the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
May 10, 2010
Vanguard Health Systems, the company taking over the Detroit Medical Center (DMC), is a privately owned, profit-making company. It already owns 15 hospitals in five states and a number of health plans. Vanguard has been aggressively buying up hospitals since 1998. It has used the money it drained out of those hospitals to pay off the debts it took on to “buy” those hospitals.
Its own annual report from 2009 shows it is 1.75 billion dollars in debt, almost as much as all the hospitals it owns are worth. That debt load is four to five times higher than that of other health systems, according to Angela Bryan, a senior high-yield bond analyst for Gimme Credit.
Vanguard is majority-owned by the private equity firm, the Blackstone Group. Blackstone is one of the largest private equity firms in the U.S., specializing in such deals – which are deals called “leveraged buy-outs” by Wall Street, meaning the buyer puts up little or none of its own money.
Vanguard has been losing money at the hospitals it owns, yet posted a profit overall last year. In other words, it takes the income from the hospitals for its own profit, while it puts the debts onto the hospitals.
It’s a lot like what the auto companies did, putting the profits into the accounts of their financial arms while putting the losses and debt into their production companies.
Vanguard has already been the subject of federal lawsuits by nurses who say it conspired to lower their wages. It spelled out its attitude toward its workers when it cited the presence of unions in its hospitals as a “risk” factor in its latest filing with the SEC.
These “private equity” companies are not buying up productive companies like Chrysler or useful entities like hospitals to make them run more effectively. They are grabbing them to rip them off, then dump them – what’s called “strip and flip” by Wall Street.
One more step in the DMC rip-off of Detroit.