. Barr earlier this month, the attorneys general decried the public trust model, and its association with governmental entities. Governments should not be in the opioid business, they said. Instead, they said that Purdue should be run privately, with government oversight.
I…what? Of all the things to get upset about? I mean, I think that governments should absolutely be in the business of making drugs, because pharmaceutical companies have proven themselves to be awful, and we shouldn’t have private companies profiting off illness, incentivized to treat rather than prevent. But, go off I guess, attorneys general. A far more legitimate gripe with the government settlement is they’re letting the Sacklers off far too easy:
Another objection to Wednesday’s settlement centers on the resolution of civil claims against individual Sacklers, raised by private families who are suing. A forensic audit last year by Purdue found that the Sacklers directed at least $10.7 billion in the company’s proceeds to family-controlled trusts and holding companies, even as Purdue was facing legal scrutiny.
Yeah, the Sacklers have been openly stashing billions offshore for years, and the government doesn’t seem to mind, which seems about right.
Anyhow, with the Feds wrapping up their case, the many other cases can now go forward, as the Sacklers try to dance between the raindrops. Here’s hoping the tens of thousands of families impacted by the opioid crisis get some measure of justice, but I won’t hold my breath.
Don’t Rap Your Crimes
A rapper who bragged in a YouTube music video about getting rich from an unemployment scam was arrested Friday on federal charges of fraudulently applying for more than $1.2 million in jobless benefits, the Department Of Justice officials said.
Fontrell Antonio Baines, 31, of Memphis, Tenn., is known online as Nuke Bizzle.
Nuke! Come on man!
In the video, which apparently was posted on Sept. 11, prosecutors say Baines rapped about doing “my swagger for EDD” and getting rich by “go[ing] to the bank with a stack of these” while holding up a several envelopes from EDD. A second man in the video raps, “you gotta sell cocaine, I just file a claim…”
At the very least, if you’re going to rap about doing crimes, and display evidence of your crimes on video, maybe stash the evidence somewhere else. Nuke was arrested in Las Vegas carrying 8 EDD cards, and an investigation turned up another 92. He’s facing up to 22 years in federal prison.
Wired - “But the noisy, undistinguished vibrator that's now collecting dust under my bed was not, perhaps, her main invention.”
CNN - “Sources tell CNN that Trump was encouraged to help Rivada by Fox News commentator and veteran GOP strategist Karl Rove, a lobbyist for, and investor in, Rivada.”
New Republic - “Voter suppression and rule rigging routinely seep from GOP state legislatures, and secretaries of state presiding over shrinking voter rolls in many key swing states mouth lies and delusional rationalizations to shore up regimes of vastly unequal ballot access…”
Tips, thoughts, Sackler voodoo dolls to email@example.com