Like autocrats throughout history, Donald Trump considers no body count too high, no cruelty too outrageous, and no lie too big in preservation of power and propagation of a warped ideology. Denial of “real reality” and creation of a “fake reality” is a typical maneuver of anti-democratic strongmen like Trump.
Science denialism, venal political calculations, and ideological considerations has led to the preventable deaths of well over 50,000 nursing home patients and employees. In an attempt to promote an image of caring and concern, the Trump regime has set up a bogus commission to “study” the issue of COVID-19 in nursing homes.[1] Advocates and the public should have two major concerns: (1) this commission is conducting business in secrecy, which means anything critical of Donald Trump and his minions will never see the light of day, and (2) Some nursing home advocates and scholars have been willing to sign a nondisclosure agreement and serve on this sham “secretive commission.”
Why would otherwise respectable and respected professionals place their imprimatur on the nefarious attempts by an autocrat to cover up his malfeasance? Anne Applebaum answered that question this way in her article in the latest issue of The Atlantic: “Each violation of our Constitution and our civic peace gets absorbed, rationalized, and accepted by people who once upon a time knew better.” (“History Will Judge The Complicit,” page 60, https://www.theatlantic.com/magazine/archive/2020/07/trumps-collaborators/612250/).
As Masha Gessen said about Trump: “He was probably the first major party nominee who ran not for president but for autocrat. And he won.” (Surviving Autocracy, p. 16). No autocrat in history has ever referred evaluation of his performance to an objective panel of citizens with the expectation that he would accept blame for a major program failure. Why would nursing home advocates and scholars expect America’s current autocrat to be an exception?
Calling it a hoax, the Trump administration initially denied the reality of a COVID-19 pandemic and has attempted to propagate that lie from the time the virus caused the death of a nursing home patient in Kirkland, Washington to the present time. This current science denialism is reminiscent of Stalin’s promotion of Trofim Lysenko’s agriculture and genetics pseudoscience. Anyone who disagreed with Lysenko was purged, imprisoned, or killed. Trump can’t at this stage imprison or execute dissenters from his warped ideology, but he can purge and smear credible scientists.
Due to Lysenkoism and, consequently, crop failures, millions of people starved under the Stalinist and Maoist Communist regimes. Donald Trump is not Stalin or Hitler, nevertheless he operates as much as he can in accordance with the strongman paradigm. Driven by an extreme ideology, his attack on science has resulted in the death of nearly 150,000 Americans at this point.
Someone quoted Jill Lapore as saying, “Commissions allow governments to appear to be doing something, while actually doing nothing.” A list of members of this sham Trump commission to whitewash the cause of a massive number of deaths in nursing homes, can be found through the link on the endnote below. They either know the nature of the regime they are enabling or are seriously naïve. Either way: shame on them.
As I watched Congressman Lloyd Doggett’s Ways & Means Subcommittee Hearing on June 25th, I noted Ms. Rebecca Gould, a nursing home administrator. spoke for the industry. Ms. Gould is the head executive of a small nonprofit operation with 120 beds and therefore a peculiar choice for representing the industry. She made the following statement that is typically made by industry representatives at legislative hearings: “Nursing homes run on very thin margins.”
From the perspective of corporate finance, these kinds of statements are so misleading that they can be classified as propaganda. I’m disappointed when advocates and experts fail to debunk them. Furthermore, in this case, nonprofits are not philosophically operating to make a “profit.” Rather they are 501(c)(3)’s. Ms. Gould represents about one-fourth of the industry – a sector obligated to represent the best interests of stakeholders rather than shareholders.
Private sector facilities are typically individually incorporated by parent corporations as limited liability corporations (LLCs). Often one or more other subsidiaries or shell companies are in a ownership hierarchy, which serve as a cash pipeline to investors. Furthermore, parent corporations often own subsidiaries or LLCs that provide ancillary services such as management services, pharmacies, and physical therapy. More importantly, the nursing home industry is more of a real estate and finance industry than a skilled nursing industry.
Cash Flow & Financialization: An Example
Two major financial maneuvers often occur between the facility and the return earned by investors and executives: (1) extraction of cash from Medicare, Medicaid, and private pay reimbursements – through property leases, management contracts, and ancillary services (all of which are expenses on the operators’ balance sheets, i.e. the LLC’s balance sheet), and (2) upstream financial engineering designed to generate cash unrelated to the quality of service at the facility-LLC level.
In this post, I want to simply illustrate some upstream manipulations in the flow of capital by briefly discussing recent financial reports of The Ensign Group, which owns a facility with the worst case of COVID-19 disease and deaths in the Kansas City area. I am writing this because I’m on a mission to change the way we strategize and present testimony and respond to lobbyists and other spokespersons for the industry when they propagandize.
The Ensign Group is a rapidly growing corporation that is classified as a holding company. It claims to not own or operate any skilled nursing or other senior housing business. That is a laughable legal fiction because it owns the subsidiaries that own the operations. Without doubt, earnings after expenses – as well as a lot before – flows up the capital stream to the holding company, i.e. The Ensign Group.
The holding company is not the most common model for organizing senior care real estate corporations. Many are owned by private equity firms, one of the biggest skilled nursing businesses, Life Care Centers, is owned by a single billionaire, and some are typical publicly traded corporations such as Brookdale and Genesis corporations. However, all corporations desire to enhance the “cash flow,” which is far more desired in the current “financialized” climate.
I don’t need to get too deep into the weeds on “cash flow,” but if you’ve been hearing about stock buybacks in the past couple of years, that is one type of financial technique for increasing the value of a company’s stock and often enriches shareholders and executives who exercise stock options. Furthermore, executives are often rewarded with bonuses by the board. Although the “margin” might have been “thin” at The Ensign Group’s Kansas City facility in 2019, the table below indicates that the compensation of top executives was not thin.
Although the salary of these executives hasn’t changed all that dramatically over the three-year period, total compensation increased by 250% for the chairman of the board between 2017 and the end of 2019. The other top board members had similar increases in total compensation. These five top executives also serve as members of the board. Only two outside directors are on the board. Therefore, the column labeled “Non-Equity Incentive Plan Compensation” is simply a bonus that these executives/board members awarded to themselves.
By buying back stock (a decision of the board), the stock price increased, therefore, they, the executives and board exercised their stock options. An award of stock was probably due to the creation of another subsidiary and the awarding of stock in that subsidiary to shareholders and executives. As I wrote in an earlier email, and posted on the Kansas-Missouri Gray Panther website, The Ensign Group’s 2019 10-K reported very large increases in the price of the company’s stock (https://kanmograypanthers.com/kansas-city-kansas-nursing-home-covid-19-poster-child-is-owned-by-a-profitable-multi-billion-dollar-corporation/).
Name and Principal Position
Year
Salary ($)
Option Awards($)(1)
Stock Awards ($)(2)
Non-Equity Incentive Plan Compensation ($)(3)
All Other Compensation ($)
Total ($)
Christopher R. Christensen
2019
522,892
383,166
1,719,859
3,658,133
27,662
6,311,712
Co-Founder, Executive Chairman
2018
505,198
—
2,521,548
2,667,852
35,261
5,729,859
and Chairman of Board (Since May 2019)
2017
490,483
96,756
59,001
1,164,999
27,421
1,838,660
Barry R. Port
2019
368,962
306,533
1,634,259
3,658,133
14,634
5,982,521
Chief Executive Officer (since May 2019)
2018
356,477
—
1,752,454
2,112,766
14,742
4,236,439
2017
346,094
51,603
108,428
963,220
17,360
1,486,705
Suzanne D. Snapper
2019
347,782
287,374
1,677,269
3,493,724
4,228
5,810,377
Chief Financial Officer
2018
336,014
—
1,914,244
2,059,056
4,100
4,313,414
and Executive Vice President
2017
326,227
45,153
96,041
866,151
3,828
1,337,400
Chad A. Keetch
2019
320,770
191,583
1,149,950
2,014,043
3,018
3,679,364
Chief Investment Officer
2018
309,915
—
1,486,699
1,442,086
2,788
3,241,488
and Executive Vice President and Secretary
2017
300,889
45,153
87,260
692,395
3,377
1,129,074
Spencer W. Burton, President andChief Operating Officer, Ensign Services, Inc. (Since May 2019)
2019
292,500
287,374
932,399
1,438,590
14,270
2,965,133
Summary
The forprofit nursing home industry would have you believe that it is hard to make money in the skilled nursing business. That is not true. Unfortunately, the industry has framed arguments and has created a narrative that keep advocates on the defensive and legislators and the public buying into “thin margin” hardship plea.
Unless advocates, activists, and scholars debunk the thin margin propaganda and go on offense, we will remain stuck playing rope a dope with the industry over cases of abuse, and neglectful practices. One suggestion I have for advocacy groups is this: find legal and financial experts that can serve on boards or at least assist with framing issues and developing a narrative that would expose the industry’s financial machinations and put them on the defensive.
In this post, I have focused on executive compensation, which is one among a large number of finance-related techniques for extracting cash from the business of caring for patients in skilled nursing facilities. In future posts, I will be exposing other corporations and other forms of financialization of the nursing home industry.
