TO MY LIMITED PARTNERS,
In March, a bank valued my clinics at 8.4 times EBITDA and asked me what I would do if the government became my only customer. I said I would raise volume. Six rooms since have written the sentence down. Nobody in any of those rooms asked what raising volume requires. I did not volunteer it.
You have already read the poll. NPR carried KFF’s numbers this week: two-thirds of Americans now favor Medicare for All, the highest reading in at least a decade, and fewer than half say they can afford their own care. Up to 355,000 Michiganders are expected to lose their Medicaid in 2028, because a law already signed took it away. Our own Michigan coverage has the same two-thirds standing in the same heat. A crowd in Lansing chanted “Money out of politics! Money in your pocket!” and a candidate promised to take our inventory off the market. The nurses rallied for him in San Francisco last week — 1,500 of them. I read that number twice. It’s a labor market. I have ordered 340 additional chairs.
You read the poll as a referendum on what the patient deserves. I read it as a receivables forecast, and I am on the favorable side of it. Here is why. I own 22 outpatient dialysis clinics across 4 states. I also own the medical debt of 31,000 Americans. You own it with me. Put the poll down. You are going to ask what a town hall in Lansing has to do with a holding company in Richmond, and the answer is that I am the reason the town hall exists. Not the only one. Not even unusual. That part comes later.
I will show you what the inventory is. Nobody in Lansing has ever seen it.
Start with the person who runs the floor I own outside Macon, Georgia. Verna is a cannulation technician. She puts needles in. Sixteen patients a shift, 3 shifts a day, 6 days a week, 22 years. Every cannulation in that building goes through her hands, including the ones she finds by feel because the patient is too swollen to see. I pay her $21.30 an hour.
One technician per shift. Sixteen chairs. A second pair of hands costs $21.30 an hour, which is $44,304 a year in one building, which is $974,688 across the chain. At the multiple the bank gave me in March, that is $8.2 million of enterprise value I would be handing to a nurse.
Don’t look at me. Look at the multiple. It is the only figure in that building that has never once changed.
Her shoulder went in April. She works through it. I have not asked her about it, because asking produces information, and information has a carrying cost. She asked for the second technician in February and again in June.
Both times, unsigned.
Read the next sentence twice.
Her training the incoming hands is the most valuable hour in the building. She is the only person who can explain the machines to them. I have told her to be thorough.
Thoroughness is free. I have never once been billed for it.
Now read the next sentence twice.
Maris is Verna with a balance. She is 68 years old, end-stage renal disease since 2023, 62 miles to my nearest door because the clinic in her county closed and did not reopen, and $738.60 sitting on her account for the part Washington does not take — the deductible, the labs nobody codes as covered, the ambulance in February. I don’t think of her as a patient. I think of her as a $738.60 receivable with a mileage problem, by which I mean a woman. She works Saturdays at a hardware store. That fact is not on my ledger and never will be.
I could forgive the balance. It is 0.02% of what that clinic grossed last year, which means forgiving it costs me $738.60 and approximately nothing else. I am not forgiving it, because the buyer’s diligence model values my receivables at face, and a forgiven balance is a face that has been lowered. She signed the form packet on her first day, in the parking lot, because the chair was already full. Say the moral part last, after the number. The number is 8.4x.
You are in the debt portfolio as well as the clinics. We bought 31,000 accounts for a figure I will not put in a letter. One of those accounts belongs to a woman named Nadine. She is a voice on the collections floor I own outside Saginaw, Michigan. She calls sick people about the money they owe, and she is good at it, and I pay her $16.10 an hour to be good at it. The explanation of benefits you set on the counter and didn’t open. Her screen holds a thousand like it.
The autodialer gives her 4 seconds between calls. It used to be 12. I took the 8 back. Eleven more calls an hour. 88 a shift. The 8 seconds are worth $0.0011 each. I’ve calculated this, because I calculate everything. The difference between 12 seconds and 4 seconds is the difference between a voice that sounds like a person and a voice that sounds like a machine. She sounds like a machine now.
That was the point.
Here is the part I will show you because you are partners and you should hear it from me before you hear it from the news. Her account is in the book. I bought it in March. The balance was $7,800. I paid $312. That is $0.04 on the dollar, and the seller threw in the interest. She has been collecting on it for 7 months. She does not know. I know. I set the flag to “do not contact” so the system never calls her. Not out of kindness. Out of inventory management. A collector who finds her own name in the book is a collector who starts asking questions, and questions are bad for yield.
She will retire the account in 11 years, if the interest does not move. We will collect $7,800 on a $312 purchase. The difference is ours. The refused cost is the $312. I could have left her account out of the purchase, one line in a spreadsheet, and the seller would have taken $312 less. I didn’t leave it out. The $312 is less than the monthly fee on the software that runs the dialer. We pay the software. We do not pay the account.
Dwayne works the charity-care desk two floors down from Nadine, reviewing the applications from people who cannot pay and denying the ones that do not qualify. His mother’s application came through in February. He denied it. He did not know it was hers. The system strips the names. I set it up that way. A man who knows he is denying his own mother is a man who might start reading the applications. She is 74. She is on the payment plan. He thinks she did not qualify. She did not qualify because the desk is ours and the qualification is a number we set.
Widen the frame. Here is what the town hall is only the loudest room of.
For 40 years the profitable thing in American medicine has not been the cure and not the care. It has been the gap between what is charged and what is collected. Every party in the system lives off that gap: the hospital, the insurer, the broker, and the man who buys the bill when the hospital gives up. The friction is not a bug in the machine. It is the machine. We are the men who own the gap. A single payer squeezes the gap on the price side and doubles it on the volume side, and I have not heard one sentence from either party’s economists about which of those two wins in a building like mine. That sentence is mine to write. I will write it in March, in a room with four other owners, and the language will be transitional pricing support, and it will pass.
The creditor is older than the hospital. The man who profits from the man who cannot pay is the oldest arrangement there is, older than the insurance card, older than the deductible, older than the chant in Lansing.
For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.
— Matthew 25:29, King James Version
That is 2,000 years old and it is the model. I did not write it. I charge tuition to teach the arithmetic that follows from it, and the seats are full. One hundred and forty finance students a year at Warden, and 9 of them price hospitals for a living now. One of them wrote the diligence model that valued this chain at 8.4x. She got a B minus in my Tuesday section because she carried the bad-debt assumption to year 3 and stopped. This year she carried it to year 7, and I wrote her a note, and the note said: better. Here is what my students never get right the first time. I am not unusual. I am a curriculum. No Senate candidate can close a faculty that has been graduating into the revenue cycle for 40 years, and the ones I have graduated are faster at the subtraction than I am. I say that the way a man says his son hit the ball farther than he did.
If the bill passes, the uncompensated line goes to approximately nothing, because there is no such thing as uncompensated care when the government is the only account, and the people who currently miss treatment because they cannot pay will arrive at my doors. I have never once asked where my demand comes from. I have never once traced where the payment plans go when the last installment clears. I haven’t looked.
The chairs arrive in March. Nadine’s shift ends at 6. She takes the headset off and her ear rings for an hour. She has a $7,800 balance she is collecting on for us. She has a $16.10 wage. She has a 4-second interval. She will never know any of it was ours. That is the part we keep.
The books balance. They always balance. Your distributions are current.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.