17 – Death of a Healthcare Unicorn | New Federal Tax and SEC Rules | Gender Clinic Struggles to Provide Care

Marcus: [00:00:00] All right, number 17, we’re back. Yes. Yes. You traveled to Kansas city, Kansas city this

Vic: week. It was pretty fun to get into a new market. I don’t know much about Kansas city trying to learn and got to meet with, um, big academic medical system there. KU med children’s hospital. Nice. Um, spend time with some entrepreneurs, some investors.

It was fun to get out and kind of learn about a new market.

Marcus: That’s cool. I was in Rochester, Minnesota, um, for the national HFMA board retreat, summer board retreat, because we have two a year. We, uh, we, we love hanging out together. Um, but man, uh, if you’ve never been to I have not been to Mayo, but I’ve, I’ve heard it’s incredible.

It’s It’s, it’s pretty much indescribable. I mean, I didn’t know what I would, what I was getting myself into going there. Um, but man, it is, uh, I mean, the, the, the depth of the, the culture, the lore around the Mayo [00:01:00] family. Yeah. Um,

Vic: when they started, there was nothing there. Yeah. It was the Western

Marcus: front.

That’s exactly right. On their own. Yeah. Yeah. And they, you know, they built it. built all the buildings and, you know, the foundation house. And, you know, it’s, it’s, it’s pretty remarkable, but, um, incredible facility. Uh, it’s interesting to be in a place where the, um, the sovereignty of the physician is so important.

It’s still clearly culturally, you know, the, the, the premier thing, you know what I mean? It’s not, it is not moved into an administration first environment. You know, the physician is still the, the sovereign there it’s, it’s obvious and, and they orient towards physicians as talent. And I think that’s why they have so many great physicians there, you know, um,

Vic: I mean, it’s, I complain about the spend and the quality.

But the real benefit of [00:02:00] the United States is we have places like Mayo that are world class by, you know, exponentially better. Yeah, right. Not that there aren’t other places in the U. S., but there’s an elite group of 10, 12 places. Mayo is certainly in the top of that. That are incredible.

Marcus: It was inspiring.

So thank you, Dennis Dolan, the CFO at, uh, Mayo clinic for hosting the entire HFMA board. We all loved it. And, uh, I certainly was very inspired and now we’re going to different culture

Vic: than the for profits or other

Marcus: systems or other things. It’s not even in the same universe, honestly. Uh, so with that, let’s talk about the news.

Vic: Yeah, it’s always, I feel like I say this every week. There’s a lot of news. There’s always a lot of news. Yeah. That’s

Marcus: the good thing about. You know, doing the, doing the show. All right. So the first thing we’re going to talk about, uh, this true pill news. I [00:03:00] mean, this is obviously really big news, but we, you did a good job of kind of, uh, going back and kind of figuring out when did this all start?

So we’re going to start with a story from August 3rd, uh, in Forbes that talked about the CEO leaving true pill.

Vic: Yeah. So the, the set, the two co founders, um, several years ago, I don’t know, six, seven years ago, started it. And they built it into a unicorn, both in leadership, and the second founder left. He was CEO for six or seven months.

The first founder was CEO and then he left in January, I think, January, February. And so that, that was the first sign. I honestly didn’t really care that much. Um, just felt like they were, they were changing the guard and bringing in new talent and not that surprising. The founders often move on after, after six years, whatever it is.

So, [00:04:00] um, and they

Marcus: raised a ton of money in 2021. So super well capitalized. They were a unicorn important to say they were a unicorn valued at 1. 6 billion. Yeah.

Vic: Yeah. They, yeah, they were, they raised probably 600. million, roughly. They raised a lot of money over time, but, but they’re, they were well into unicorn status.

They, they had a lot of equity value. Right. And for people that may don’t know that they were one of the first sort of nationwide dispense from one place and ship drugs to you, all over the country. Um, and they were, they did a lot of volume

Marcus: and they weren’t just doing that volume direct. They were partnering with telehealth platforms as well.

Yes. Right. To, they

Vic: would dispense the drugs that were prescribed by the doc in a, in any visit, but primarily

Marcus: in telehealth visits. Right. And, and, and, and. Tech first telehealth. So, you know, it’s like, you may have a primary care physician. Uh, you know, I, I do, and sometimes I don’t want to go in to see him.

So we’ll just do [00:05:00] sort of a doxy dot me session. And then he would say, okay, here’s what I think you’ve got. Uh, I’m putting a script at Walgreens. Right. So that’s, yeah, that’s like one way that telehealth and pharmacies sort of work together. Yeah.

Vic: And he, he is your main doctor. He has your medical records for a long time.

You talk to the same person. That’s right. Sometimes in person, sometimes. over a telehealth visit. Yeah. And then sometimes it’s just via text. Yeah. Sometimes via text, that’s harder to bill for. Right. But, but yes, then there are what you’re calling tech first. Like that’s probably a good enough way to say it where they are.

There is no on premise site where the docs work. It’s all telehealth. Right. Um, HIMS and Roman were the first big ones really treating, you know, I know about it cause I’m losing my hair. I never used them, but, but they, they really were treating hair loss. Yes. Function and it makes a ton of sense. We wrote about it five years ago.

Um, things that are a little embarrassing [00:06:00] to do in person. are natural, like perfect for, for telehealth. Right. And, and that’s great. We should get help to people that maybe are embarrassed to go in and talk about ED, erectile dysfunction in person. Um, but it also led to some bad actors.

Marcus: Yeah. So cerebral.

Which was on the behavioral health side. Um, that became infamous for effectively being a pill mill for Adderall. Um, they, I think they’re out of business. Yeah, oh yeah, I think the DEA shut them down. Yeah, I think Cerebral is done. So, a story came out. But Cerebral didn’t, was not allowed, was not licensed to dispense drugs.

No, they were a telehealth platform. So, who was dispensing their drugs? So, a story came out in the information. Uh, which I would imagine most of our listeners may not have even heard of and certainly probably don’t have a subscription to, but the information is, um, a, uh, a heavily [00:07:00] paywalled media company that really focuses on Silicon Valley.

And so, um, they do a really good job of kind of covering what’s happening in the VC world, largely focused on Silicon Valley and, um, they covered this because it was a Y Combinator story.

Vic: Yeah. And it was a really, uh, kind of a strange story, I thought.

Marcus: Yeah. Well, the way, the way it was portrayed, right?

Bizarre. Yeah. So, so the, so the story is announcing, uh, not really in the form of a press release, but clearly they had the information structured almost like a press release that the, that the company is cutting their share price 90%. And Gary Tan, uh, who’s the, the president of Y Combinator, but prior to that was a Y Con founder.

And, and after that was, um, a VC with Initialized, partnered with Alexis Hanian before they split. And um, yeah, you know, Alexis would famous.

Vic: Well, like a guy you want on your board. Yeah, absolutely. Yeah. Yeah.

Marcus: Very, very well known. Big, you know, San Francisco, you know, guy. Yeah. Um. The [00:08:00] president of the YC today.

Yeah, right. Departs the board. He’s leaving the board. He’s leaving the board, so. But

Vic: they’re not raising money. So the reason I thought it was a strange story is they announced in the press that they were cutting their share price. This is a not traded company. It’s an illiquid company. And we should talk through who the owners are, but Y Combinator, Initialized, Which is where Gary probably was when he did

Marcus: it.

Well, so, so the article says that they disclosed the share prices in updated articles of incorporation. So it seems like they are, they’re going through a pretty significant restructuring and that sort of where all this, this information came from, um, other investors in the deal, um, initialized capital, which is, you know, that was Gary Tann’s old firm.

So that makes sense. Um, and, uh, Oak, um, HDFT, uh, big, big healthcare, FinTech, um, Fund. Uh, they collectively, they raised about 300 million from those, uh, VC firms and others. So these, these are blue chip VC firms that were in this [00:09:00] deal.

Vic: Great firms and a

Marcus: lot of money. Yeah. A lot of money. Um, and so a 90 percent markdown from their peak in 2021.

So we’ve talked about the 2021 vintage and what a disaster that vintage is going to be. So here’s yet another unicorn that is now worth less than 200 billion. Yeah, it lost its 1, 000, 000. Yeah, just a unit. Uh, so, so as you get further down into the article, what you find is that, um, the DEA alleged that TruePill had wrongly filled Adderall prescriptions on behalf of Cerebral.

And this gets back to our constant discussion around Silicon Valley based VC invested Firms in the healthcare space playing fast and loose in healthcare, particularly at the clinical side of things. [00:10:00] Um, you can’t do it.

Vic: We in Nashville, I think, I think across the country in middle America. Have a different view of the healthcare regulatory environment than Silicon Valley does.

They, they, I think they believe that innovation and startups lead the change, and then the regulators follow. And that might be true with Uber. It might be true with Airbnb. But I don’t think it’s true, and this is another example where it failed in human health, where life is at stake. Now, whether college kids illegally getting Adderall to be able to stay up all night studying is Life or death is, I don’t know, but the DEA is serious.

They do not allow controlled substances just to be thrown around like that

Marcus: for, for a good reason. No, no. And, and, and look, a 90 percent markdown. I mean, they’re, they’re, they’re worth nothing. That’s [00:11:00] brutal. The company’s worth nothing. That’s brutal. That’s brutal. So, so all, all of that capital that was invested, you know, by those firms, it’s gone.

Vic: I mean, think about it, like, if you, if we were gonna start a telehealth company, would we use them to fill our scripts? No. Well, not now. Not now. Well, after the DEA came out, you wouldn’t. So, like, it’s 90%, I think it’s 100%. There’s nothing, there’s nothing left there.

Marcus: Yeah. I mean, maybe, maybe there’s some technology that can be, you know, sold for parts or something like that.

But, um, look, I mean, it’s a brutal story, right? It’s a brutal story. And, and, and what, what I think is really interesting is that true pill was behind. Cerebral, right? So they were the, the pharmacy, um, fulfilling cerebrals prescriptions, right? That were, that were issued. And this is a bit of the Yeah, an

Vic: MD or someone wrote a script.

And [00:12:00] the pharmacy, TruPill’s pharmacist filled it. Filled it, right. And the DEA is connecting them, I think saying they should have known that this volume was not possible, or something similar to that. Right, right. Which I don’t know if that’s fair or not, but again, you don’t want to get sideways with the DEA.

Yeah,

Marcus: look, I don’t know enough about operating pharmacy to know what, you know, what, what the actual, um, relationship or auditability of, you know, the, the relationship between a doctor and a pharmacy and sort of tracking the patterns of what a doc is, is, you know, submitting in terms of their patterns. I don’t know enough about that, but what’s clear here is the DEA has.

Tied cerebral and true pill together and in what they’ve alleged and you know, that’s pretty serious I mean, I’ve never had a company have the DEA come in, but I don’t ever want it like that’s not a good day That’s scary. Not a good day. Yeah, so I’m sure I’m sure Gary Tam was like I’m [00:13:00] getting off this Right, exactly.

I’m running the

Vic: other way. Yeah, dude. Yeah, ScriptDrop and we deliver drugs You All over the country, we intentionally are not the dispensing pharmacy. Right. So we partner with other pharmacies. But you’re the deliverer. We’re the delivery. And we, we did that strategically to partner with pharmacies to not compete, to not compete, to sort of enable them because we were trying to compete against a pill pack and true pill and all that.

They’re trying to displace the pharmacy and kind of knock them over. Right. You were, you were

Marcus: enabling the pharmacy to have this delivery capability. Yeah. Yeah.

Vic: And. Now that I read this article, sort of a very good side effect of that is it’s also not my responsibility. Like we’re not the dispensing pharmacy, right?

You don’t

Marcus: have that liability. Yeah. So that’s, that’s very good. Okay. Let’s, let’s move on to the, to the big CVS care mark story with blue shield. Uh, this is a big story came out on the 18th. Uh, and [00:14:00] basically, I mean, straight up blue. Blue Shield has backed away from Caremark. And what I think is really interesting is they’re backfilling it, not with another PBM, but with some array of companies.

And they, they, uh, they cited Amazon and Mark Cuban’s cost plus. Right, right. And

Vic: they are concerned about the price of drugs. and trying to find a solution that will be less expensive for their employers. The cost of drugs and the number of drugs that are effective is growing really quickly. I think every employer, every employee I talk to is, is trying to figure out, okay, how do I navigate this and have some visibility where it’s going to cost?

And then you pointed out, which I think is, is probably the better way to read it is they’re a payer competing with CVS. Yeah. And so they don’t want, they don’t want to use their platform and enable them when [00:15:00] they’re competing against them for large employers and other things.

Marcus: Yeah. I mean, this, this to me feels like continued evolution of vertical integration, uh, that we call payvider.

Um, you know, all of the really strong ones. Have a PBM built in Optum has a PBM, obviously CVS and it has a, has a PBM. Cigna has one, Cigna has one, Express Scripts, right? Is there a PBM? Yeah. So, you know, it’s part of the stack that you have, the Blues have been behind on this entire evolution. Part of it is because they’re very fragmented.

We have seen Elevance, which is a very, very strong blue sort of say, we’re going to put You know, was Anthem say, we’re turning into, we’re turning into a full, full on pay lighter. Um, but I mean, I think if you just look at that overall trend, this makes sense. And, and I’m not, I’m not entirely sure. I mean, you know, the shares of CVS tumbled and, um, UHG took a smaller hit than, than CVS, obviously they didn’t lose the business, but the analysts in wall street just sort of extrapolated it as a PBM, you know, issue.

Well, [00:16:00] the PBMs have been

Vic: a cash cow and they make money. For these firms.

Marcus: Yeah, but, but I, I think they’re just going to get placed as part of the vertical stack. That’s, that’s what I think is going to end up happening. And, and I think the key, what we talked about before the show was that you didn’t have Amazon and Mark Cuban’s cost plus as players, even three or four years ago.

Right. And so now that you have these like true hyper transparent generic platforms, you can kind of more say, okay, well, I don’t need a formulary for that at all. Yeah. I can just go direct with absolute transparency. Don’t have to worry. And I can maybe 70

Vic: percent of the formulary. You can go to a fully transparent platform and you have at least two choices.

You have a couple of choices, right?

Marcus: And I’m sure, you know, at the volume that they are going to be buying, they will get better than advertised rates from Amazon and Mark Cuban. You know, so some of the margin is going to, you know, go. Yeah. Go away. They could just negotiate that. And then [00:17:00] for the more expensive, you know, designer drugs or the specialty pharmacy stuff, they’ll just figure out their own path for that.

And

Vic: they’re going to end up building their own kind of focused PBM for those drugs that they care about. Yeah. Or, or maybe the whole man, maybe the blue cross association will, or there’ll be some solution

Marcus: for the blues. Something will, will, will come up for that. But, but I think what is interesting is that.

The, the new, um, hyper transparent generic, you know, drug distributors are creating optionality and, and really putting a dent into the PBM. And this was the intent. This was always the stated intent was, you know, the PBMs are gouging middlemen. And I think this is, this is a really big move. I mean, it’s difficult for

Vic: CVS’s strategy, but it’s great for everyone else, right?

I mean, every employer, every. You know, someone that’s in a fully insured book. The drug cost is the biggest cost. And having [00:18:00] a whole nother set of ways to find drugs. I mean, it’s often less expensive for me to go outside the coverage that I have. And not even use it, and just pay the cash cost. Right. Which is crazy.

That’s how I’m getting some of my drugs now.

Marcus: Yeah, and I think this just further, you know, I think we have stories every week that just indicate that people are not going to sit back and just keep paying more than they think they should. Like, we’re going to keep seeing moves be made around lowering the cost, lowering the cost, lowering the cost.

This is, you know, some of it’s going to come in the form of, you know, Closing hospitals, you know, it’s, it’s, it’s going to happen in all these really brutal ways, but deals are going to be unwound. New deals will be formed. Things will be shut down. Things will merge and it’s all around cost. Everything costs too much.[00:19:00]

Vic: Yeah. And I think there’s something around, um, Complexity for the sake of sort of hiding where you’re making money and making it super confusing for the employers to even understand what they’re buying. And that’s healthcare, isn’t it? That that’s the entire system. Yeah. And that, I think that is on a decline over a long period of time.

I mean, it’s a pretty complicated market, but the PBMs have been sort of in the spotlight by Congress and all kinds of people. Because I don’t know, they’re, they are, it’s, everyone knows that they’re very complicated and they’re making money somehow, but, but they kind of obfuscate exactly how with rebates and all kinds of complexity.

Marcus: Yeah. Yeah. I mean, it’s, it’s really interesting that Mark Cuban was able to come into this space and become a player. Yeah. Well, don’t you think that’s, that’s like,

Vic: I mean, I, I, I love to watch Cuban. What I’ll say about him, he, he was a big investor in Truepil. [00:20:00] And then he also has, I mean, he, he just sort of sees a theme and plays everything he can play to try to learn, which is a good strategy, but this is

Marcus: his, his, this is his venture,

Vic: right?

Yeah. I think he probably seeded a bunch of things and was learning and then decided, well, That I learned from that, they’re clearly in trouble. I’ll do my own

Marcus: thing. Right, right, right, right. Well, I think it’s really cool. I mean, because he’s going to make a lot of money and he’s going to provide optionality that’s going to lower the cost of care.

And to me, like, this is, you know, it’s great. There’s so much opportunity for innovation like this, right? At scale, how are we going to lower the cost of care? So, you know, hats off to, to Mark Cuban for, uh, coming into the space and Meaningfully making an impact

Vic: and, and Amazon continues to put the end consumer as a priority and that that’s helpful.

I mean, they do it in all kinds of markets. It’s challenging when I’m competing against them, of course, but, but as a

Marcus: [00:21:00] consumer, they’re great. Yeah, they’re going to consist consistently drive change. I, I, I mean, I’ll give Amazon their due, but I think it’s, to me, it’s more impressive for Mark to sort of enter on his own.

Yeah, and be in a league with Amazon as part of what Blue Cross Blue Shield is going to look at, you know, leveraging. Um, so, so continuing to talk about the cost of health care and the obfuscation of, uh, of how the financing works story in the Wall Street Journal this week, um, that is more just more bad.

Shenanigans for hospitals, la largely for community hospitals. Mm-Hmm. , you know, onesie, twosie, um, safety net hospitals. Yeah. And, um, it’s, it’s, it’s actually about landlords.

Vic: Yeah. So, um, this company, MPT, they buy hosp me any kind of medical building, and then they lease it back to the same. [00:22:00] Hospital that is, that used to own it.

And so there’s, there’s a lot of hospitals that have owned the, the building and the dirt that the building’s on for decades. Maybe, you know, in some senses for centuries, it’s

Marcus: been an asset.

Vic: Yeah. It’s been an asset. They really haven’t. Uh, I mean, they’ve maintained the building kind of, but they haven’t really like focused on it.

They’re treating patients. Right. And. MPT has worked with a whole bunch of. Hedge funds, private equity funds, different groups to help them monetize that asset. Meaning they buy the building and they give several hundred million dollars to the hospital and then they sign a lease with the hospital so they can lease back the building.

And. In theory, that can work well. Like if the, if the price of the, of the sale is right and the lease is fair, you know, I would argue maybe hospitals shouldn’t be in the business of owning a bunch of real estate that they can’t really keep up with. Right. [00:23:00] But it also leaves, again, lots of complexity. You might pay a little bit extra and then charge a really high lease.

There aren’t a lot of comparables to know like what the square, what the square foot price should be. Right, right. And so they have done this for a long time and now some of those leases are just unsustainable and the hospitals are not able to pay it. The money that they Got has has evaporated, right?

They’ve spent it on whatever and they don’t have any money to pay the leases now

Marcus: Yeah, and and I think part of this how well, first of all, this is the At least they’re framed in this wall street journal story, which I think they take they don’t take Their journalistic integrity lightly here, um, as America’s biggest hospital landlord.

So, you know, I mean, I just talked about how it was in Rochester, Minnesota. I mean, Mayo owns all their buildings, right? So when we talk about the landlord, we’re not talking about the Mayo’s of the world. We’re not talking about the HCA’s of the world. We’re talking about these [00:24:00] hospitals that are struggling.

And when I was trying to find an analogy for how we might explain this to the layman, it was like, it’s kind of like the reverse mortgage thing, right? You know, it’s, it’s a, it’s an. Struggling individual. Yeah. They’ve got this

Vic: deal with their retirement. They have an asset. And they want to

Marcus: keep living

Vic: there, but they don’t know what it’s worth, they don’t know anything.

Right,

Marcus: and they need money. Yeah, right. They need, you know, they need cash. Yeah. So they sell it, but then they gotta pay

Vic: rent.

Marcus: Right,

Vic: right. So all of a sudden, now you’re paying rent for the house you’ve lived in for 40 years. Right. That’s how these hospitals are. Right. And sometimes, so Stewart Healthcare is probably the biggest one.

It’s maybe like a 10 billion, 12 billion dollar health system. It’s pretty big. Pretty big health system. That’s pretty big actually, yeah. It’s a for profit. They, um, they were spun out of the Catholic system, but then a bunch of for profit [00:25:00] owners have had it. They don’t have a, a coherent strategy that I can tell.

Um, they’re the biggest, uh, participant in MPT. Uh, but you’re right, overall, NPT, I, I looked into it, they have a, I think Wall Street Journalists have about 20 billion in medical real estate. And they, they have been caught. The Wall Street Journal caught them reporting earnings using a transaction that was not close, not complete,

Marcus: not complete.

They were said, they said it was complete.

Vic: It was not complete. Yes. And so it helped them meet their earnings for the last quarter. Ooh, that’s, that’s bad. Yeah. They, they, they propped up their own earnings with this transaction and the regulator has not approved it. And it’s not clear they’re going to approve it.

Because the regular, I mean, this is back to this, what we’re talking about with regulators, they are [00:26:00] not comfortable that it was a arm’s length fair transaction. Now, maybe there’s no, I think MPT is saying there’s no other alternative. No one else was bidding and that’s true. But, but the fact is they reported earnings as if it was closed and it’s not closed.

And I think that’s, I don’t think, that’s not allowed. You can’t do that. So, so that was the main story. Uh, but then when we started looking into it, there’s a second story that I think is pretty interesting about another hospital. Yeah.

Marcus: But just, just one other thing here. So a lot of MTP, MPTs acquisitions came from private equity firms.

So there’s obviously a consistent scrutiny of private equity in the hospital space specifically. Buying hospitals, doing the financial engineering to sort of, you know, turn to a two to three X return. Um, MPT has been buying a lot of these hospitals from private equity firms. Right. Um, so private equity firms have been able to generate lots of.

Results. Lots of earnings. And we from Nashville, having [00:27:00] watched many different playbooks of how you grow, have seen some things work well, and some things not work so well in terms of just acquiring lots of hospitals across the country, right? HCA has been an incredible executor of this model. Very, very diligent, uh, in, in their assessment of the markets of the, you know, of the, um, of the facility itself of the management teams before they make an acquisition and have rarely made a misstep in their, you know, their

Vic: network is the population sort of in the normal distance away from the hospital that that you would go if you got hurt or you need a new hip or whatever you wouldn’t fly to California to get a new hip.

Marcus: But they also look at the You know, the economic makeup of the market. That’s

Vic: what I mean. So they want to make sure it’s growing. They want to make sure the population is good size. You have inflow and young families that are going to have kids. There’s a whole bunch of research that goes into whether a market and then a facility in that market [00:28:00] is attractive or not.

Right. Not simply how many beds it has. Right. But some take the

Marcus: strategy of just more, more, more, more, more, buy it up, buy it up, have the scale. Some will go, you know, they probably do some margin of error, you know, 10 percent will go bad, but the 90 percent will continue to grow as an asset base. And well,

Vic: that,

Marcus: and

Vic: then sometimes they have other financial engineering strategies that are going to work no matter how good the hospital is.

Well, I mean, this isn’t an operational thing. This is, well, we’re buying this, Asset it has an operating business, but it also has The land and the buildings. Well, sure. And we can monetize that.

Marcus: Yeah. Well, I mean, that, that works if you, if you don’t think that the percentage of hospitals that are projected to close are actually going to close.

But I mean, there’s a pretty nasty trend out there in terms of how many hospitals are projected to close over the next five to 10 years. So, I mean, if, if [00:29:00] you’re looking at that as your operating business as some form of, you know, risk mitigation. Just depends how long you think you’re going to be in it.

Yeah, that’s right. That’s right. That’s right. If you are. Well, who are you going to sell it off to as a sucker? Right? Doesn’t matter.

Vic: Right? So, I mean, just hypothetically, I don’t know the. the facts and we haven’t done enough research. So I need to say that, but, but there is a strategy of buying up a bunch of facilities that own the building, monetizing the building, paying a dividend to the owners, which are the private equity firm.

And then you have a, a highly leveraged, it’s lease leverage. So it’s a little different than a lot of private equity deals. Everyone knows about the way they put traditional debt on the a lease is a form of debt. So you leverage it up a lot. You pay all your equity back, you have it, you have your return already built in.

Yeah. And then if they operate it really well, then maybe you can sell that asset. But if it [00:30:00] happens to have troubles, then you, you already have your money. And it’s, it’s in a, it’s in a corporation. You don’t have liability in a bankruptcy. And I’m not saying that the private equity firms did that or that we have looked into it, but that is a, that’s a financial engineering strategy that you would do.

And you won’t, you don’t care necessarily about, it can’t close like in the timeframe I hold it, but you know, you want to hold it three to three to four years. So you probably could. Anyway, I don’t know if they did that, but MPT has done a lot of these deals very quickly.

Marcus: Yeah. So, uh, a few months back, March 31st, there was a very specific, um, story of a, uh, a single hospital, uh, Watsonville community hospital, uh, in Watsonville, California.

Uh, it’s the small cities only hospital. And It went bankrupt. Hospital went bankrupt. Right. [00:31:00] Um, and part of it was around the rent. Yeah. Who’s the biggest creditor? And, you know, why would a listener care about Watsonville, you know, community hospital? Well, you might not care about Watsonville cause you don’t know about it, but you might know about Martinelli, which is the apple juice and apple cider company.

Maybe as a kid, you, you, you know, you got that or during the holidays, you have like a couple of bottles of, of that apple cider in your house. So Martinelli’s. That’s that’s their town, you know, as a company town, that’s their town. They have a bunch of farms and they have a bunch of a very large Latino farming workforce.

Yeah. And this

Vic: is, I mean, whether you like their cider or not, this is an hour outside of San Francisco in America. And it’s, it’s That town should have a hospital or like it has to somehow take care of the people if you get in a car accident You shouldn’t have to drive an hour to the hospital or that’s challenging It’s a new kind of America if we don’t have [00:32:00] hospitals in these rural areas

Marcus: Yeah, so so so in this company town, right and Martinelli’s is a brand that many people will recognize They lost Their hospital because it went bankrupt and, and they are trying to raise 70 million to buy the hospital and save it from closure.

And that’s just to like, to pay the debt off. Yeah, that’s just to save it. I still got to operate it. That’s right. That’s right. And so that just kind of shows you the kind of, and that’s a town that actually has a business that’s doing well. Not all towns even have that.

Vic: So when we’re. We talk about this sort of in the abstract that there’s a lot of health systems that are struggling They don’t have the right payer mix or something and all of that is true And these stories just made it much more real to me like there are situations where whether it’s a an intentional bad actor or Unintentional the hospital got in trouble with too much too much lease [00:33:00] debt You I don’t know where the money went that came in from the sale of the buildings, but they don’t have it anymore.

Marcus: Yeah, well, what do you think that the payer makes is at Watsonville Community Hospital? I think it’s all government. Or I think it’s 80 percent government. Well, that’s where the money went. To cover charity care and negative margins. That’s where it went.

Vic: Sometimes. Other times, it is owned by a for profit.

Marcus: Sure,

Vic: sure. And it’s a combination of those things.

Marcus: Um, so anyway, sad story. We don’t have the answer. There’s no

Vic: real answer. This is ongoing and we as a country have to figure out how are we going to deliver care to these communities.

Marcus: I just think It’s important for us to keep trying to pull apart. Um, well, first of all, tell specific stories about hospitals closing.

Like to me, I mean, I drink Martinelli’s every year during the holidays. I don’t drink alcohol. Right. So people start breaking out wine. Like [00:34:00] I kind of reach for some Martinelli’s or something like that. And so that kind of. Brings this home for me. I’m like, okay, like that company and their workforce, this was their hospital.

And I didn’t know that in March, their hospital went bankrupt and they’re trying to raise 70 million. Cause I didn’t know that. And now I know that the reason is because of this MPT, you know, real estate scheme basically. Yeah.

Vic: And, and I, and I know that I have to say, there are some, there are purposes where a sale leaves back can be fine.

Like, if you set the leases correctly, and you’re running it appropriately, and you use the money to improve the facility, maybe you use it to buy some of the diagnostic machines, or you upgrade things, but they’re also, it can be used for

Marcus: bad purposes too. Yeah. Yeah. So, uh, and then final note, we’ll, we’ll make sort of on just how difficult it is for providers right now.

Uh, modern [00:35:00] healthcare came out with a story on the 23rd showing that bankruptcies are mounting in the nursing home industry. Um, I mean, I don’t know what, what really to say more than this is, you know, terrifying as we are. Reaching a place where the boomers are going to really start to flood our health care system.

Unknown: Yeah,

Marcus: look

Vic: at the chart. I mean, it’s really difficult to run a nursing home. Anything in sort of the elder care space. But nursing homes are probably one of the most challenging areas and it’s growing. Kind of alarmingly quickly. The bankruptcies.

Marcus: Yeah. So there were 12 in 2022, there were 13 in 2021. There are projected to be 20 this year.

Right. Um, I would imagine some of that is because many of the, um, relief funds that came in during COVID 19 have expired. Um, and so that’s, that’s sort of the end of that. And we’re, and it’s, I think

Vic: it’s similar [00:36:00] to the. Um, health systems as we’ve been talking about that nursing homes don’t really control their pricing a lot.

I mean, if it’s government paid. They don’t control pricing at all. If they have a mix, they can set their private pay, but they are subject to worker, you know, having to pay workers more and the price of energy going up and everything is going up inflate. We have an inflation and inflation. Yet they’re not getting any more revenue in.

Marcus: I want to read these two paragraphs just to really put a finer point on this. Among those filing chapter 11 was Evangelical Retirement Homes of Greater Chicago, which operates Friendship Village in Schaumburg, Illinois. The large non profit continuing care retirement community offers skilled nursing, assisted living, and independent living.

In its June bankruptcy filing, Evangelical retirement homes listed 10 million to 50 million in assets and between 100 million to 500 million in liabilities in Rhode Island. Three of the state’s 79 [00:37:00] nursing homes representing more than 450 beds are in receivership Herbert Health in Smithville, Trinity Health in Woonsocket and Pawtucket Falls Healthcare Center in Pawtucket Falls.

A receivership is a process designed to allow a company to restructure its debt while avoiding a bankruptcy filing. So, I mean. This is 450 beds.

Vic: Yeah, it’s terrible. I mean, okay, they don’t have enough money to pay their debt. But where do the people go? There’s, I mean, there’s, there’s probably 430 people that live there.

Right. And I don’t think there’s anywhere that they can go.

Marcus: No. So. And, and, and, and, and think about the families that are. You know, trying to care for the loved ones. I mean, you and I are both have parents, right? And I mean, I’m just scared for our generation trying to take care of our parents where this infrastructure is falling apart.

It’s not viable.

Vic: [00:38:00] Yes, and we’ve been sort of kicking the can down the road year after year after year, just like, well, let’s refinance that that, you know, we’ll have zero interest rates forever. And just kick it out. We’ll never actually have to pay it. Right. And now with interest rates coming up, you, you can’t, you can’t do it.

And so that I think that’s part of this too, is that they’re, they can’t refinance it.

Marcus: All right. We’re going to stop and on that happy note, from

Vic: Doug Edwards.

Marcus: Yeah. Talk about jumpstart foundry.

Doug Edwards: Thanks guys. For the opportunity to talk about our pre seed fund jumpstart foundry. My name is Doug Edwards, CEO of jumpstart health investors, the parent company of jumpstart foundry.

We’re so excited to be able to talk about, uh, early stage venture investing. Certainly the need for us to change the crazy world of healthcare in the United States. We are spending 20 percent of our GDP north of 4 trillion a year on healthcare with suboptimal outcomes. [00:39:00] Jumpstart Foundry exists to help us find and identify and invest in innovative companies that are going to make a difference in healthcare in our country.

Every year, Jumpstart Foundry invests a fund. Raises a fund and deploys that across 30, 40, 50 assets every year, allowing ease of access for our limited partners to invest to help us make something better in healthcare. Some of the benefits of Jumpstart Foundry is there’s no management fees. We deploy all the capital that’s raised every year in the fund.

We find the best and brightest, typically around single digit percentage of companies that apply for funding from Jumpstart. And we invest in the most incredible, robust, Innovative solutions and founders in the United States. Over the last nine years, Jumpstart Foundry has invested in nearly 200 early stage, pre seed stage companies in the country.

Through those most innovative solutions that Jumpstart Foundry invests in, we also provide great returns and a great experience for our limited partners. We partner with [00:40:00] AngelList to administer the fund, making that ease of access, not only with low minimums, but the ease of investing in venture much better.

We all know that healthcare is broken. Everyone deserves better. Come alongside us with Jumpstart Foundry, invest in making the future of healthcare better and make something better in healthcare. Thank you guys. Now back to the show.

Marcus: All right. We are going to actually have a happy note here. Um, I actually know somebody who sent a note in our group chat that said that they had their student debt.

Relieved. And I was very, very happy for this person. They, uh, they just welcomed a new baby into their family. And, um, it’s great. And I think what’s, what’s, what’s really good is to understand sort of why the, the debt was forgiven. Um, so in this Bloomberg story that that’s covering it, you know, we talked about it last week.

We saw it in the, in the chart that was in the wall street journal. We couldn’t really explain it, but yes, 39 billion in student debt, uh, for more than [00:41:00] 800, 000 borrowers has been, um, Has been removed, forgiven, forgiven, and, uh, and the, the key is that these are borrowers that had enrolled in an income driven repayment plan and had made monthly payments for at least 20 years.

So basically the terms of their loans. Should have put them in a place where they were done with the debt, uh, but they were not. And so they found a way to sort of get it done and relieve some of the pressure in the economic system. But nowhere close to the entirety of the tsunami of, of, uh, student debt, uh, payments that are about to be turned back on in September.

Vic: Yeah, I mean, I think it’s, we should, you’ve been making payments for 20 years. And I don’t know how they set the income repayment plans, but it’s tied to how much money you make. So, um, you’ve been paying whatever the government tells you to pay every month for 20 years. I feel like we should, we should let, let them off the [00:42:00] hook.

Yeah. But there’s a lot of people that aren’t included in that.

Marcus: Yes, there are a lot of people

Vic: because what’s the total number it gets 1. 7 trillion and so, you know, this is for let’s call it 40 billion 0. 4 trillion right but that’s you know, there’s still 1. 3 trillion, right? You know, they haven’t been paying for 20 years.

They’ve been paying for five years or ten years or whatever

Marcus: Yeah, so you found this this report that Fidelity put out and it’s just talking about saving for college and always trying to

Vic: 529 plan or whatever But then they have this, like, uh, extra little piece talking about the federal, um, you know, policy that now the, the delay of payments is ending.

Right. And it, I was, it kind of scared me, so I wanted to talk about it. It says 65 percent of college students currently taking advantage of the federal payment pause say they [00:43:00] have no idea how they’re going to start repaying their loans once the emergency pause is lifted this fall. So that’s. Almost two thirds, 65 percent of people.

It’s it’s in, it’s in September. I need to find the exact, but it’s in the next month. And now maybe if fidelity

Marcus: calls. So, so, so if we were to evenly distribute it, we’re talking about north of 700 billion that people have no idea how to start paying

Vic: like they already are tight on their, like they make some money, but then they buy food and pay rent and whatever.

And it’s been maybe two, two or three years, right? They haven’t had to pay this student loan. So they’ve gotten used to their cost of living without that. And they don’t know what they would cut. Maybe they’re going to cut their, not have a car anymore. They’re not going to eat. I think maybe if a fidelity calls, it might just [00:44:00] be simpler to say, well, I don’t have a plan and hope maybe that filters up and the government does something for me, I think it’s pretty clear.

There’s going to be a lot of. pain. A lot of cutback in spending where it’s not that easy to cut back. They’re not saving the money and putting it in a fidelity index. They’re going to have to cut back on something that they don’t want to cut back on.

Marcus: I mean, look, just telling the truth. When I was making my sort of social and economic mobility climb, um, I wasn’t even aware of five 29s.

Like I just, I just didn’t even really know about them. And, um, you know, I’ve been fortunate to have some events because I’ve got into the startup world where I had a couple of things sort of pan out. And so I. You, you know?

Vic: Yeah.

Marcus: Some

Vic: you get like a block of money and then put it away for your voice.

Right? Exactly.

Marcus: Exactly. And then, you know, one of my boys decided to go in the military and the other one went to [00:45:00] instate. Right? Yeah. Yeah. And so I’ve been very, very fortunate that, uh, I can basically write the checks and, and it’s, it’s, you know, we don’t have this debt issue in our family, you know? I know.

I mean, I, I personally had student debt

Vic: and I was 49. I’m 52 today. I was 49 when I finished paying off. It was like right before the pandemic. I was paying it off for whatever that is, like 30 years. Um, and it was fine. I mean, I made enough money to pay it and do other things. You were never worried

Marcus: about it, but it took a long time.

It took a long time. It took a long time. It took a long time. And, uh, you know, we won’t even get into the, the real value of the degree versus where it was when you graduated from school in terms of, you know, return on investment and earning potential from that and just real dollars, um, on the return.

It’s. This is, it’s, look, it’s, it’s terrifying. And why do we talk about it on a show that’s supposed to be about healthcare? Well, because healthcare costs too much [00:46:00] and people with no money or not enough money, they end up on Medicaid and that’s a system that is not working very well right now. Right.

Vic: Yeah.

And that’s true. I also worry that one of the places they’ll cut is going to be well vis, like going to see your primary care doc for sure. Like your, Maintenance medication or whatever like and that’s gonna increase chronic disease. Yeah, of course because we don’t because we’re still fee for service Incentive right model.

Yeah, so two thirds of people don’t know what they’re gonna do on average I think it’s something like fourteen hundred dollars a month that is gonna come out of retail sales It’s gonna come out of yes healthcare spending. It’s gonna come out of I don’t know The new car sale is going to be, it’s going

Marcus: to increase bankruptcies, which is going to make a lot of people not credit worthy, which is going to definitely decrease spending and all sorts of consumer activity.

Yes. Um, the [00:47:00] government has been really active doing things. So we, we just talked about the student debt piece, um, which was in the works for a while. Uh, but there’ve been a couple of business moves that, that, uh, that, that have come into play. So the IRS, uh, added a new tax. Um, yeah, this was

Vic: really shocking and pretty brilliant, honestly.

Part of the Inflation Reduction Act. I don’t know how this fit in with that title. They are taxing share buybacks by publicly traded companies at 1%. So 1 percent of the money that’s spent to buy back shares by a publicly traded company. PayPal is in the In the picture here, because they just paid 24 million in taxes, I guess because they bought back, whatever, 240 million.

240, yeah. And so, it’s kind of a brilliant tax strategy, really, because companies are still going to buy back shares, but they’ll buy [00:48:00] back somewhat fewer shares because they have to pay this tax. I don’t know what I think about it. It’s kind of an interesting way to raise money. It’s surprising that it just happened.

And no, I don’t, I didn’t know about it. I don’t think anyone knew about

Marcus: it. It’s a new corporate tax, but it’s on a very specific behavior. And it’s not a behavior that I think is generally not very popular. Right. Um, it’s, it’s on a behavior that is seen as just corporations. You know, not investing in in R and D, not paying employees, you know, not taking care of their communities, but just taking their money and buying their own chairs and enriching their own value.

Yeah, I

Vic: think that’s true. I think it’s also true that, um. The IRS hates it because it’s a way to, you can give shareholders a benefit, but you’re not paying a dividend, which is taxed. It’s like a tax advantaged [00:49:00] dividend, and so I think that’s probably one of the reasons that they are taxing it now, and it’s gonna, it’s gonna raise a lot of money.

Yep. So, that’ll be good for the, U

Marcus: S balance sheet. Well, it’ll be interesting to see whether or not it has any impact on this strategy. Um, it could be that 1 percent is exactly the right number that it’s like, okay, fine. We’ll, we’ll take that hit, but we’re going to keep doing it.

Vic: Yeah. So the, what the wall street journal talks about in the, in the body of the thing is 1 percent probably is fine.

Yeah. Not many taxes have stayed at their original like first time it comes out. So if it creeps to three, 5%, now, now it’s going to really impact like the company’s ability to do that.

Marcus: Yeah. And by the way, just to correct ourselves, so we said two 40, but now that would be 2. 4 billion, right? Cause 1%, 1%, not 10%.

Yeah. Yeah. Okay. Just want to make sure we correct ourselves in real time. I was like, I don’t think that’s quite right. Um, okay. So this is, this is getting [00:50:00] into our business in a very specific way. Um, the

Vic: IRS attacking someone else is not a big deal. Totally traded companies. I don’t appreciate it.

Marcus: Uh, the SEC takes on private equity hedge funds and it doesn’t say venture capital, but it should,

Vic: it is, it’s BC.

Marcus: Yeah. So they, there’s a bunch of sweeping new rules, um, around transparency and driving down fees. But one of the big things is that side letters or this is certain side letters, but that to me, that felt like kind of the legal ease of it. You know, certain, certain meaning all probably

Vic: you can’t have a side letter that’s not disclosed.

Marcus: Okay. So let’s talk about what, what a side letter is. Yeah, yeah, yeah. Almost nobody who’s listening to our show knows what a side letter is. Yeah,

Vic: yeah. So when a VC or a private equity fund, or a hedge fund, all of these, um, kind of private pools of money are raised with what’s called a limited partnership agreement, which just is how the VC firm or the private equity [00:51:00] firm works with its investors.

And it kind of lays out the general guidelines. We’re going to raise X amount of dollars. We’ll, we’ll raise, I don’t know, 500 million and we charge some, some fees to run our business. And then if we have profits, we got to share that. And there’s a lot of details of how the people that are invested in money, the limited partners are requiring the general partner do its job.

That’s all laid out in one document. Everybody signs called the LPA. And that’s the basis for all the funds. And then, often, there are side letters which are sort of attached to that for one particular investor that they want something specific. So that maybe they want the right, a very common one is they want the right to co invest [00:52:00] alongside the fund in certain kinds of deals.

Maybe in all the deals or in some subset of it. And there’s, you can be as creative as you want to be, it depends on what the LP and the GP are willing to agree to. But a lot of firms have many, many side letters, because the standard LPA is sort of a general document, but then there’s all kinds of exceptions, and, and that is, Not going away, but you, you have to disclose all of that to everybody.

Marcus: I mean, I, I think there’s a couple of things here. One, the sec, um, has a split. So Gary Gensler is the chair, um, has to Pierce is kind of the, the, the Republican consistent dissenter. Um, To, to Gensler, um, we’ve heard a lot about them, quite frankly, they’ve been very active fighting. He’s obviously winning because he’s a chair and he’s got three to two, you know, [00:53:00] um, sometimes four to one is when sometimes she’s the only objector.

Yeah, this was three to two. This was three to two. Um, You know, he, he has made a lot of noise in the crypto space,

Vic: right?

Marcus: Um, that’s where it’s been most public. It’s been most public with hacking coinbase and

Vic: lots of ways, but coinbase is probably the biggest name. Most people know that he’s, he’s basically saying.

All the coins that are traded on Coinbase, except for Bitcoin, are illegal. They’re securities. Yeah, they’re securities, and Coinbase is not running it correctly. Yeah,

Marcus: yeah, yeah. They’re not registered to be able to be in exchange for securities. Yeah, and Coinbase has pushed back on that. So they’re currently still fighting.

Right. They said these are not securities. So anyway, As I read this and I really realized, Oh, this is the same split. It’s still Gensler versus Pierce here, breaking, you know, breaking out. But, but now the principles, as opposed to being imposed to crypto are being applied to the private market. And so I think we really are going to [00:54:00] have to watch this closely because, you know, the crypto thing is you and I know we don’t, we never talk about crypto on this, on this podcast, but we, you and I track crypto and we know this, this fight’s been going on for years between these two and it’s gotten really ugly.

Right. It’s really ugly. And so this, this is the, the first sort of move in the private space. And I want to just read the quotes from, from Gensler and Pierce here. So, um, Gensler’s quote is at the core was addressing some of the opacity in this field, our investors, large or small benefit from greater transparency.

All right. So that, that feels like a very Gary Gensler kind of quote. It’s hard to, hard to fight with that quote. And then Hester Pierce said the rulemaking is ahistorical, unjustified, unlawful, impractical, confusing, and harmful. That’s, that sounds like Hester Pierce. I wish I could have been a fly on the wall at that, at that meeting.

Um, and so, you know, I mean, I think what’s really interesting is that [00:55:00] the way that I have always thought about our industry is the SEC. does not allow everyday people to be involved in our industry. And how they regulate it is they say, unless you’re an accredited investor, you can’t even play in this space.

Right. But if you’re an accredited investor, it’s pretty, I mean, you know,

Vic: it’s assumed that if you’re accredited, you can, you can negotiate for yourself. You

Marcus: can negotiate for

Vic: yourself. You understand this stuff and you

Marcus: can negotiate. That’s exactly right. You can negotiate for yourself and we’re going to let these, Organizations basically structure funds, you know, we’ll create, you know, we’ll create some regulation around it.

And there’s a lot of stuff you can’t do, obviously, you know, you read your reg D and it’ll tell you everything that you can’t do in terms of the way that you structure the side letters is a really clear example of this. You know, this is how funds are constructed today. Like if you have a fund and you have a major investor in it, there’s a side letter, there’s a [00:56:00] side letter.

There’s a side letter like that’s how it’s done. Okay. So, I mean, obviously, if there are no side letters, let me just say what’s what is going to happen. I think it’s going to be harder to get funds off the ground. Um, purely because there’s The agreement called the limited partner agreement is going to take longer to get done, right?

It’s going to have to be constantly amended because you’re going to have lps are going to say I must have this provision in our agreement and and Because you can’t have a side letter everything has to be in the lpa And so you’re going to have to be constantly amending that that’s going to that’s the raise legal fees

Vic: I think probably I don’t understand the legal stuff that way, but I believe You The sec is killing side letters.

Yeah. They can’t actually prevent side letters. So making you disclose all the side letters, a hundred percent, [00:57:00] it ends up like you might as well just put it in the LPA, put it

Marcus: in the LPA. Right. But that’s going to make the LPA so unwieldy. I mean, yeah.

Vic: And so, I mean, obviously. We’re in this space, and we have LPAs and side letters, so I have to say I’m not independent in this.

Marcus: No, of course not.

Vic: But I agree with the MFA, so there’s a lobbying group, a bunch of hedge funds that was in the Wall Street Journal. Their quote is, This is going to increase costs, undermine competition, and reduce investment opportunities. Really, it’s going to prevent new funds Yes. Yes. from having a reasonable chance to get up and get started.

Marcus: It’s, it’s, it’s, it’s going to functionally be a barrier to new funds. That’s, that’s exactly right. I think it’s

Vic: like GDPR. Like, it, it’s a hassle for everybody. Yeah. But the big firms, you know, they have, they have Citadel, Bridgewater, Millennium in here. Yes. Apollo, Blackstone. Those funds have a lot of resources.

Yes. And they have. They’ll figure it out. Lots of [00:58:00] LPs. They’ll figure it out. And they won’t let in some smaller LPs probably, which is not good for the overall market. But then a new firm or maybe someone who had success there and wants to break off with two other partners and start, start a new private equity firm, which is healthy and the American way is not going to be as easy to do.

Marcus: No, because what typically happens is if you are a new fund, you generally have an anchor, which is someone who really, you know, likes you and wants to help you get off the ground, right? With your funding one, you have no track record, right?

Vic: And they get a side letter with a

Marcus: special deal. Of course. When they’re the anchor, they’re going to say, you know, Hey, listen, because I’m basically getting you off the ground and legitimizing you, right?

You know, here’s all the little benefits that I want. And that is not that it’s not favorable for you as the fund manager, how to have to disclose that to all the future investors you’re trying to get to round out your fund. Well, what will happen is everyone’s [00:59:00] going to have that deal, right? So you’re going to have to do it for, well, everyone’s going to have to have it because you’re going to have to disclose it.

And then everyone’s going to say, well, I want that too. Right. It’s going to hurt the fund manager. It’s going

Vic: to hurt the fund manager. And I think in the, in a five year view, there will be fewer options. Yes. And so it’ll hurt the investors too, because there will be less choice. And so, I mean, I’m, I’m sort of more of a free markets perspective in general.

And I’m totally biased in this because I have side letters. But I think that in the long run, the SEC is trying to bring transparency and transparency Free sort of open opportunity to all the LPs in a fair world. But what’s that’s not going to happen. No, what will happen is there’ll be fewer choices and only CalPERS and the really big LPs will get in.

Marcus: Yeah. So, so the, I think the punchline is it [01:00:00] will take some years for this to play out, but if this rule stands. If this rule stands, uh, I think this is more headwinds for, um, early stage capital in the market. Yes. Less, less innovation at a time when we don’t need that. That’s right. That’s, that’s the, that’s the headline.

Okay. And, uh, final financial story, the Atlanta fed signal that they have a model and that the, we should expect in the third quarter for GDP to, uh, get a 5. 8%, uh, growth rate. And

Vic: so the summary of this is, which is a lot, by the way, it’s huge. We’re getting taxed. I mean, it was basically flat, maybe just one percent, two percent.

I think it’s probably one percent in the second quarter. So it was slightly positive. This would be really big growth and wonderful. But the summary of these three stories to me is their increases taxes [01:01:00] on a whole new way to tax. The SEC is coming after private equity in a way that’s going to be a challenge and limit competition and new fund formation, and yet everything is going great and the economy is growing gangbusters.

And I don’t know if I believe that, but whether I believe it or not doesn’t matter. This is the, the US Fed, the Atlanta division of the Fed coming out with its model, which says to me that their analysis. Is there’s no reason to cut rates. Everything is going great. That’s right. That’s what I mean. Um, Powell will speak tomorrow from Jackson hole and who knows what he’ll say, but, but this is, I think a signal.

I mean, of course he knows they put this out of course. I mean, they are showing that we’re going to have a soft landing and everything will be fine, even though two thirds of people have to start paying student loans and [01:02:00] they have no idea how to do that.

Marcus: Yeah. I mean, one of the big things they talk about here is how.

U. S. single family, uh, home building surged in July and permits for future construction rose amid an acute shortage of previously owned homes. Yeah, but that’s

Vic: because no one can move.

Marcus: Exactly. Everyone’s locked in. But what they’re saying is, home building’s growing. That’s good. This is good for the construction industry.

Right? Don’t worry. We will, we will house the people because we’re going to grow our construction and our development, uh, industry. So that’s good.

Vic: I mean, the economy will do whatever it does, but it’s pretty clear the Fed’s not cutting anytime soon. In my mind.

Marcus: Yeah. And also, I think they’re saying that rates are not, um, stopping people from building homes.

Right? So new inventory will be created and the rate is not prohibitive to that.

Vic: Yeah. Okay. I hope that’s right.

Marcus: All right. Uh, final story. We’re, we’re, we’re backing off of, uh, all the finance stuff. You [01:03:00] found, get back to healthcare. Yeah. You found, you found this story in the New York times and I think we just can watch the New York times probably every week for a great story on really the heart of healthcare.

Vic: Yeah. So, um, The gender transition, gender clinics has been kind of a battleground and over politicized, or at least politicized, we felt it here with Vanderbilt, but it’s all over the country, it’s all over the country, and I thought the New York Times did a really good job in this story, it’s a long story, very detailed, but they talk about A Washington University, kind of St.

Louis based clinic for children, teenagers, that have, um, concerns about their gender identity, and are needing counseling, and are considering whether they want to transition, and it takes a while to dig through, but, but the summary is, it started off with, I think, two [01:04:00] clinicians, working maybe 10 hours a week seeing patients.

And they had a very organized process that you did counseling for a while. They did offer transition services with the medication to, to stop and everything. Um, but it was very, um, slow and methodical and they had research backed on it and I think very well done. And there’s some percentage of people in the world that That watch your transition and I think that is that’s been true for a long time

Marcus: and

Vic: there’s a full process.

Marcus: It’s not just like you want to transition. You don’t just get the

Vic: meds immediately. And what happened is that they got flooded with people really suffering and wanting help where they couldn’t see all the patients and they didn’t have the capacity. So they did what? Any clinician [01:05:00] would do, which is try to find other people to help with some of these patients.

Because volume is good in healthcare. Volume is good, and they felt like there’s a lot of people in need. Of course, of course, but And both, like we need money, but I don’t know that these people were that focused on the money, that they were like, A waiting

Marcus: list with too long. Yeah, but, but look, I’m not saying money from, from a profit perspective.

I’m saying money as you need money to operate. Yes. Right. And so it’s very hard. I mean, yes, you’re looking at the child who needs, who needs help and needs support. Um, and, and I’m sure it’s very desperate because there are not a lot of options for support anywhere in the world, I would imagine.

Vic: Yeah. I think they were driving from all over.

Yeah.

Marcus: But, but also. You know, more volume equals more money equals more ability to do the work, right? Um, because that’s the way that it’s set up.

Vic: Yeah. And so there are not a lot of [01:06:00] clinicians in the country that are trained in this. There aren’t enough clinicians in behavioral health at all. Yeah. In anything.

Definitely in behavioral health. And so I, my interpretation, and it, maybe it’s the reporter’s writing, but it seemed legitimate, they did the best they could. They hired people that were licensed, but maybe didn’t have this same kind of extensive training in transgender work, but they were psychiatrists or counselors, or they’re in this space.

And more patients came, like the more they served, the more came. And then they added some contract labor. And they just couldn’t, they couldn’t train everyone quickly enough. And so there were several examples where kids, teenagers were granted medication without all the counseling and things. And it was not great outcomes.

Some of the kids had bad experiences and [01:07:00] now regret doing it. But unfortunately, you know, it can cause irreversible damage. And so it just struck me as a balanced story of like, the real problem is Teenagers around St. Louis and in the surrounding areas, there’s a lot of teenagers that are really confused, really suffering, that need help, and our system is not providing the help.

Marcus: And principally, they need behavioral health support. They need counseling. They need advice.

Vic: They need support. They want to consider their identity. Right. And they don’t know where that will end. It might mean transitioning. It may mean that they, after considering it through several years of counseling, they decide not to, it may decide they go forward.

They tried to answer the need and they were not able to find clinicians and it went badly, but I don’t blame the [01:08:00] people. I think the problem is we have a lot of, a lot of patients that, that need behavioral help and we don’t have

Marcus: the systems to treat them. We have a lot of patients. We have not a lot of clinicians and we have a lot of pills, right?

It’s just like trickle exactly in three. Yeah,

Vic: right. Yeah, so eventually it just the standards slip a little bit Someone doesn’t have quite the training. I Take the assumption that no one did something intentionally bad, but people were soon best

Marcus: intent. Yeah,

Vic: but he people were harmed and This the sad thing is that this hasn’t ended in that there’s people today that are suffering And so it just struck.

I think it was a well written story we’ll put a link to it, but it really highlights the the challenge and the and the problem and the lack of behavioral health Support in our country

Marcus: as as difficult as it is Was and I’m sure that I’m very much, you know, [01:09:00] I’m very much

offering an opinion with no actual You know insight at all into the situation, but from my seat my Monday morning quarterback seat Having a really really long waiting list and sticking with the really high caliber Clinicians and making sure the process was executed at the highest and most pristine level.

That’s the, that’s the least bad thing you could do would have been the least bad thing. Yeah, right. That would have been the least bad thing, right? Um, and that, that is very, very hard. It’s very, very hard, but it prevents the entire practice from being jeopardized, right? Right. Which is kind of where I think this, this, well, and I think, especially in a highly politicized world where people are just looking for something like this, right?

Vic: And [01:10:00] I mean, it’s Hippocratic Oath, do no, do no harm. Like, I know the clinicians want to help the kids, but you have to first do no harm. Right. Right. And so I think you’re exactly right having a long wait list and having only the experts working through this very regimented process. And this

Marcus: is awful. I understand that what I’m saying that that’s also bad is

Vic: awful.

I understand people on the wait list that are suffering by definition. They’re suffering. I understand that the alternative of rushing them through and finding someone who does. Marriage counseling and has a license in the state, but they’ve never treated this before that is Destined to have problems.

Yes, it just it’s just not gonna work So the answer is we need to train more clinicians, but that’s 10 years 20 years It’s gonna take a long time. We don’t have people applying to do it. I’m gonna take a long time So it’s a, [01:11:00] unfortunately, our society is, is creating people that have a lot of pain, a lot of, a lot of confusion, a lot of behavioral health issues.

I mean, the true pill Adderall thing is also a behavioral health. Totally. I mean, it’s just. People with

Marcus: ADHD are suffering. Yeah. That’s, that’s, you know, um. Yeah. All right. Well, look, we. I Just just an appeal. I mean, this certainly one of our less positive episodes. Um, but, but look, we’re we are in a time of, um, we are in a very, very challenging time.

I don’t think there’s any any question about it. I mean, uh, I, I don’t know. I’m recognizing it in all the conversations I’m having, not just the ones I’m having with Vic on a weekly basis on this podcast, but with just people in healthcare, you know, with my, my, my fellows in the Aspen Institute, Health Innovators Fellowship with, you know, people I’m meeting in HFMA with just friends [01:12:00] of mine in the healthcare industry, my friends in the Nashville healthcare, uh, you know, fellows program.

It’s, this is a hard time in this industry. And, um, I think we have to continue to, to try to, uh, talk through the problems as depressing as they might be, uh, because once we can get to what the root cause is, we can start to, we can really start to innovate and we can really start to find some solutions.

And, you know, that, that’s, that’s why I was giving kudos to Mark Cuban for, for his solution. His solution is a very good first principle solution, right? You know what I mean? Just. Take the unnecessary cost out of the drugs that are widely available. Yes. There’s going to be some variance in the quality. We, that’s a whole different issue.

That’s a whole different issue, but the middleman clearly we don’t need that right now with all the other challenges we have from a cost perspective, we don’t, we don’t need that right now.

Vic: [01:13:00] Yeah. And I, I, I think that, uh, I mean, there’s a lot of hard issues, right. But what I like about having this conversation with you is that.

We can talk about a gender clinic, which is super emotionally charged and politically charged and gets used for political purposes that have nothing to do with really helping the kids and talk about the issues without sort of going to Raising our voice and pointing fingers and saying that anyone did something intentionally bad, right?

And try to understand what’s going on and what can we do that makes a Let’s make a small positive change. I mean, we make investments in companies that are bringing innovations to healthcare. There are so many places that need help. It’s close to overwhelming. It’s a never ending list. Yes. But, but doing it for political reasons or to raise money or to put up some teenager.

[01:14:00] On the front page of the paper is not the way to do it. So I like to point out this story, cause I think the times did a good job sort of fleshing out a full story as opposed to just like a hit piece where they get the, like the headline thing. And so I think that was good.

Marcus: Yeah. Our system is challenged.

It’s, it is a systems issue. Um, it had a really flawed, uh, design and it’s an industry that should be regulated, but You know, in a lot of ways, the regulation is dependent on the quality of, of, of our, our government. And right now we’re very challenged in that respect. And so, um, that makes it even harder.

You know, it makes our job as, as, as free market innovators that much harder, you know.

Vic: Yeah, I mean the reason, I understand why Silicon Valley tries to roll over the regulations. Yeah, sure. They, they see It’s just not going to work. It just doesn’t, it doesn’t, it’s not successful. No. Right, right. [01:15:00] If I thought it was going to work, I’d be doing it too.

Right. I just think it’s not the right strategy, but I understand the, the emotion of it. Sure. They’re standing in the way. We need to find a solution. It’s, um, it’s too risky given the power of these

Marcus: regulatory bodies. That’s right. So, um, next week we’ll talk about Powell. Um, it’ll be my last week in the studio for, I think just one week, uh, cause, um, I’m flying off to worlds next Friday.

So we’re going to record in the studio before I fly off to worlds. It’ll be my last, my last thing I do for work before I

Vic: go. That’ll be good. Focus. I’ll, uh, I’ll have a last word of encouragement before you go beat up a bunch of people.

Marcus: Yeah. Um, so I’m looking forward to seeing what pal says and, uh, hopefully we have some better, more positive things to talk about next week.

We will search for some more positive things. Yeah. Um, anyway, until next [01:16:00] week.