MEDICAID IS POOR PEOPLES’ MEDICINE & POOR PEOPLES’ MEDICINE IS POOR MEDICINE.

By:

Dave Kingsley

The Southern Segregations’ Plan to Institutionalize Racism and Inequality

In a conversation with Lyndon Johnson prior to passage of Medicare and Medicaid, the late segregationist Congressman Wilbur Mills of Arkansas told President Johnson that across town from his mother in Arkansas, “…a Negro woman has a baby every year. He went on to explain that every time he went home, his mother complained that the “Negro woman now got eleven children.  He proposed that welfare should be designed to let “the states pay for more than a small number of children if they want to.”

Joseph Califano, Jr., President Johnson’s Secretary of Health Education & Welfare (HEW) in the room at the time noted that Johnson turned to him after Mills left and said,

 “You hear that good, now.  That’s the way most members feel. They’re just not willing to say it publicly unless they come from redneck districts.”

Most member of congress aside, Mills was not your run of the mill congressman.  He was the influential Chairman of the exceedingly powerful and critical House Ways and Means Committee.  He was a product of Southern one-party politics run by the all-powerful Southern planter class.  Mills and his Southern brethren in the Senate and House had in 1957 signed and issued the “Southern Manifesto” – a protest against Brown v. Board of Education and the civil/human rights enveloped within the Supreme Court decision. 

As I will explain, these segregationists had designed and legislated a precursor to Medicaid into existence. The passage of the Mills-Kerr program in 1960 included the framework of Title 19 of the Social Security Act in 1965 (Medicaid).  Medicaid became Kerr-Mills 2.0.  Designed into Kerr-Mills was devolution of power over federal welfare to states, which would allow them to arbitrarily place onerous administrative burdens on qualified applicants and maintain a lower status for African Americans.  They were successful in keeping Hill-Burton funded hospitals segregated for ten years after Brown v. Board of Education had declared that “separate is not equal.”

The Concepts of Kerr-Mills – Especially the Power of States Over Welfare – Are Barriers to Transforming an Embarrassingly Bad U.S. Medical System

Like the Hill-Burton Act of 1945, which initiated a massive hospital building program across the U.S., Medicaid is funded by the states with federal matching funds.  Administration and regulation of Medicaid funded nursing homes have been left to the states.  Long-term care and skilled nursing operators have benefited from lax oversight and political power in state houses.  As should have been expected, legislatures and agencies have been captured by deep pocketed industrialists and are therefore likely to serve the interests of operators at the expense of ethical and humane medical care.

States and powerful interests have devised ways to siphon off Medicaid funds for the benefit of corporations and special interests.  Consequently, poverty medicine is enriching corporations and wealthy individuals (see previous posts on this blog re: The Ensign Group & Centene Corporation) while the medical care and health of poor Americans have been deteriorating.  For instance, the state of Indiana discovered a loophole in federal law that allowed the state to buy nursing home licenses from for-profit corporations and skim a considerable amount of nursing home funding off for other purposes.  The nursing homes continued to run the facilities and extract their usual cash flow as before.

Having studied cost reports submitted by thousands of nursing home facilities, I can safely conclude that the states shield the industry from exposing cash flow into and out of the system.  If you can complete daunting tasks of gaining access to legally required and public cost reports (or pay a considerable sum for them) you will discover that you are dealing with closely held corporations that are not required to make their financial statements public. Therefore, you can follow the money to a point.  But the pools of payments to their parent corporations’ shell companies are kept secret.  The public cannot see consolidated balance sheets, income statements, and cash flow statements of parent corporations and holding companies.

Without clear and honest financial information, no amount of reform of what most everyone agrees is a bad system is possible.  The industry can and does engage in misinformation and falsehoods to maintain myths that the biggest problem in long-term and skilled nursing care is skimpy government funding.

SCOTUS ALERT!  THE CASE OF HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY v. TALEVSKI IS BEING HEARD BY THE SUPREME COURT TODAY

By:

Dave Kingsley

Today the Supreme Court is hearing Health & Hospital Corporation of Marion County v. Talevski.  If the S.C. overturns the 7th Circuit decision in this case, it will not be merely “earth shaking” for nursing home patients, it will be an 8.0 earthquake followed by a tsunami for all Medicaid beneficiaries. For decades, the court has upheld the right of beneficiaries of Social Security programs whose rights are violated by states to seek redress through the federal courts.  Overturning this body of law has grave implications for beneficiaries of such programs as Aid to Families with Dependent Children (AFDC, replaced by Temporary Aid to Needy Families or TANF), Medicaid/Medicare funded long-term and skilled nursing care, and the Children’s Health Insurance Program (CHIP).

In addition to the derogation of human and civil rights resulting from an S.C. reversal of a body of law upholding rights such as those delineated in Federal Nursing Home Reform Act (FNHRA), the dimension of this case of major concern to me is the enhancement of states’ rights and corporate power in federally funded health and welfare programs.  The nursing home industry and major corporations such as The Ensign Group, UnitedHealth Group, Molina, Centene, Anthem, and Aetna/CVS violate regulations with impunity now – imagine how they will ride roughshod over states and beneficiaries if the 7th Circuit decision goes down.

The facts of Talevski v. HHC involve an elderly dementia patient by the name of Gorgi Talevski who was managed with psychotropic drugs and transferred from a facility in violation of FNHRA requirements.  Although the family fought the psychotropic constraints and transfer through state and CMS procedures and guidelines, they were frustrated by agency inaction and lack of relief.  The facility, HHC of Marion County, is part of a chain of facilities owned by the State of Indiana.

Ivanka Talevski, Mr. Talevski’s wife filed a suit in federal court (their daughter Susie is the attorney in the case).  The district court held that federal programs legislated in accordance with Congress spending powers do not provide for beneficiaries’ relief in federal courts and dismissed the action.  On appeal, the 7th Circuit reversed the district court’s decision and found in favor of Mr. Talevski.

The specific question in this case is whether patients whose FNHRA rights are violated can seek redress through the federal courts or whether their only recourse is appeal to state and federal agencies and/or through a personal liability suit. The 7th Circuit, citing precedence, decided that patients can sue a state in federal court when they incur clear violations of their FNHRA rights and reversed and remanded the case back to the district court.

It is likely that the six-member majority of extremist ideologues on the Supreme Court will overturn the opinion of the7th Circuit – a relatively conservative court with 7 members appointed by Republican presidents and 3 appointed by Democratic Party Presidents. The ideology and decisions of the S.C. conservative majority have been synchronized with the Republican Party and the reactionary conservatives now dominating the party.  Extremist conservatives have been in a decades-long crusade to dismantle the administrative state.  Their intention is to loosen all restraints on corporate behavior.

*6 F. 4th 7713 – Court of Appeals, 7th Circuit 2021.  Can be accessed at: https://scholar.google.com/scholar_case?case=10683715986232030526&q=talevski+v+health+and+hospital+corporation+of+marion+county&hl=en&as_sdt=6,26.  See also: https://www.scotusblog.com/case-files/cases/health-and-hospital-corporation-of-marion-county-indiana-v-talevski/; https://www.brennancenter.org/our-work/research-reports/supreme-court-shadow-docket

CENTENE CORPORATION, AMERICA’S 26TH LARGEST CORPORATION AND A MEDICAID CONTRACTING FIRM, REPORTS STRONG 3RD QUARTER EARNINGS

By:

Dave Kingsley

Centene Corporation’s Business & 3rd Quarter Results

Centene Corporation contracts with states to manage Medicaid programs.  Two-thirds of the company’s revenue flows from means-tested, welfare, programs.  The other one-third of its revenue is derived from Medicare, Tri-Care, and their prison contracting subsidiary Centurion.  Basically, the bulk of this corporation’s business is poverty medicine. 

Centene purchased a non-profit organization in the 1990s and took it private.  In 2001, the company issued an IPO.  In a mere two decades, Centene increased its revenue to $111 billion (2021 revenue).  In 2021, Fortune magazine placed it at 24th in the “Fortune 500.”  Ahead of Centene was Anthem at 23rd with revenues of $122 billion, at 22nd was General Motors with revenue of $122.5 billion. As an illustration of the rapid growth of this poverty-medicine company, in 2018, it was ranked 63rd in the “Fortune 500,” with revenue of $48.6 billion.

Centene’s 3rd quarter revenue of $35.9 billion was a 11% increase over their 2021 3rd quarter revenue of $32.4 billion.  The company is on track to increase its 2022 revenue to $135 billion.  According to the 3rd quarter report, “The increase was driven by organic Medicaid growth, primarily due to the ongoing suspension of eligibility redetermination, 22% membership growth in the Medicare business, and [our] acquisition of Magellan Health, Inc. (Magellan), partially offset by the PANTHERx divestiture.”

Centene is predicting (called guidance in finance lingo) an increase in 2022 earnings per share of $5.65 to $5.75.  The company’s stock which is trading above $81 per share as I write this, has been outperforming the DOW & S&P since the equities market moved lower at a rapid rate in late November of 2021.  On November 29, 2021, Centene closed at $73.77 and has been incrementally moving up while the overall market has been moving down.

Executives, Board Members, & Shareholders

The recently retired Centene CEO/Chairman John Neidorff is one of the highest paid corporate executives in the United States.  Over the past 3 years his compensation has totaled $72,033,192.  He owns 1.5% of 560 million outstanding shares of Centene stock – today worth over $80 per share.  Hence, his wealth in stock alone is worth approximately $680 million.

Sarah London – Neidorff replacement as CEO – earned $15 million in 2021 before her promotion to CEO.  The eleven 2021 board members earned from $335,000 to $426,000.  In 2021, two powerful former congressmen on the board, Richard Gephardt and Tommy Thompson, were paid $426,923 and $403,046 respectively. 

An activist investor (Quinten Koffey of Politan Capital Management) acquired 2 percent of the stock and made a successful move to oust Neidorff.  London, his successor, was most likely in on the move.  The board has been restructured as part of the company’s long-term plan to improve its profit margin (https://www.healthcaredive.com/news/neidorff-retire-centene-activist-investor-board-shakeup/611465/).

The Ensign Group, America’s Largest Nursing Home Corporation, Reports Strong Third Quarter 2022 Results

By:

Dave Kingsley

A Business Success Story

Since its founding in 1999, The Ensign Group (Nasdaq:  ENSG) has experienced remarkable financial success and growth. (See, e.g., Kingsley & Harrington (2021) *.  That trend continues.  The company reported a 3rd quarter 2022 revenue of $770 million – an increase of 15.2% over the same quarter in 2021 – and raised its expected 2022 revenue from $3.01 billion to $3.03 billion – an increase of 14% over 2021 and exceeding 2020 by 32%. 

With a net quarterly income of $56,761,000 on a revenue $770,005,000 for the quarter, Ensign’s net was a positive 7.3%.  The company reported Earnings Before Interest Taxes, Depreciation & Amortization or EBITDA (a far more important metric from a cash flow perspective) of 12.5%.

Across all industries and sectors, a net and EBITDA of 7.5% and 12.5% respectively reflect robust earnings.  CEO Barry Port stated that, “Given the improvements we continue to see in occupancies, skilled mix and reimbursement, we are raising our annual 2022 earnings guidance again to $4.10 to $4.18 per share.”  The company has 57 million shares outstanding.

Asset Management Firms/Institutional Investors are Bullish on Ensign Group Stock

On Friday, October 28, 2022, Ensign stock, which has been outperforming the DOW and S&P, closed at $89.96 per share. Since the beginning of a rapid decline in the market on November 29, 2021, the DOW has dropped from 35,135 to 32,861 and the S&P has declined from 4,655 to 3,901 (as of the closing bell on Friday, October 28, 2020) – declines of 6.5% and 16% respectively.  Conversely, Ensign stock has increased from $77.20 per share to $89.96 in the same period – a 16.5% increase.

At the date of Ensign’s issuance of its 2021 proxy statement, beneficial owners included BlackRock (15.1%), Wasatch Advisors (11.1%), and Vanguard (11.0%).  Hence, stock is concentrated in three asset management firms owning 37.2% of the company’s shares on behalf of pension, college endowment, insurance, sovereign wealth, 401K, and other pools of capital.  Executives and board members own 4.7% of the 57 million shares.  Ninety percent of Ensign stock is owned by asset management firms such as T. Rowe Price, State Street, PIMCO, etc. – in addition to the 40+ percent owned by BlackRock, Wasatch, Vanguard, and executives/BOD members (5% is required for beneficial ownership).

CEO Barry Port’s 2021 compensation package of $7,421,472 is approximately 209 times the typical CNA wage over one year of full-time work. CFO Suzanne Snapper’s compensation totaled $6.5 million, CIO Chad Keetch and COO Spencer Burton were awarded $4.3 million and $5.0 million respectively.  Compensation of $23,259,112 for the four top executives in 2021 was an increase of 37% over the $16,961,920 they were awarded in 2020.  

Ensign’s Path to Dominance in the Long-term & Skilled Nursing System

In the past quarter, Ensign added 20 facilities (mostly in Texas) to its portfolio of 268 healthcare operations, 26 of which also include senior living operations, across 13 states.  But this doesn’t tell the whole story.  At the end of 2021, the company’s skilled nursing facilities were embedded in a network of 400 subsidiaries (all LLCs incorporated in Nevada).  These subsidiaries have been set up as property, insurance, management, and other ancillary service LLCs which appear as related parties on Ensign facility cost reports (examples of 5 facilities in the Kansas City area will be used as illustrations below).

During the past decade, Ensign has spun out a considerable amount of real estate (nursing homes and assisted living facilities) into two separate corporations:  the CareTrust Real Estate Investment Trust (skilled nursing facilities) and the Pennant Group (assisted living properties).  The company has an interlocking financial and management relationship with both spin off corporations, the details of which are beyond the scope of this post.

As referenced earlier, my colleague Charlene Harrington and I published a study we conducted last year of Ensign growth and development.  Based on the board bios and the background of founder Roy Christensen, we noted a strong relationship between the company and the Marriott School of Business at Brigham Young University.

Ensign executives and board members are highly sophisticated finance and real estate professionals. Their astounding success stems from sophisticated real estate and financial structures that have been devised to maximize cash flow from Medicaid, Medicare, and generous tax advantages.  As noted above, Ensign executives have been richly rewarded by their board for their financial performance.

*”The Financial & Quality Metrics of a Large Publicly Traded U.S. Nursing Home Chain in the Age of COVID-19,” International Journal of Health, 1-13, 2022.  For a copy of the article, contact David E. Kingsley, dkingsley@tallgrasseconomics.org, 785 550 3576.

In the Nursing Home Business, Medical Care Versus Financial Performance Is an Important Dimension

By:

Dave Kingsley

In a blog post, the financial facets of a company like The Ensign Group (“Ensign”) in the LTC/SKN business, must, of necessity, be distilled into and summarized through information from reports submitted to the Securities & Exchange Commission, cost reports submitted to state agencies, and CMS data. From a scientific perspective, all of that of data should be triangulated with other data related to capital markets, the state of the economy, Bureau of Labor Statistics wage/salary data, and so forth. 

Furthermore, given the financial information available to advocates and researchers, we should be able to consider the congruence between return on investment (shareholder interests) and the quality of care provided to patients.  LeadingAge and the American Healthcare Association/National Center on Independent Living (AHCA/NCAL) will invariably claim that businesses in LTC/SKN are operating “on a slim margin,” a “low net,” or some such term implying that it’s really a tough business in which providers are merely trying to stay solvent.

Those claims by industry representatives are based on cost reports submitted by each facility to state agencies – not on the financial metrics of parent corporations, e.g., income statement, balance sheet, and cash flow statement.  In the previous post on this blog, I discussed the robust earnings reported by Ensign for the 2022 3rd quarter.  In this post, I juxtapose cost reports submitted by the following five Ensign facilities on the Kansas side of the Kansas City metroplex to reports submitted to the SEC: (1) Riverbend Post-Acute Rehabilitation, (2) Shawnee Post-Acute & Rehabilitation Center, (3) The Healthcare Resort of Kansas City, (4) The Healthcare Resort of Leawood, and (5) The Healthcare Resort of Olathe.

These five facilities reported a combined net loss of $3,678,304 on a combined revenue of $46,801,526 – an 7.9% net loss overall.  In the previous post, I noted that the company reported +7.3% net for all operations.  But all Kansas facilities but one – Riverbend Post-Acute – reported a net loss.  Riverbend had a small net gain of $3,345 on revenue of $9,753,360 – a miniscule 3 tenths of 1%.

CEO Barry Port stated the following in his 3rd Quarter press conference: “We are grateful for the efforts and commitment of our teams, caregivers, and leaders who work endlessly to love and support one another, which allows for the high-quality outcomes they consistently achieve.”  I have no doubt that the employees work hard, are dedicated, and try to provide loving care.  However, if the five-star, CMS Nursing Home Compare rating system is meaningful at all the outcomes for the five facilities at issue in this post belie Mr. Port’s claim of high-quality outcomes.

There is not a 4- or 5-star rating among the five facilities.  Two have a 1-star rating, two have a 2-star rating, and one has a 3-star rating.   The Riverbend facility’s 1-star rating is accompanied by a red hand, which indicates that some serious abuse and neglect has been identified in the facility.  This facility was also an early media “poster child” for COVID deaths.  The Kansas City Star and other local media outlets were on the large number of Riverbend COVID deaths early in the pandemic.  I was interviewed by the local FOX affiliate.  It was not lost on perceptive journalists that the facility had received a 1-star rating not long before the COVID outbreak.  Lack of infection control was a major issue in the inspection leading to the low CMS-NHC rating.

Message for Advocates

A publicly listed company like Ensign provides advocates with an opportunity to consider consolidated financial statements of parent corporations in conjunction with financial data reported to state agencies.  The importance of this cannot be underestimated.  LeadingAge and the AHCA/NCAL have a political narrative based on a false impression that the industry is comprised of struggling businesses barely avoiding bankruptcy.  Industry media such Skilled Nursing News and McKnight’s Senior Living reinforce this narrative, which is based on the pervasively faulty and misleading cost reports – not consolidated financial statements.

My colleagues and I at Tallgrass Economics have embarked on a project to compile cost reports for all Ensign facilities.  We are interested in the combined payouts to their own ancillary businesses such real estate, insurance, management services, etc. that are expensed on cost reports which affect each facility’s net income but funnels cash to Ensign Corporate.  LeadingAge and AHCA/NCAL are relying on a report compiled by the accounting firm Clifton-Larson-Allen (CLA), which is based solely on cost reports. CRs are a ludicrous source of financial data.  This post is an initial effort to spread that truth.

A right-wing religious PAC just received a $1.6 billion donation, and the medical-industrial complex will now be a whole lot harder to fight.

By:

Dave Kingsley

Leonard Leo and the Marble Freedom Trust

As head of the Federalist Society, Leonard Leo has had a major role in picking Catholic right-wing Supreme Court justices such as Alito, Roberts, Kavanaugh, and Barrett.  Leo is himself a fanatic, right-wing, Catholic who has no respect for the separation of church and state.  This brand of Catholicism works well with the Christian Nationalist Movement[1] that cuts across most fanatical, fundamentalist, Protestant sects.  

Although the Federalist Society is an organization for the promotion of legal conservatism and includes a variety of far-right believers in a sort of faux libertarianism and assorted other rightwing philosophies, Leo has locked in the Notre Dame law school theocrats as a powerhouse in the grooming and promotion of suitable candidates for future government legal positions and jurists.

Barre Seid, a Chicago industrialist, and ardent libertarian, has donated his entire company – Tripp Lite – to the Marble Freedom Trust, a 501(c)(4) political entity controlled by Leonard Leo.  The Marble Freedom Trust sold the company to the Eaton Corporation for $1.6 billion. This intersection of radical, libertarian, industrialists and the assortment of theocratic movements does not bode well for those of us who are working to deindustrialize healthcare, and other government functions.  The religious right shares many values of super-rich, self-proclaimed libertarians such as the Koch brothers. They believe that wealthy industrialists are godly insofar as they either share or are willing to tolerate the Christian Nationalist value system.

History has taught us that major religious institutions and industrialists are willing to accommodate regimes and politicians that serve their interests no matter how corrupt, anti-democratic, and debasing to the public interest.  The Supreme Court’s decision in Citizens United has already placed corporate political activities in a protective bubble.  We can look for corporations threatened with movements for reform to look to the current lopsided court and politicians on the make to protect their interests.

Therefore, Marble Freedom Trust money will be directed toward politicians and court actions that place property over people, profit over health, capital over labor, and the super-rich over the broad mass of citizens.  This will make changing a life-shorting, inhumane nursing home system far more difficult.  Gouging the public for life-saving medications and denial of medical care to the uninsured will be difficult to end. Let’s face it, we cannot ignore politics in our quest for social justice. 


[1] Christian Nationalism has been studied and reported on by journalist Katherine Stewart.  In her book, The Power Worshippers, she discusses this movement’s belief that the U.S. is a Christian Nation, and that the U.S. should be ruled in accordance with what they consider “Christian values.”  The values they endorse include are anti-gay, anti-democratic, pro-super wealthy, and freedom from government, except when they want to leverage government for imposing their radical beliefs on the rest of society.

The “medical industrial complex” is not capitalism, so let’s change the narrative.

By:

Dave Kingsley

Genuine Capitalist Enterprises are Not Operating in Anti-Competitive, Government Rigged, Systems.

As a proponent of capitalism, I resent the U.S. privatized, government-funded, health care system and the implication that it is a suitable representative of a capitalist system.  It is not.  The system of nursing homes, hospitals, and clinics through which patients pass for care is a financialized[1], corrupt, rigged, system.  Furthermore, some services important to society should not be industrialized under the farcical notion that return on capital will drive quality care.

Reformers have failed to create a narrative to defeat the financiers’ mantra that privatizing appropriate government services will increase quality and productivity.  History has taught us a very clear lesson:  industrialization and privatization of medical care and a host of other government services are unproductive and lead to excess extraction of capital, lower productivity, and reduction of innovation and reinvestment.

You Can’t Shame the Shameless

There is an unfounded belief that exposing bad operators in sensational mainstream media articles will force a change for the better in nursing homes and hospitals.  The misguided view that the medical-industrial complex will be moved by horror stories reminds me of an old T-Shirt in my closet with the following silkscreened on it: “We Don’t Care, We Don’t Have to Care, We’re EXXON.”  You could substitute the words medical-industrial complex, The American Health Care Association (AHCA), Ensign Group,” Welltower Corporation, Centene, United Health, and thousands of other corporate associations and entities for EXXON on such a T-Shirt.

Nursing home and hospital corporations don’t care about the shaming they deserve because politicians in federal and state legislatures have their backs.  Furthermore, they have captured the agencies charged with regulating them.  The Center for Medicare & Medicaid Services, and 50 state agencies are dominated by the industry and their well-financed lobbying organizations (not to mention the FDA, the FTC, the CFTC, etc.).  You can shame private equity as a business model, scurrilous operators, low wages/salaries, understaffing, and other outrageous practices, but financiers in the healthcare business are, for the most part, shameless. 

For at least a decade, I have been urging advocates to form a narrative and political strategy.  Playing rope, a dope with an industry that has a very well devised, effective, and well-funded narrative will change nothing.  The nursing home industry has a narrative based on falsehoods, which are comprised of frames related to the hardships endured by noble businessmen and investors.  Frames in which the industry purports to be suffering from low Medicare/Medicaid reimbursement, and low net income (profits) are blatantly false and misleading.  Regardless of how unbelievable the frames comprising industry propaganda, they are never seriously challenged by the constellation of nonprofit and government entities representing the elderly.  Furthermore, do-gooder commissions charged with studies of nursing homes, hospitals, and other health care subsystems generally whitewash and paper over the unethical, inhumane, and anti-democratic nature of the entire medical-industrial complex.[2]

Let’s Get Technical

I propose that advocates create frames that can be integrated into and support this narrative: “The privatized U.S. healthcare system is not fair, capitalistic, or ethical.”  Frames accusing industrialists of manipulation of markets, financial machinations, pay offs/bribes to legislators, and covering up corruption through well-funded lobbying entities such as the AHCA (nursing home lobby) are necessary but risky for professionals who want to go along to get along.

Industry moguls and their minions in government know from 70 years of history that their propagandistic efforts work well. They have been able to convince the public that privatized, for profit, services are better than non-profit and government services.  This mantra has gained traction and is embedded deeply in the American zeitgeist.  It will take a concerted effort across a broad array of nonprofit advocacy organizations to destroy a narrative based on industry lies and complex financial maneuvers.

However, before advocates can suitably frame messages for the media and legislators, a considerable amount of research, data collection, and analysis must be undertaken.  Data and evidence related to “rent seeking,”[3] “net operating income,” and “cash flow,” is necessary for debunking the “low net,” “thin margins,” and other hardship frames of the industry.  The nursing home system must be unraveled and explained as a network of capital flows from taxpayers and other sources through Real Estate Investment Trusts (REITs), private equity firms, LLCs/LLPs, and C-Corporations.

It is necessary to show how excessive capital flows through nursing homes and hospitals to investors and executives.  REITs have been existing under the radar and never discussed at legislative hearings (See my blog post: “Real Estate Investment Trusts (REITs) are Big Players in the Nursing Home Industry:  That Should Concern All of Us” February 13, 2021).  We must recognize how the entry of private equity and REITs around 2000 literally transformed the industry.

Advocacy research must include data from cost reports submitted by facilities to CMS and state agencies.  Falsehoods in these reports are pervasive.  Nevertheless, it is important to organize the data to make a case and support our frames pertaining to corruption and excessive extraction of capital at the expense of care.

We Are on It!

A team of people across the U.S. have come together to initiate solid, evidence-based, research.  With some help from the LTCCC and a lot of volunteer work, a group of us have been organizing data from cost reports and digging into financial machinations, ownership, and the flow of capital from various sources (including taxpayers) to investors, executives, and family wealth. 

We want to direct attention to more than horrendous examples of nursing home abuse and neglect.  The industry justifies poor care with a well-honed, richly funded, propaganda campaign. We should not respond to their “woe is me pleas for increased funding.”  Rather we should follow the money and make the trail available to legislators and journalists that we know will utilize it (think Senator Elizabeth Warren).  I don’t want to engage them in their claim that investors in the nursing home industry are suffering.  My only response to that is investors are not stupid.  If returns were no good in public-funded, skilled nursing care, investors would be investing somewhere else. 


[1] By labeling the system “financialized,” I mean that financial maneuvering for extracting cash takes precedence over increased productivity and quality of services.  Shareholder value is the primary mission of most healthcare private corporations.  Stakeholders are of secondary importance.  Often stakeholders suffer for the sake of enhancing and protecting shareholders’ interests.

[2] While COVID was surging in the Spring of 2020, CMS convened an “independent” commission the management of which was outsourced to the Mitre Corporation.  The report of this commission was a whitewash and papered over general neglect by the nursing home industry which resulted in 200,000 patient and employee deaths.  Contrary to suggesting accountability for lack of infection control and no preparation for a pandemic that scientists had been warning about for decades, the final report recommended more financial assistance for the industry.  Recently, a commission under the auspices of the National Academy of Sciences, Engineering, and Medicine (NASEM) in operation for a number of years entitled “National Imperative to Improve Nursing Home Quality” issued a report of their work. This commission tiptoed around the corruption, deceit, and excessive extraction of capital at the expense of quality care.

[3] “Rent seeking” has evolved in the field of economics to describe corporate efforts to extract wealth without a correlative increase in the production of goods and services.  The nursing home, finance, real estate, lobby is constantly hectoring legislators for an increase in reimbursement without any real, scientific, evidence that the cash flow and return on their investment is inadequate.

Nursing Home History as Pablum:  Creating a Comfortable Reality for the Powerful

By:

Dave Kingsley

A commission to study the nursing home system, conducted under the auspices of the National Academies, of Science, Engineering, & Medicine (NASEM), recently released its report entitled The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff.[1] The report included a very brief history of the nursing home system – a 400-year history reduced to a couple of pages.  Furthermore, it is a history that will not upset officials, proprietors, investors, executives, politicians, and others who are benefitting from the status quo. 

Basically, the commission is feeding the public historical pablum.  Left out of the multi-century account are such salient features as ongoing and intensifying financialization, and pivot points such as the 1950s-60s’ development and codification of “the medically indigent,” the role of states’ rights, and the influence of racist, segregationists.  Also excised were many significant changes of 1980s-90s such the transformation of macroeconomic and corporate philosophy from managerial capitalism into what is known as “agency theory,” – basically meaning that shareholder value is not just the highest ethic of capitalist management but the only ethic.

Between the late 1990s and early 2000s, capital markets and tax codes were conducive for the entry of real estate investment trusts (REITs), private equity (PE), and other corporate legal structures (e.g., limited liability companies or LLCs) into the senior housing market.  Large pools of capital had been accumulating through pension, college endowment, sovereign wealth, and insurance funds that needed to flow into businesses that would provide desired yields and return on investment.  These funds are managed by institutional investors such as Vanguard and BlackRock.  The number and size of publicly listed companies have grown considerably over the past two decades as REITs have expanded their power and financial dominance in the senior housing market.  To ignore these players in the industry is to ignore the proverbial 800-pound gorilla in the room.

These changes have been accompanied by massive investments of cash into political campaigns and politicians’ coffers by PACs, Corporations, and lobbying firms representing the medical-industrial complex, Wall Street, and real estate.  What worthwhile history would tiptoe around the corruption wrought by money in politics?

It is easy to become known as a radical and marginalized. Taking a hardnosed stand regarding the truth is an annoyance.  History is written from a “point of view” of the powerful and their version of events. They choose the people, places, and things to include and exclude.  Challenging those points of view will typically evoke hostility.  This is currently noticeable in the backlash to “critical race theory.”  African Americans would benefit greatly from a factually accurate history of race in America, which would facilitate an honest look at institutional racism still pervasive in the United States – including in the nursing home system. It would also be helpful to the elderly to have a movement that could be called critical elder theory – perhaps CET would be an appropriate acronym.

Unfortunately, humans are beset with psychological defense mechanisms that serve the avoidance of truth and lend support to the creation of a comfortable reality.  There are many defense mechanisms recognized by psychoanalysts.  However, four main defenses in history: denial, rationalization, repression, and fantasy are essential for understanding how official bodies such as commissions paper over reality and prevent real change. 

Fantasy is seeing the world not as it is but as the way we would like it to be.  No American wants to think that the elderly, as humans, are only worth what the treatment in a typical nursing home would suggest.  We believe we are better than that.  Our creed does not permit widespread shortening of life and suffering because of financial considerations.  Somehow the incongruence between our creeds and our deeds must be reconciled.  So, we retreat into a fantasy world in which medically fragile and frail elderly and disabled persons are living in as system with a few tweaks can be fully staffed and made into a “home-like culture” (a vague term if ever there was one).

Fantasies can only be maintained through denial of reality (out of sight-out of mind), repression (just don’t think about it), and rationalization (Medicaid reimbursement is too low).  Human nature being what it is, these defenses operate mostly at a subconscious level. 

Window dressing called “home culture” as it has been conceived and implemented thus far will not substantively change the structure and function of the nursing home system as it has evolved.  However, it will assuage our consciences.


[1] National Academies of Sciences, Engineering, and Medicine 2022. The National

Imperative to Improve Nursing Home Quality: Honoring Our Commitment to

Residents, Families, and Staff. Washington, DC: The National Academies Press.

https://doi.org/10.17226/26526

What Has Reaganomics Wrought?

By:

Dave Kingsley

“In the Age of Show Business, Public Discourse Has Become Dangerous Nonsense” Neil Postman in Amusing Ourselves to Death

Shareholder Value is the Only Value:  Even the Taxpayer Funded
Life & Death Care in the Healthcare System Has been Reduced to a Matter of
Return on Investment

Welltower, Inc. – one of the major players in the senior living industry – states in its annual report to the Securities and Exchange Commission that the company’s primary goal is to “protect and enhance shareholder value.”  Although Welltower is a dominant force in the taxpayer funded, skilled nursing and long-term care system, nothing is mentioned in company financial reports about a duty to provide ethical medical care to patients.

I consider these nursing home corporations to be no less evil than corporations in the fossil fuel industry, tobacco industry, and the assault weapons industry.  Like big oil, big tobacco, and big firearms, they value people only as consumers with little to no human worth other than parting with their money for the benefit of investors.

Unlike the tobacco, fossil fuel, and gun industries, nursing home corporations earning extraordinary returns from taxpayer funded medical care are excused for their pervasive patient neglect and abuse by carefully selected members – often naïve academics or industry shills – of various commissions (e.g., the recent National Academy of Sciences and the COVID-related Mitre Corporation Commissions).  Without any empirical, scientific, justification, the industry’s propagandistic claims about skimpy Medicaid reimbursement are taken at face value in the media and generally by the public.  The industry has a richly funded a very effective PR machine.

Unquestioned misinformation – whether intentional or unintentional – is creating a crisis in American governance and the well-being of residents.  The anti-vax, anti-science, assault on the public health system during this era of COVID has long been in the making.  What has become known as proofiness (or truthiness) has polluted public discourse.  I have spent untold hours collecting, organizing and analyzing corporate financial reports submitted by nursing home corporations to state and federal agencies.  Much of it is fraudulent, much of it is financial machination, and much of it is laughably ridiculous, but hardly any of it is seriously questioned. So, deadly conditions in nursing homes continue unabated.

“Nihilism, the devaluation of the highest values of Western culture.”  Ashley Woodward in Understanding Nietzscheanism

Ronald Reagan Propelled a Destructive Economic & Social Philosophy Forward Through Government Policy:  Trumpism is the Apotheosis of Reaganomics

The previous post by Kent Comfort chronicles the economic revolution that commenced with the Reagan Administration. This post addresses the values wrought by the economic superstructure described by Kent.  A deep dive into philosophical movements that seeped into the American zeitgeist along with Friedman/University of Chicago radical free market nonsense is beyond the purview of this post.  Suffice it to say that Ayn Rand’s philosophy of selfishness, dog-eat-dog capitalism, and Nietzschean ubermensch (John Gault) seeped far deeper into the American zeitgeist than is readily apparent to most observers.  Along with the Randian virtue of selfishness, the nihilism and rejection of Enlightenment values of the postmodernist philosophical movement became de rigueur among intelligentsia – eventually on the right of American politics.

The changes we’ve seen entrenched in U.S. culture over the past 40 or more years can be characterized as the triumph of self-interest over public interest and community, the prevalence of wealth and power over equality, and the weakening of science engendered by disregard of and disrespect for reason and objectivity.  We are in a post-truth age characterized by deceit, manipulation, and cheating without accountability.  Any claim based on pseudoscience is deemed legitimate – especially if it is legitimated by journalists, politicians, and influential voices in academia.

In the winner take all, survival of the fittest, milieu, it is OK to spout falsehoods and engage in practices that would have been otherwise unethical and unacceptable in the pre-Reaganomics era.  Lying, cheating, stealing, and preying on the vulnerable and weak can be justified by absolutist beliefs in abstract principles.  In its most extreme form, Reaganomics is conflated with Christian fanaticism and right-wing, proto-fascist political movements.  Furthermore, extreme principles of the movement include total deregulation and dismantlement of the administrative state except insofar as it can further a free-wheeling corporate state.

In post-truth America, shareholder value as the highest value of business enterprise, doesn’t need to be justified scientifically as beneficial to the American people in general.  Universal human rights of equality and fairness handed down to us from the Enlightenment have been devalued while the powerful and wealthy leverage their power to degrade democratic processes and direct more and more economic resources from the middle- and low-income classes to themselves.  In the long run, we will see an increasing amount of tragedy and farce detrimental to the future of the planet and all living things.

REAGANOMICS, FRIEDMANOMICS, WELCHIANISM

The RFW Debacle

By:

Kent Comfort

How Ronald Reagan, Milton Friedman and Jack Welch combined to misalign American Capitalism and the Economy

“In the beginning…”, there was Ronald Reagan, Milton Friedman, and Jack Welch. Or at least there are too many people who would like to think that they started a positive economic revolution. We have been living with the damage ever since.

Reagan was a convenient fool and puppet, Friedman was a misinterpreted false prophet, and Welch was just a crook. There you have it, three sacred cows butchered in one sentence!

Each of these men are now deceased, of course, but the legacy of the damage they caused lives on and on.

Reagan was a patsy for the deregulation crowd and that lead to immeasurable loss of many services for the commons. Airlines and railroads are two important examples of industries that no longer serve the public good beyond the extent to which they are forced to. They have been free to strip away humanitarian services and create mini monopolies. A mini monopoly is one which controls specific segments or geographical regions of the markets they serve with the advantage of not having to worry about competitors entering their space. Another prime example of this is the cable TV industry. Your zip code dictates who you have available for your household.

Friedman preached, do anything you want, buyer beware! He included a safety valve in his self-proclaimed predilections that everyone fails to mention if they even knew about it. He realized that many of his ideas contained considerable risk to American society. To protect those members of society who were not equipped to enter the business scrum, he advocated for a version of what we today call UBI, or Universal Basic Income. But his intentions were not necessarily noble. Rather, if the masses could count on some level of economic safety net, the business bandits could go about the task of creating metaphoric strip pits anywhere and everywhere they desired for their personal gain.

Welch rose to the top of a corporate mountain, namely General Electric, and drove it upside down in the ditch while trying to reinvent ancient accounting principles, and pile up a strange combination of acquisitions to create the impression of rapid growth. He ran for the hills just before the consequences caught up with him. For greater details about this travesty, check out a recent book titled “The Man Who Broke American Capitalism” by David Gelles. This might be the best biography about Welch ever written.

The ”everyone else is doing it” momentum took over for the following decades leading up to present time. Welch declared that American business only had one obligation. That was to serve the shareholders. It could be said that because this view became the norm, the words shareholder and stakeholder became no longer interchangeable. The American capitalism model damage is continuing unabated to this day. It does not matter which of the two political party monopolies are in the majority, neither has been willing to give up the largess they collect and instead focus on working to end these rotten practices.

That is an abbreviated overview of how we got to the low point we are at today. Let’s look at the four primary elements of the current capitalist system and how they harm more than help most of us.

They are the formula, the impact, the culture, and the future.

The Formula –

The American business formula can be boiled down to a simple equation: Deliver the least possible value for the highest possible price. If you pause for a moment to think about that statement, it is probably very easy to identify examples you encounter every day.

The skill required by a business entity to benefit from this formula demands that they do not take either end of the equation too far. On the low value end, if that is taken too far, loss of sales results. The same outcome applies to trying to charge too much for the value delivered. The practice becomes one of trying to balance both ends without giving up sales and consequent profits.

Let’s not forget that an important element of this formula has been the suppression of middle-class wages. They have actually gone down when adjusted for inflation, while the executive suite has been raiding the corporate coffers on a level not even imaginable prior to the RFW (Reagan-Friedman-Welch) era.

When one’s master is the shareholder, this is the only perceivable option. If a business is not beholden to masters who would dump their shares in a blink if they do not think it is making enough money, it can instead focus on delivering as much value as possible for the lowest price possible to earn a sufficient profit to sustain the business. That is truly possible and it is more typical of the way business was done before the advent of the RFW era.

A successful business could build a great reputation and be rewarded with repeat business from a satisfied customer. The profits from such high operating integrity could be reinvested both inside and outside the business to grow owner wealth over time. The quarterly report was never a necessity or useful tool.

The Impact –

The long-term impact of the above-described formula has been analogous to the well-known aphorism of the frog sitting calmly in the bottom of a pot of slow boiling water. Many would agree to the fact that the water is boiling today.

What is at the root of the impact? There has been a continuously growing gap between the value of a service and commodity and the escalating prices for them. Consider the “Made in” label on nearly any item in your house. “USA” is nearly non-existent. In fact, it is a selling point to proclaim a product as made domestically today because it is so uncommon.

Of course, the initial benefit to the product originator has been marginally reduced manufacturing costs. America has endeavored to impose regulations on child labor and other forms of involuntary and exploitative servitude that corporations have a history of not hesitating to deploy if there are no barriers. The amoral culture and policies of major corporations give leeway to these practices in the name of growing their profits for the Welchian philosophy of shareholder first no matter what. And China apparently does not aggressively enforce even the most lenient policies they proclaim regarding inhuman workplace conditions. American corporations do not interfere with Chinese labor practices and economic practices. The American people who consume the output of Chinese factories enjoy the perceived low out of pocket cost and do not question or challenge how or why they benefit from that. That is the nature of slow-boiling pots of water. The short-term benefits cloud the horizon of long-term damage.

Is this practice limited to only the multi-national corporate giants? Unfortunately, the answer is no. Here is a story that has been duplicated nationwide for decades. Yep, it is another slow-boiling pot story. Only this time, it is about a thriving midwestern family-owned multi-generational business that produced a globally popular product that you, the reader very likely have in your toolbox as you read this. If you don’t, then you may not even have a toolbox. This is the Vice Grip story. You have a pair, right?

The invention of this remarkable tool was accomplished by William Peterson in the late 1930’s. The product went through a series of refinements through the World War II years and began achieving popularity initially with farmers following the war. The location of this business was in the small agricultural community of Dewitt, Nebraska. The business grew and thrived under the able management of Dewitt’s son and two grandsons. They were a very generous family who employed and promoted people within the company until they had over 300 souls toiling away to supply a hungry market for a great tool. Community families prospered, sent their children to college, and everything about this saga epitomized the American dream. Until…..

Later generations of the Peterson family chose not to continue working in the business. Going away to college and seeing new horizons has a way of doing that to young people from small towns. So, the company was put on the market for sale, and according to the story it was a quick and easy sale. The new owners decided to close the Dewitt factory and move manufacturing to…wait for it….China! Those 330 employees were suddenly out of work. Multiply that number by and average household of four, and the negative impact to a small community is clear. Dewitt, Nebraska will never been the same.

A superbly handcrafted and high standard tool became a lower grade high volume throwaway tool, and copious profits were piled up consequently. If you were fortunate enough to have in your possession a Dewitt manufactured version of the Vice Grip, you probably still have it and it is still working as designed. If you have the Chinese made version, find and original version to compare it to. It will be clearly different.

This decline in value offset by increase in cost is not limited to your personal toolbox or any other product in your household. Consider your experience today with what is fictionally called customer service.

When you have the misfortune of needing to call your source for service, most often the individual on the other end of the call is offshore, entirely ignorant about the service or product you are having a problem with and trying to search for answers on their computer literally as they speak with you. You are nearly always placed on hold for two or three minutes several times during the call, so the support person to research what you are calling about because they do not know anything.

Most major American corporations who have products or services that require customer support use these offshore call centers. They are drastically cheaper than maintaining a state-side call center. But the damage their reputations incur often necessitate contracting with yet another specialty business. That would be the “reputation management” service.

It is uniquely American that reputation management is a growing industry. Companies are willing to spend millions having their soiled reputations professionally laundered instead of spending those same millions providing a higher quality service or product in the first place. Does that make any sense?

The Culture –

What is the downstream effect of the formula and impact described above? How does it degrade the culture of the nation and people? This is where the most severe damage is realized. Unless one is in a coma, awareness of how much cultural and economic deterioration has been accumulating during the last five decades is being realized and talked about at every tier of our social hierarchy. Virtually no one is content with the national homeostasis that has devolved during this time. Correspondingly, no one has any idea what to do about it. The social and economic deterioration was so gradual and so multi-layered that everyone has just acclimating to it while it has marched through our lives.

Disillusionment and a sense of being violated and cheated has led to a growing distrust in the institutions and commercial sources we believed we could rely on. That trust has eroded to the point that everyone has become more wary of everyone else.

When we feel powerless, fear becomes the primary emotion that guides all decisions. Strength and empowerment never emanate from fear. I would be willing to wager that most of the personal firearms sales today are motivated by little more than fear. Personal firearms are not rational protection from the kinds of fear most of us carry around. They are a symbol or metaphor for the sense of helplessness we feel in our daily environment.

The Future –

What will it bring us? That was a trick question. The better question is what kind of future we are going to bring ourselves. Whether we are individually and collectively proactive, or passive, the future is on the way. And even in passive mode, what comes will be of our making. Inaction is a form of action.

Nothing I have written about so far is unchangeable or irreparable. We made it what it is, and we can make it something else. There has to be a public will, supported by a public awareness that we are the masters of our lives and collective culture. We have been lazy. We have become addicted to the prevailing status quo, even if it is hurting us.

The regression and distrust that so many Americans live within today will have to change because nature is not static. Evolution is still very real. We can hope that history is not our guide or window of what is to come. The reason for that statement is that throughout history, sovereignties that degraded in the manner discerning humans are witnessing ultimately collapsed. Not talking about just a dip that they recovered from. They melted down into a form of dark ages that eventually led to a period of rebirth. The reset button was finally pushed after sufficient decay purged the prevailing policies that led to that downfall. I challenge anyone to find an exception to that. The best anyone will be able to do is recognize varying scales of collapse, not exceptions to collapse itself.

Are we ready to agree yet that the kind of social leadership that brought us to this threshold is not what is needed to lift us out of it?

Are we getting closer to agreeing that political parties have no solutions to the predicaments we live with today?

Can we imagine an electoral purge on a national scale that removes every electee from their perch and replaces them with new blood?

Can we turn a deaf ear to all the tired arguments about why experience matters and we need our incumbents to retain the power they have appropriated?

Can we become more personally engaged at the community level to initiate the paradigm shift that must and will happen even if we do nothing?            

I know I need to become more intimate with each of those questions in my own life, and I hope you will join me. Your comments and thoughts are encouraged and appreciated.