They took the fees, loaded the debt onto the hospital, and now that the debt is coming due they want the country to call it a crisis. A Guardian report describes an industry facing what its own executives call an “existential crisis” — more than 13,500 companies sitting unsold in private-equity portfolios, including 1,536 healthcare businesses and 2,563 consumer firms, the legacy of a buying spree that put Saks, Eddie Bauer, Kmart, JoAnn Fabrics, and the Steward Health Care chain into bankruptcy and left whole communities without a local hospital. The firms and their portfolio companies employ more than 13 million people. Thirteen million Americans work for companies owned by funds whose names they do not know, in towers they will never visit. The industry calls its predicament existential. I call it the bill, and the bill was always coming. The only question was who would be left holding it.
The strongest case for the funds is not difficult to state. A struggling business may need capital, discipline, or a new owner when its old management has failed. A fund with committed capital can carry a company through a hard stretch where a lone owner would have to sell. The American Investment Council says its firms are “committed investment partners” able to keep funding companies when other investors retreat. A Boston College finance professor quoted in the same piece makes a parallel point: leverage is what determines whether a company fails, and a private-equity-owned firm is no more likely to default than any other company carrying the same debt. None of this is false. A rural hospital cannot be sustained by nostalgia, and a failing retailer is not rescued merely because its storefront once mattered to a town. I grant all of it.
None of it answers the question the article keeps circling: why do these companies carry so much more debt than anyone else? Because the debt is the design.
The leverage is not weather. It is the plan. The fund buys the company with borrowed money, and the company — not the fund — is on the hook for the payments. The fund extracts its fees and sometimes its dividends off the top. The cash flow that once fixed the roof, trained the staff, and kept the safety equipment current is diverted to creditors and equity holders; the University of Chicago’s Business Law Review, cited in the piece, says so in so many words. Recent studies put debt at roughly half the enterprise value of private-equity-backed companies. The buyer may call this ownership. The town experiences it as abandonment with paperwork. Then, when the exit door closes and the next sale will not cover the debt, the fund calls it an existential crisis and the town is left holding the bag.
I used to trade agricultural futures in Chicago. I know the seduction of a claim detached from the thing beneath it. On the screen, a bushel is a contract, a hospital is an asset, and a company is a stream of payments. The farmer who delivers the corn never sees the trader who priced it. The men who make those claims do not need to know the names of the people who depend on them. They need only know the exit price.
That is the betrayal. The old conservative language promised stewardship, settled work, local control, and institutions passed from one generation to the next. The modern fusionist bargain delivered the opposite: absentee ownership, financial engineering, weakened labor, and communities told to accept the wreckage as the price of freedom. This is not the work of some alien force. The movement that called itself the party of local control built the legal architecture that made it possible — the carried-interest loophole, the antitrust abdication, the celebration of creative destruction as long as the destruction happened in someone else’s town. It called it freedom when a fund bought the local paper, the nursing home, the dentist’s office. It called it efficiency when the free cash flow went to New York instead of the roof. It preached moral hazard and market discipline, and now that the discipline has arrived, it wants the rest of us to call the wreck a crisis and find someone to save the companies.
This is not a story of one unlucky investment. Private-equity-backed companies accounted for the largest share of major corporate bankruptcies in 2025 and the first half of 2026, according to research by the Private Equity Stakeholder Project. More than 60 percent of large manufacturing bankruptcies last year were private-equity-backed. Steward Health Care collapsed, costing thousands of jobs and leaving communities without a hospital. Saks, Eddie Bauer, Kmart, JoAnn Fabrics — the brand hollowed, the store closed, the patients moved an hour away. Leverage does not become virtuous because it is arranged by sophisticated people. This is not a market disciplining an inefficient firm. It is a property claim severed from responsibility.
The pattern is so familiar by now that we have stopped being shocked by it: record profits alongside terrible service, the empty Kmart, the poorer fast-food meal, the clinic that has become a chain, the local hospital whose emergency room is suddenly a balance-sheet problem. The language of efficiency often conceals a simpler fact: the people paying for the transaction are not the people who negotiated it.
And here is the part that should make a conservative’s blood run cold. The next proposal, already in circulation, is to put the workers’ own retirement money into the funds — as states scramble to build retirement programs for people with nothing saved, Washington wants to feed what little they have to the machine that bought their hospitals. They put a casino in every man’s pocket and called it liberty. Now they want him to bet the hospital.
I know what a town-built hospital looks like. The kind raised by a community for its own use, paid for by local fundraising, owned because it was needed. That is what subsidiarity actually means — the thing held at the lowest level that can hold it, by the people it serves. Catholic social teaching has a plainer answer than either the private-equity apologist or the state-capitalist reformer. Property is real and good, but it answers to a prior truth. The earth was given for all. In Quadragesimo Anno, Pius XI called it a grave evil to assign to a higher body what lesser organizations can do for themselves. That is subsidiarity — not government indifference, and not corporate dominion. A fund’s claim on a hospital’s cash flow does not outrank a town’s claim on its own hospital.
The left is right to demand oversight, transparency, and protection for patients and workers. Senator Elizabeth Warren’s proposal to impose criminal penalties where healthcare executives’ looting results in a patient’s death addresses a genuine moral horror, if the underlying conduct is proved. I do not object to a jail cell for an executive who loots a nursing home and a patient dies; that is not socialism, that is the Seventh Commandment. Executives who treat nursing homes and hospitals as extraction sites should not be protected by the corporate veil while patients and workers absorb the loss.
But the cure cannot be another distant command structure that assumes Washington will possess better knowledge, better motives, and better local judgment than the people living with the institution. A concentrated state can fail in the same way concentrated capital fails: decisions move away from the people who bear the consequences, and the institution becomes answerable upward rather than outward. The coming fight will offer two wrong cures. The first is the bailout — let the fund take the loss it earned, and let the lesson land where the risk was taken. The second is the state as the new owner of everything the funds broke, which is the same disease in a different coat. The question is not whether government may set a floor. It must. The question is whether the people in the building will have any ownership, voice, or power after the floor is set.
Healthcare facilities should be barred from being stripped while patients depend on them. Debt, ownership, fees, and related-party transactions should be visible. Workers and communities need enforceable seats at the table. But the long answer is ownership that cannot flee as easily: worker cooperatives, nonprofit and mutual hospitals, community land trusts, credit unions, and locally governed networks that keep surplus in the institution rather than sending it to an absentee fund.
The cooperative is not a sentimental relic. It is a business in which the people who use or work in the institution possess a claim on its future. It can fail; managers can become oligarchs; members can grow inattentive. Co-ops fail too; I have sat through board meetings that would test a saint. Those are reasons for democratic safeguards, not reasons to hand the keys to a fund whose legal duty is to leave richer than it arrived.
In Friendship, I manage a farm cooperative. The work is slower than a leveraged buyout and less glamorous than a Chicago exit. Members sit across the counter from one another. They know which farms are in trouble, which debts can wait, which improvements must be made, and which promises cannot be priced away. That knowledge is not inefficiency. It is the practical knowledge no distant owner can purchase after the fact. Why is this harder? Because a co-op cannot conjure money by loading the future with debt, extracting the real estate, and selling the shell. It must earn trust before it earns scale. That is precisely its virtue.
They will tell you the industry is too big to fail — thirteen million jobs, too important to let go. The same men said that about the banks. Let the fund fail. Let the fund’s investors and managers take the loss they earned; what must not fail is the patient, the worker, the pension, the local service. They sold the familiar to the unknown and called it progress, and now the unknown wants to be saved.
Conserve what, exactly? The fund’s exit, or the hospital’s open door?
The answer is not a stronger landlord. It is a different kind of ownership: the mutual, the cooperative, the credit union, the local institution whose members can remove its managers and whose surplus remains among the people who keep it alive. Leave the town its life.