Paul Ormond Managed HCR-ManorCare Into Bankruptcy & Walked Away With $116.7 Million

These days, one of the major problems facing retirees is adequate savings and retirement funds for survival throughout their later years of life. Not a problem for former HCR-ManorCare CEO Paul Ormond. After he managed the third largest nursing home chain into bankruptcy, he was awarded with an astounding golden parachute – ostensibly for retirement benefits.

According to Skilled Nursing News Mr. Ormond, who left ManorCare in September 2017 was, “…owed $116.7 million under the prepackaged bankruptcy plan by which Quality Care Properties, Inc. (NYSE: QCP) will take over the Toledo, Ohio-based skilled nursing provider.” (https://skillednursingnews.com/2018/03/manorcares-former-ceo-owed-millions-bankruptcy/.) 

The Carlyle Group is one of the biggest and most predatory private equity firms on the planet. It engineered a takeover of HCR-ManorCare in 2007 and the looting began. Property was sold off and leased back by operations. Like all PE takeovers, most of the deal was leveraged with debt loaded on the victim company, i.e, HCR ManorCare.

The CG – HCR-ManorCare saga is a story yet to be fully explicated. It is a project on which we are currently working. It is important that the damage done to skilled nursing by financiers be compiled systematically, organized, and made available to the public.

Workers’ Doing The Backbreaking Work Have No Retirement

One salient feature of American free enterprise after the Reagan Revolution was the demise of company provided defined benefits pension programs, i.e. after a set number of years of employment, employees were vested and could count on an annuity from retirement until death. As the economic paradigm shifted toward a radical free market form of capitalism (I use the term capitalism quite loosely here), the responsibility for funding retirement fell on the shoulders of employees through defined contribution programs such as the Roth IRA and 401(k).

The frontline nursing home workers without whose hard work economic rewards for the financiers at the top of the ownership hierarchy would not be possible generally have no retirement benefits. The shift to defined contributions was an excuse for corporations to end defined benefits programs. Consequently, affluent Americans have most of the defined contribution accounts with sufficient funds for a satisfying retirement.

As Monique Morrissey of the Economic Policy Institute stated in her comprehensive report, “The State of American Retirement: How 401(k)s have failed most American workers:” “For many groups—lower-income, black, Hispanic, non-college-educated, and unmarried Americans—the typical working-age family or individual has no savings at all in retirement accounts, and for those that do have savings, the median balances in retirement accounts are very low” (https://www.epi.org/publication/retirement-in-america/).

DID YOU KNOW?

From 1997 to 2005, Federal Reserve Chairman Jerome Powell was a partner at The Carlyle Group, where he founded and led the Industrial Group within the Carlyle U.S. Buyout Fund. From 2005 until he was appointed Chair in 2017, Chairman Powell was involved in finance and service on Bipartisan Policy Committee and the Federal Reserve Board.

    The nursing home system is predatory. It is designed for optimum extraction and exploitation without reinvestment for innovation and improvement in the quality of care.  Although federal and state regulators promote a veneer of protection for patients and the public, their primary mission is maintenance of government support for massive real estate and financial services industries.

    Here are some recent examples of how the system of profit and nonprofit corporations, elected official and regulators is designed to protect providers at the expense of patients, the public, and communities in which they operate:

The power of money in politics

    The New York Times reported on August 16, 2020[1] that large nursing home chains are hiring high powered lobbyists to scrounge around Washington and push for favors such as tax breaks, immunity, and cash infusions through COVID relief bills.  Genesis, the biggest operator of nursing homes is on the brink of bankruptcy due to mismanagement and sees the COVID crisis as a path to rescue – it has hired two former top White House aids to lobby on its behalf. 

    Life Care Centers, the third largest owner and operator of skilled nursing facilities has hired former top-level congressional staffers to lobby on its behalf.  This company – owned solely by billionaire Forrest Preston – has a record of not just poor care but horrible care.[2]

    Aside from nursing homes corporations hiring their own lobbyists, they are represented by two powerful trade associations: the American Hospital Association and the American Health Care Association. OpenSecrets.org indicates that the AHA disburses about $100 million per year for political campaigns, lobbying, and maintaining a lobbying army in Washington and the 50 states.[3]  These appear to be a productive expenditure.  According to the NYT article:

The industry has received about $7.6 billion in federal grants through the federal economic stimulus package, according to the American Health Care Association, an industry group, and will soon get another $5 billion. Nursing homes have also received an estimated $11 billion more in government loans and advance Medicare payments, according to an analysis of federal data by Good Jobs First, a progressive research group. Executives at Genesis, which has reported 1,500 deaths at its homes nationwide, told investors last week that the company had received nearly $190 million in federal grants and was looking for more.

The Industry is well protected, but patients and employees are neglected by regulators

    Regulators, whether they be CMS, state agencies such as the Kansas Department of Aging & Disability Services, or local health departments have circled their wagons around the industry and provide it with a veil of secrecy.  I began calling agencies and checking on websites for information about cases of COVID and deaths. 

    Nothing on websites. Using the ruse of finding a nursing home for a friend, I inquired about information regarding COVID cases and deaths in the facilities in the area.  Generally, I was referred to other agencies such as – believe it or not – an Area Agency on Agency, which has nothing to do with COVID or regulating nursing homes.

    Eventually, I was directed to public health departments such as the Kansas City, Missouri health department.  Amazingly, one public health director told me he did have that information but wouldn’t share it with the public.  One epidemiologist told me that her agency had the information but wouldn’t give me the phone number of the person I would need to talk to because that person was just too busy to talk to me.

    Seventy or one hundred thousand (who knows?) nursing home patients and workers who have died from COVID is an unnecessary, preventable tragedy of major proportions.  But due to deregulation and capture of government agencies and their employees, the tragedy continues.  The Wall Street Journal reported that 26 states are not bothering to even test inspectors entering skilled nursing facilities.[4]

In the final analysis:  A protective shield and largess for the industry.

    Government agencies and legislatures are enmeshed with the skilled nursing business in exploitation of private pay patients, workers, and taxpayers. Behind a veneer of state and federal regulatory activity is a mutually protective relationship between government and providers.

    The claim of a competitive market in which competition will improve service is mythical.  Prices are controlled – advantageously for the industry – through reimbursement rates while wages are allowed to float in an imaginary “labor market.” Huge amounts of largesse is funneled to the industry through tax expenditures, price controls, supplemental payments, and bailouts.

[1] https://www.nytimes.com/2020/08/16/business/nursing-home-safety-trump.html?searchResultPosition=1

[2] Having checked Nursing Home Compare ratings for Life Care Centers, I was struck by its extraordinary number of low ratings in Kansas and Missouri.  Also, I have noticed that this company appears frequently on the CMS “special focus facilities” list.  Its Wichita facility has been on the SFF list throughout the pandemic.  This means that the facility is so poorly operated that CMS won’t even rate it at the lowest level of 1.  Preston was caught because of whistleblower employees for overbilling Medicare for rehabilitation services.  He settled by returning $140 million to Medicare.  Who knows how much he got away with?

[3] https://www.opensecrets.org/orgs/summary?id=D000000116

[4] Anna Wilde Mathews, “Many Nursing-Home Inspectors Aren’t Tested,” Wall Street Journal, Saturday/Sunday, August 15-16, 2020, p. A3.

    PREDATORY ECONOMICS 101:  SUPPLEMENTS & NURSING HOME REFERRAL SERVICES

    Nursing home referral scam A Place for Mom is the topic of this second post in a series with the theme:  Predatory Economics (the other one calls out purveyors of the snake oil Prevagen, see last post August 11, 2020).  In this series we will be calling out businesses preying on the public – especially the elderly.  As a plutocracy has become more entrenched in the United States, predatory marketing and manipulation have become increasingly open and shameless. 

    Among other for-profit corporations that have been integrated into the assisted living and nursing home system, referral services now exist to guide prospective tenants and patients to assisted living and skilled nursing facilities.  We do not really need these services, the Center for Medicaid & Medicare Services rates nursing homes based on regular state inspections.[1]

    A Place for Mom, is the biggest and best known of these so-called services.  No doubt, many readers of this post remember Joan Lunden’s soothing assurances about how this service intends to be a guide to the best place for mom (her conscience must have bothered her, she’s gone).  The truth is that mom will be referred to whichever facility is willing to pay for the referral.

   It is important to note this:  A Place for Mom is owned mostly by predatory, private equity firms Warburg-Pincus.  There is no evidence that I’ve ever seen which suggests that this outfit is in the nursing home business for any other reason than to extract value for investors at the expense of care.

  A Place for Mom advertises itself as a “free service,” but the ads don’t tell the whole story. Indeed, mawkish, maudlin, phony-baloney television ads featuring Ms. Lunden and others would lead viewers to believe that the company is not even a company but rather just a free service that does nice things for moms (and dads or anyone else supposedly).

    Because a Place for Mom is a for-profit company, its revenue must come from somewhere.  In fact, nursing home and assisted living operations using the service pay a fee for referrals equivalent to one month of their monthly charge. This information is not present on the company’s website homepage. [2] However, it raises profound ethical issues that must be explored in some depth.

    Empirical evidence suggests that a Place for Mom revenue is driven more by the facilities willing to pay than by an objective evaluation of quality of care in those facilities.  For instance, exactly which skilled nursing facilities with which the company has a referral agreement in the Kansas City area is difficult to discern from its website.[3]  However, I did find Indian Creek Health Center of Overland Park listed as a Place for Mom’s referral. The CMS website on which the five-star rating for each facility can be found indicates a 1 – the lowest rating – for Indian Creek. 

  I called the company’s 1-800 number to see if they would disclose which facilities were customers. However, the salesperson was brand new and knew nothing about the nursing homes in the area. I could sense that her job was to capture me as a customer.  It was clear that if I didn’t tell them exactly for whom I wanted to find a facility I would not receive any information.

    These services exemplify the irrational nature of deregulated government funded systems. Neoliberals, conservative Democrats and Republicans, and libertarians promote the mistaken notion that government is inept and private businesses can provide services much more efficiently and effectively.  Contrary to the belief in the advantages of the free market over government in health care these privatized services tend to be opaque, predatory, and manipulate unsuspecting citizens into care that is far more costly than if it were provided by the government.

    It is important to consider the ethical concerns raised by operations like a Place for Mom:

• Individuals are lured into these services under the guise that quality of care is the main consideration in guiding customers to assisted living and nursing home facilities.
  
  
• Funds that could be dedicated to care are siphoned off into an unnecessary for-profit entity. 
  
  
• Evaluation of the service by social scientists is not possible due to a veil of secrecy.

[1] If you want to find out about a nursing home, go to this site and enter the city of the nursing home you are interested in and the name of the nursing home: https://www.medicare.gov/nursinghomecompare/search.html?  The facility to which A Place for Mom refers your mother/dad/friend/child/relative will pay for that referral.  This is money that comes out of care.  The people in the company’s boiler room operation will not have near as much information about the place as what you will find on the CMS website.

[2] https://aplaceformom.com

[3] https://www.aplaceformom.com/nursing-homes/kansas/kansas-city

EXPOSING SHAMS, SCAMS, AND PREDATORS

    This is the first in a series of blog posts with the theme:  Predatory Economics.  In this series we will be calling out businesses preying on the public – especially the elderly.  As a plutocracy has grown more powerful in the United States, predatory marketing and manipulation have become increasingly open and shameless. 

The Federal Trade Commission (FTC) and Food & Drug Administration (FDA) increasingly bend to the will of industry.  Because of saturation advertising on television, many people are suckered into believing that medical shams and phony products are legitimate.  We intend to expose them.  But we also believe that many aspects of Medicare, and Medicaid have been rigged to the advantage of providers and disadvantage of beneficiaries. So, those need to be exposed also.

    In the first posts, fraudulent sales pitches to the elderly and their families will be highlighted – “called out” if you will for these two scams:  (1) “Prevagen,” a snake oil which is sold as product for improving memory, and (2) “A Place for Mom,” a cubicle sales program (boiler room operation) for directing people to nursing homes by making victims think the company really cares about the quality of care they will receive.

    WE ARE NOT ANTI-CAPITALISTS.  We believe in a real, well-functioning capitalistic system in which both buyers and sellers have accurate and complete information.  However, we also believe that government must regulate business in the interest of the public good and provide the resources to people for full participation in a democratic society.

PREVAGEN, A PRODUCT FOR SAVING YOUR MEMORY. YOU MAY HAVE SEEN THE ADS.

    A supplement with the brand name “Prevagen” is sold nationwide and is marketed through a massive television advertising campaign. The claim is that this supplement will improve memory.  No evidence has ever been presented that it will do that – none, nada, zip, zero.  However, plenty of data exists that it will do nothing for brain health.[1]

    You might ask, “Why does the Federal Trade Commission or the Food & Drug Administration allow the purveyors making huge amounts from selling this phony, baloney product continue to blanket TV programming with false claims?” Although these agencies are unduly differential to industry (in my view), in the case of the Prevagen, they have attempted to stop false ads.  Both agencies have been attempting through litigation to end the fraud perpetrated by the manufacturers of the product but have been hung up through appeals.[2]

    Ads Preying on The Elderly

    You might have seen the ads.  An elderly lady is pondering over products at the pharmacy that could help her memory.  A kind pharmacist walks up and tells her that Prevagen is the best. Or you see 60+ people telling the viewing audience how much it has done for their minds.  One man even proclaims that all his friends say, “man you have a memory like an elephant.”   The content of the ads is clearly directed toward the elderly and preys on fears of memory loss – even dementia – during the later years of life.

Quackery Is Nothing New

    Medical quackery including worthless medicinals and the sales of snake oil have been part of U.S. history for centuries.  Prevagen is the latest iteration of a pill that will cost you a pretty penny but do absolutely nothing for you – unless you consider a placebo effect as doing something for you (much like Lydia E. Pinkham’s Little Pink Pills of yore).  The makers of this memory pill will charge you $70 on Amazon per bottle of 30 pills for which they have provided no scientific evidence that their curative will effective (check it out yourself on Amazon).

    What is in this magic pill?  The manufacturers are giving you ground up jelly fish. Robert H. Shmerling, MD Senior Faculty Editor, Harvard Health Publishing, had the following to say about Prevagen:

    “The bottle promises it “improves memory” and “supports healthy brain function, sharper mind, clearer thinking.” Never mind that the main ingredient in jellyfish (apoaequorin) has no known role in human memory, or that many experts believe supplements like this would most likely be digested in the stomach and never wind up anywhere near the brain.”[3]

    I asked the head pharmacist at the CVS pharmacy a few blocks from my home if her store sold Prevagen.  She said yes.  I asked her why they would sell a product that is obviously fraudulent.  She said that she didn’t have any choice in the matter, but stated that it was kept behind the counter because people were stealing it. “Why,” I asked. This pharmacist didn’t seem to know and didn’t seem to care about why people were stealing it. When you think about it, many people who are desperate about perceived loss of memory (or perhaps real loss of memory), but can’t afford the $70 bottle of 30 pills.

What Should We As Citizens Do?

    Elderly Americans remain deceived by the ubiquitous ads and waste of money on a memory pill that simply doesn’t work.  Leading retail outlets such as Amazon, CVS, Walgreen’s, and others peddling these over-the-counter supplements have no legal obligation to reveal the scientific truth about them.  The same is the case for television networks who are obviously earning a significant amount of advertising revenue from supplement frauds.  Moral obligation and corporate responsibility are another matter. 

    Please tell your nice friendly pharmacist that it is wrong to foist snake oil on the elderly.  Also, call your state attorney general and tell them to file an injunction against the company making Prevagen and the retail outlets selling it.

[1] See the discussion in the court referenced in endnote 2 regarding the Madison Study in which there was no significant difference in a double blind, placebo-experimental group design.  It took 30 post hoc analyses to find a subgroup with a significant difference on which the company (Quincy Biosciences) stakes it claim that it has been clinically tested.  The search for a significant p-value by repeatedly looking for subgroups in which a difference can be found is bogus.  Eventually such a difference will occur by random chance.

[2] https://www.ftc.gov/system/files/documents/cases/quincy_bioscience_complaint-filed_version.pdf; https://www.ftc.gov/enforcement/cases-proceedings/152-3206/quincy-bioscience-holding-company; https://www.lexology.com/library/detail.aspx?g=2f42c12e-180b-40f9-8597-e9371fc43324

[3] https://www.health.harvard.edu/blog/fda-curbs-unfounded-memory-supplement-claims-2019053116772