By:

Dave Kingsley

Here is a message to the media:  high net worth individuals and their financial managers do not invest in long-term care because it is a poor investment.  Furthermore, corporations will not continue in a line of business that is a losing proposition for their shareholders.  Nevertheless, journalists keep writing articles in which they promote a false narrative concocted by the long-term care industry and spread by the American Health Care Association. I call it the “nursing home industry hardship narrative.”

An egregious example of this false narrative appeared in the Kansas City Star recently.  Writing about the assistance requested from the National Guard by long-term care facilities, Star journalist Sydney Hoover said this: “Nursing homes in Kansas have long struggled financially, with many unable to pay competitive wages, or even basic utility bills.” The article went on to say that the “pandemic has exacerbated those difficulties, as the cost of personal protective equipment increases and staff shortages grow.” (“Kansas nursing home officials push for staffing aid – and calling out National Guard,” https://www.kansascity.com/news/coronavirus/article248477490.html).

This article cited no empirical evidence or any credible research that supports this typical industry “hardship narrative.”  I have been researching Kansas nursing home ownership for years – probably to an extent no one else has – and the only evidence of bankrupt and insolvent facilities pertains to chains taken over by private equity firms or white-collar criminals and looted.  Conversely, plenty of evidence exists to suggest that the long-term care business is an attractive investment.

It is incumbent upon agency employees, the media, and advocates to debunk the industry’s hardship pleas.  The evidence is not difficult to find.  Publicly listed companies are required to file quarterly and annual financial reports with the Securities & Exchange Commission. They are also required to file a “proxy report” on an annual basis, which includes executives’ and board of director’s compensation.

The largest long-term care facility owners are real estate investment trusts.  Welltower is the dominant REIT long-term care corporation in revenue (Over $5 billion in 2019).  It’s 2020 proxy report indicates that CEO compensation was $17 million in 2019.  Board member compensation ranged from $250,000 to $350,000. 

The Ensign Group – not an REIT – is one of the largest long-term care corporations in number of facilities.  Its 2020 revenue has increased quarter over quarter.  Like most of the other publicly listed corporations, the Ensign Group has had robust earnings, has paid dividends, and has not drawn down its rather impressive stash of cash. These companies are sitting on $billions in cash and equivalents and are not overly debt ridden.  Like the rest of corporations listed on a stock exchange, the value of Welltower, Ventas, Ensign Group shares tanked in March but have since recovered to near prior highs.

The 10-Q reports for these publicly listed long-term care corporations also indicate that they have been receiving a considerable amount of COVID relief from the federal government through the CARES Act.  For example, the VENTAS 3rd Quarter 10-Q states that the corporation applied for $35 million under Phase II of the Provider Relief Fund.  They further stated that “HHS recently announced a new $20 billion Phase III General Distribution allowance.”   

There seems to be little doubt that these highly subsidized corporations will land solidly on their feet as the pandemic is brought under control.  It is interesting to note the following statement by VENTAS regarding its liquidity during the COVID pandemic:

Since the start of COVID-19 pandemic, we have taken precautionary steps to increase liquidity and preserve financial flexibility in light of the resulting uncertainty.  See ‘Management’s Discussion and Analysis of Financial Condition and Result of Operations, Liquidity and Capital Resources; Recent Capital Conservation Actions.”  As of November 5, 2020, we had approximately $3.2 billion in liquidity, including availability under our revolving credit facility and cash and cash equivalents on hand, with no borrowings outstanding under our commercial paper program and negligible near-term debt maturing (Form 10-Q, page 9).

Fourth quarter 10-Qs, 2020 annual reports, and proxy statements will be issued early in February. At that time, we will have a clear picture of the financial condition of the publicly listed “players” in long-term care.  We will be analyzing those and reporting on the finances of the major providers in the industry.  These reports are hundreds of pages of financial information. Writing about them is a daunting task.  However, we will take small bites for posting on Tallgrass Economics Finance & Politics.

Our detailed analyses of long-term care provider finances will be uploaded to a new website – The New Economics & Politics of Aging at http://neweconomicsofaging.org/. If we do not begin to push back on industry propaganda, the future of long-term care looks bleak for patients and families.  The victimhood bestowed upon long-term care corporations during the COVID-19 pandemic will, if left unchallenged, strengthen their position with the public, politicians, and agencies charged with regulating them. Conversely, it will weaken the hand of advocates, the public, and families as they attempt to transform the current long-term care system from a business for extracting federal and state dollars at the expense of care into a truly humane system that values the lives of the elderly and disabled.