How the BlackRock scandal changed the way we think about medicine
I’m not one of the few people who believes that healthcare will be privatised in America.
But there’s a chance that we will have to change that.
BlackRock is a company that has grown exponentially in the last two decades.
Its CEO, Stephen Schwarzman, has become a leading proponent of what he calls the “Blackstone-like” approach to healthcare, which he says will deliver the best value to patients, with little risk to shareholders.
“The private sector does a lot of the things that the private sector doesn’t,” Schwarzman said at the start of my interview.
But his idea of healthcare, he said, is “the healthcare of tomorrow”.
He argues that a private company will provide more value than a public system because the healthcare costs of patients will be spread around the country, which would mean fewer doctors, nurses and hospitals in hospitals.
Blackrock has built a massive business in the healthcare sector, and it’s now seen as a model for other private companies.
But it has also sparked controversy.
In November last year, it was revealed that Blackrock employees had been paid $200 million in bonuses without giving them a penny of their pay.
The company had received $1.3 billion in funding in 2013 and 2014.
In response, some of its critics have accused Blackrock of “selling out”.
Schwarzman was in fact quoted by Bloomberg News as saying Blackrock was “going through a very difficult period” and had a “lack of accountability”.
He also described Blackrock’s “hugely successful” healthcare business as a “model” for other companies, but said that private companies would have a different approach.
And he did say that Blackstone would not be privatising healthcare in the US.
But now, with the scandal engulfing Blackrock, he says he’s changing his mind.
He’s now suggesting that the company may have to sell itself.
“We have to make the difficult choice of selling Blackrock,” he said.
Schwarzman has a point that the healthcare industry is a lot bigger than Blackrock.
It’s not just a healthcare company, it’s a huge healthcare sector with a huge workforce and billions of dollars of revenue.
But that doesn’t mean Blackrock should be privatise in the USA, he argues.
He believes that private firms are in a better position to do what’s best for the healthcare system.
The private sector can make a profit, but it’s only a profit if the people are getting the best service.
That’s not happening.
It doesn’t make sense to privatise the healthcare of America if you can’t provide a good value to the people who are paying the bill, he told me.
“It’s a very big question mark over what happens when you’re a private entity in America.”
BlackRock has a history of taking big risks, and many of the investments in healthcare have been controversial.
It has been sued several times over its healthcare investments.
The most recent case was in 2014, when a federal judge in Arizona ordered Blackrock to pay $1 billion to the US government, alleging that the firm had misled investors by lying about its business model.
In that case, the judge found that BlackRock had misled the investors about the firm’s business model, which included a “market-based model” that was a more efficient way to manage healthcare.
“Blackrock failed to demonstrate that its business plan was inherently superior to the alternative, a market-based approach,” the judge said in a ruling.
Schwarz is now calling for a review of the company’s investment in healthcare, and the government to consider the implications of the court’s ruling.
In a statement, Blackrock said that the US courts were wrong in concluding that the Blackrock healthcare strategy was inherently better than other models, but that it had made “significant progress” in helping patients get the best care.
Blackstone said it would “review the legal challenges and will respond appropriately to the court order”.
I also asked Schwarzman if he had any plans to buy Blackrock in the near future.
“I think we’re going to have to see where that goes, but I think that the risk-reward of doing business with Blackrock is there,” he replied.
I asked if Blackrock had any future plans to take its business private.
Schwarman said he didn’t have any plans yet.
But he did acknowledge that the case in Arizona was a “significant test” of Blackrock and its healthcare strategy.
Schwarzen says Blackrock will make an announcement soon about what its plans are.
But if BlackRock does sell itself, it would be a big change for healthcare in America, and potentially an even bigger shift for the US healthcare system as a whole.
And it would leave some big questions unanswered.
“What does it mean to be a provider of healthcare?”
I asked Schwarzen.
“You can’t really tell,” he responded.
“But I think the fact that we have a situation where a private sector is selling healthcare is a very