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Organizational Restructuring in US Healthcare Systems: Implications for Jobs, Wages, and Inequality

September 1, 2017

The healthcare sector is one of the most important sources of jobs in the economy. Healthcare spending reached $3.2 trillion in 2015 or 17.8 percent of GDP and accounted for 12.8 percent of private sector jobs. It was the only industry that consistently added jobs during the Great Recession. In 2016, the private sector healthcare industry, which is the focus of this report, added 381,000 private sector jobs, the most of any industry. It is a particularly important source of employment for workers without a college degree, most of whom, as we document in this report, earn low wages.This report describes how organizational restructuring is affecting the job opportunities and wages of healthcare workers. We focus on changing employment and wages in hospitals and outpatient clinics, where the most profound restructuring is occurring. Over the last decade or more, hospitals have restructured the organization of care delivery in response to major technological advances, regulatory changes, and financial pressures. This restructuring has occurred at two levels: the consolidation of hospitals and providers into larger healthcare systems on the one hand; and the decentralization of services and the movement of jobs to outpatient facilities on the other. Outpatient care facilities include a wide range of services — from primary care centers to specialized units such as urgent care centers, ambulatory surgery centers, free-standing emergency rooms, dialysis facilities, trauma and burn units, and other specialty clinics. These organizational changes began before the 2010 passage of the Patient Protection and Affordable Care Act (ACA), but have accelerated considerably since then, and are likely to continue even as the ACA is revamped in the future.This shift to outpatient care centers offers benefits to patients — convenience as well as opportunities for preventative care — and most healthcare providers and unions have supported the move to more community-based care. But in this report, we show that workers are bearing the costs of this organizational restructuring.

Update: Are Lower Private Equity Returns the New Normal?

February 1, 2017

This report updates a version released in June 2016.U.S. private equity fundraising had its best year ever in 2015 -- raising $185 billion. But is the enthusiasm of investors warranted? Do PE buyout funds deliver outsized returns to investors and will they do so in the future? This report answers this question by reviewing the most recent empirical evidence on buyout fund performance; the answer is no. While median private equity buyout funds once beat the S&P 500, they have not done so since 2006 -- despite industry claims to the contrary.

Are Lower Private Equity Returns the New Normal?

June 29, 2016

U.S. private equity fundraising had its best year ever in 2015 -- raising $185 billion. But is the enthusiasm of investors warranted? Do PE buyout funds deliver outsized returns to investors and will they do so in the future? This report answers this question by reviewing the most recent empirical evidence on buyout fund performance; the answer is no. While median private equity buyout funds once beat the S&P 500, they have not done so since 2006 -- despite industry claims to the contrary.

Fees, Fees and More Fees: How Private Equity Abuses its Limited Partners and U.S. Taxpayers

May 11, 2016

The private equity industry receives billions of dollars in income each year from a variety of fees that it collects from investors as well as from companies it buys with investors' money. This fee income has come under increased scrutiny from investigative journalists, institutional investors in these funds, the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), and the tax-paying public. Since 2012, private equity firms have been audited by the SEC; as a result, several abusive and possibly fraudulent practices have come to light. This report provides an overview of these abuses -- the many ways in which some private equity (PE) firms and their general partners gain at the expense of their investors and tax-payers. Private equity general partners (GPs) have misallocated PE firm expenses and inappropriately charged them to investors; have failed to share income from portfolio company monitoring fees with their investors, as stipulated; have waived their fiduciary responsibility to pension funds and other LPs; have manipulated the value of companies in their fund's portfolio; and have collected transaction fees from portfolio companies without registering as broker-dealers as required by law. In some cases, these activities violate the specific terms and conditions of the Limited Partnership Agreements (LPAs) between GPs and their limited partner investors (LPs), while in others vague and misleading wording allows PE firms to take advantage of their asymmetric position of power vis-à-vis investors and the lack of transparency in their activities. In addition, some of these practices violate the U.S. tax code. Monitoring fees are a tax deductible expense for the portfolio companies owned by PE funds and greatly reduce the taxes these companies pay. In many cases, however, no monitoring services are actually provided and the payments are actually dividends, which are taxable, that are paid to the private equity firm.

Domestic Outsourcing in the United States: A Research Agenda to Assess Trends and Effects on Job Quality

March 15, 2016

The goal of this paper is to develop a comprehensive research agenda to analyze trends in domestic outsourcing in the U.S. -- firms' use of contractors and independent contractors -- and its effects on job quality and inequality. In the process, we review definitions of outsourcing, the available scant empirical research, and limitations of existing data sources. We also summarize theories that attempt to explain why firms contract out for certain functions and assess their predictions about likely impacts on job quality. We then lay out in detail a major research initiative on domestic outsourcing, discussing the questions it should answer and providing a menu of research methodologies and potential data sources. Such a research investment will be a critical resource for policymakers and other stakeholders as they seek solutions to problems arising from the changing nature of work.

A Primer on Private Equity at Work: Management, Employment, and Sustainability

February 9, 2012

Private equity, hedge funds, sovereign wealth funds and other private pools of capital form part of the growing shadow banking system in the United States; these new financial intermediaries provide an alternative investment mechanism to the traditional banking system.2 Private equity and hedge funds have their origins in the U.S., while the first sovereign wealth fund was created by the Kuwaiti Government in 1953. While they have separate roots and distinct business models, these alternative investment vehicles increasingly have been merged into overarching asset management funds that encompass all three alternative investments. These funds have wielded increasing power in financial and non-financial sectors -- not only via direct investments but also indirectly, as their strategies -- such as high use of debt to fund investments -- have been adopted by investment arms of banks and by publicly-traded corporations.