Monthly Archives: February 2021

The Ensign Group, America’s Biggest Nursing Home Corporation, Had a Banner Year in 2020

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The American Health Care Association’s Well-Funded PR Machine Is Promoting a False Narrative.  The Ensign Group’s 10-K Debunks the Industry “Hardship Claim.”

The AHCA – the long-term care industry’s lobbying arm – has a perpetual propaganda machine which incessantly cranks out a hardship narrative.  By operating mostly behind a veil of secrecy, the industry has been able to convince the public and legislators that profitability is so meager that firms are barely making it and, consequently, are on the verge of exiting the business.

Let’s consider the industry’s narrative in the context of what we are learning from publicly listed firms required to file financial statements with the Securities & Exchange Commission (available to the public).   I will begin a series of posts with the consolidated financial statement of The Ensign Group, one of the handful of publicly listed long-term care corporations.  I consider the Ensign Group to be the largest skilled nursing corporation with over 300 stand-alone nursing homes.

Other companies owning and operating skilled nursing facilities have larger annual revenues, but they are Real Estate Investment Trusts with a diverse portfolio in the broader senior housing realm. The Ensign Group owns and operates facilities in buildings it also owns.  For this reason, I’m claiming that it is the “biggest” skilled nursing corporation.

2020: A Banner Year For The Ensign Group

On a February 4th conference call, The Ensign Group reported the following:

  • Earnings per share of $3.06, an increase of 86.6% over the prior year.

  • Revenues of $2.4 billion, an increase of 18% over the prior year.

  • Net income of $174.6 million, an increase of 74.8% over the prior year.  This is “GAAP net income.”  GAAP is Generally Accepted Accounting Principles.  This measure of net income will be significantly lower than non-GAAP measures, a fact with which I don’t need to bother readers.

  • Liquidity, which is of great importance to shareholders, remains strong with $236.6 million in cash and equivalents on hand, and $340 million of available capacity under its line-of-credit facility.

  • The company returned approximately $150 million relief funds provided under the CARES Act.  Given the company’s strong financial condition, it’s interesting that a corporation as large and in solid financial condition would have received these grants in the first instance.

Financial Engineering through Patient Arbitrage

As we unravel the finances of the long-term care industry during the COVID-19 pandemic, we need to access all data pertaining to corporate patient mix.  Furthermore, it’s well-known that patient care reimbursed by Medicare is much higher than reimbursement from Medicaid. Also, premiums are paid for patients with COVID.

 Although there is plenty of evidence that Medicaid is profitable, providers will manipulate their business in favor of Medicare patients.  I call this “patient arbitrage.”  Given that protecting and enhancing shareholder value is the primary objective of long-term care corporations, no one should be surprised by the practice of seeking higher reimbursement patients.

By perusing The Ensign Group financial statements and promotional material, I surmise, reading between the lines, that the pressure on management at each facility to maximize revenue is rather intense. Here is a quote from the February 4th Conference Call:

Port noted that as evidence of the medical communities’ confidence in their local operations’ clinical capabilities, the Company saw a marked improvement in patient volumes, especially with high acuity and skilled patients with a 7.2% and 10.8% increase in Medicare census and 6.2% and 5.7% in managed care census, sequentially from second quarter to third quarter and third quarter to fourth quarter for same store and transitioning portfolio, respectively.

This improvement in our admissions trends not only gives us great confidence that we can continue to perform well as the pandemic stubbornly persists in many of our largest markets, but it also gives us confidence that we are in an excellent position to see occupancies normalize to pre-pandemic levels even while the pandemic continues to impact us and our patients. Because we have been working arm in arm with our hospital and managed care partners during this pandemic to care for both COVID-19 positive and negative patients with complex medical needs, our operations have solidified the critical role they play in the post-acute care continuum as an essential and cost-effective setting for highly complex patients.

Don’t Cry for Long-Term Care Corporations: Demand Accountability!

Most restaurants, movie theatres, and other small businesses in your community could only hope to have the government provided revenue stream as that provided to long-term care corporations throughout 2020 while the COVID scourge killed at least 200,000 people in their care.  As the pandemic is brought under control, it is important to demand answers from our political representatives.  What did providers do for patients and families versus shareholders?  Why were nursing home systems in countries throughout Asia, Australia, New Zealand, and other parts of the world able to keep death in long-term care facilities so much lower than the United States? If our government is not presented with these and other questions along with a demand for answers, patients in nursing homes will remain vulnerable to the next pandemic.

The Long-Term Care Industry COVID Narrative: A Barrage of Unsubstantiated Claims & Falsehoods

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The Scope of the COVID Long-Term Care Tragedy & Lack of an Outcry for Accountability Is Horrifying

Compared to our peer countries in the advanced industrialized world, the United States has been a complete and utter failure in the protection of vulnerable long-term care patients from COVID.  At this time, we can only estimate the total loss of life in skilled nursing institutions, but the number of patient deaths has probably reached 200,000. 

Except for centuries-long assaults on the health of African Americans and Native Americans, and the flu pandemic of 1918, these deaths comprise the biggest medical tragedy in U.S. history.  Certainly, they constitute the most massive loss of life in one demographic group in such a short period of time. If experiences of other countries around the globe are any indication, a large proportion of these deaths were preventable. As I stated in an earlier blog, for instance, S. Korea has had less than 400 deaths from COVID in its long-term care facilities (more about other countries’ COVID losses will be on later posts and one accompanying this post).

An industry was entrusted by the federal and state governments with the care of at-risk elderly and disabled patients.  For the most part, the industry failed.  In addition to cross-cultural comparisons, evidence suggests that the industry was either incompetent, or greedy, and derelict. Nevertheless, there has been not been an outcry from the public, legislators, and regulatory agencies for accountability through some type of 9/11 commission.

The Industry Is on Offense. But What Exactly Does a Claim of $35 Billion Loss in Revenue Mean?

Passivity on the part of individuals and organizations one would expect to speak out about industry dereliction is not only horrifying, but it has also left the media playing field to the industry.  Consequently, the industry’s narrative, based on misinformation and no information, is designed to escape culpability as well as to squeeze a higher level of funding from Medicare and Medicaid.

Having observed industry television interviews, press releases, and print reports in publications such as the New York Times, I am beginning to surmise that the industry’s objective is to depict operators and, consequently, parent corporations, as victims of a natural disaster over which they had no control.  Their propaganda ignores preventative measures that could have been taken while it is focuses on exaggerated financial losses.  

 On February 10th, Alex Spanko reported in Skilled Nursing News that the American Health Care Association (AHCA) had made dire projections of financial losses incurred by the industry throughout the 2020 and 2021:

Nursing facilities will lose a total of $22.6 billion in revenue during 2021, according to a new projection from the American Health Care Association, as occupancy – the primary driver of income for facilities – remains low.

On top of an $11.3 billion decline already seen in 2020, that would brings [sic] the COVID-19 financial toll to $34 billion, or a decline of 24%, even as expenses related to staffing, personal protective equipment (PPE), sit at an estimated $30 billion per year for 2020 and 2021.

Nursing Home Industry Projects $34B in Revenue Losses, 1,800 Closures or Mergers Due to COVI – Skilled Nursing News

Let’s put these claims into perspective. If indeed, total two-year revenue loss of $34 billion could empirically be demonstrated as valid, the impact of that would be de minimis on an industry with revenues of hundreds of billions per year.  However, we need to see evidence supporting the AHCA claims.

More importantly, in evaluating corporate financial performance, factors other than total revenue are essential: (1) Net income may still be robust or even higher in conjunction with a reduction in revenue, and (2) Cash flow, the real metric investors are looking for, may actually be improved in a year in which revenue has dropped.  Furthermore, skilled nursing is often embedded in corporations in the broader senior housing industry. For instance, real estate investment trusts, private equity firms, and other corporations typically own a broad senior housing portfolio of continuous care retirement communities (CCRCs) in which independent and assisted living are combined with a skilled nursing facility, and stand-alone facilities providing apartment housing, assisted living, and skilled nursing.

I love to listen to Dr. Anthony Fauci speaking on behalf of the Biden Administration these days say, “let’s look at the science, let’s look at the data” regarding vaccines. It is a refreshing change from the previous administration.  Hopefully, we can do the same thing when we examine the financial impact of COVID on the long-term care industry.

You Can’t Trust Industry Research Reports

We are lacking sufficient information to substantiate industry claims while at the same time misinformation is distributed across the world of finance.  I do not claim to have my mind wrapped around the entirety of the long-term care industry – it is, after all – an industry that operates behind a veil of secrecy.  However, the data that I’m collecting suggests that the highly subsidized (maybe most subsidized) industry providing skilled nursing is doing well (see my post re: The Ensign Group today).

“Doing well” is my description of consolidate financial statements, including, but not limited to:  revenue growth over a period of years, net income, equity, and cash flow (liquidity, cash/equivalents, lending facilities, etc.).

You can find industry financial information that sells for a very high price.  Take it with a grain of salt.  For instance, IBISWorld, one of the leading sellers of industry information revealed its analysts’ ignorance of the long-term care industry by claiming that Genesis HealthCare, Inc and HCR ManorCare are the “biggest companies” in the “nursing care facilities industry in the U.S.” Beside that claim is a red lock icon, which means if you pay an excessive fee, you can see the data backing the claim (https://www.ibisworld.com/united-states/market-research-reports/nursing-care-facilities-industry/).

.  Don’t waste your money. Genesis is a zombie company that probably won’t survive much longer and has been reduced to a contract managing firm – its property and operating entities are now owned by a Real Estate Investment Trust (REIT).  Like Genesis, HCR ManorCare was bankrupted by a private equity firm and its property was sold to a REIT. These companies don’t represent the industry and analysts indicating that they do are providing bad information.

By Dave Kingsley

Doonesbury on Prevagen

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Snake oil foisted onto elderly Americans through false advertising is an increasing problem. I wrote about a product called Prevagen on August 11, 2020 (see “Predatory Economics 101”). Doonesbury captured the essence of the problem today with humor. I didn’t ask for permission to use this, but if I’m called out for failure to do that, I’ll apologize.

By Dave Kingsley 2/14/2021

Real Estate Investment Trusts (REITs) Are Big Players in the Nursing Home Industry: That Should Concern All of Us.

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REITs Are the “New Kids on the Block,” and they Swing a Lot of Weight

You may be wondering how the Carlyle Group unloaded 338 facilities in 2010 as it dismantled HCR ManorCare and pocketed over $6 billion from the sale of real estate.  You also may be wondering why that’s important.  I’m suggesting in this post that it’s important because legal entities known as “real estate investment trusts” (REITs) have purchased significant amounts of senior housing properties in the past two decades and are fundamentally changing the structure of the industry. Indeed, HCP (now Healthpeak), an REIT, picked up the HCR ManorCare properties from Carlyle.  Because of these kinds of deals, REITs have been integrated into the fabric of for-profit nursing care in a big way.

PE takeovers and massive sell-off of long-term care property in the first and second decade of the 21st Century ushered in a new REIT era in nursing home ownership. REIT’s and PE firms have been a “hand and glove” phenomenon in what amounts to a revolution in nursing home ownership.  As I will demonstrate in this and later blog posts, REITs are the new, and now the big, kids on the block in the nursing home business.

Furthermore, the growth of REIT ownership of skilled nursing property has been fueled by well-established chains such as Brookdale that are selling property for an infusion of cash.  These chains typically sell their property to REITs and hold themselves out as management companies. REITs create LLCs as operators (100% owners) and place each property in a newly created LLC and contract with companies like Brookdale to manage the facility. 

What is an REIT?

I’m writing this post to make a very important point that will be expanded, illustrated, and clarified in the months and years ahead on this blog: the primary mission of the nursing home industry is not medical care, nor is it real estate; rather, the corporate function driving the business of long-term care is financial engineering. Finance is not an ancillary function of REITs – it is the function.  The same can be said about the rest of the industry – whether the ownership structures of facilities are embedded in REITs, private equity portfolios, family trusts, family offices, limited liability companies, publicly listed holding companies and privately held corporations in their various legal forms, the mission of providers is extraction of cash as expeditiously as possible.

The financialization of the American corporation has roots that can be traced beyond the take-off period of Reagan-Thatcher neo-liberalism and Chicago School theories of corporate management.  REIT’s became part of the U.S. financial landscape with President Eisenhower’s signature on legislation creating publicly listed real estate trusts.

This legislation provided an opportunity for the “average American” to invest in real estate trusts, which prior to that time was limited to wealthy investors.  REITs as corporations could issue IPOs, raise capital, and gain a listing on a public stock exchange.  There are considerable tax advantages to the REIT as a corporation because these entities pay no corporate income tax on net income distributed to shareholders.  They are, however, as REITs, required to distribute 90% of their income to common stockholders.

When REITs Entered the Senior Housing Industry

Until 1999, REITs were legally authorized to own, lease, and trade in real estate.  They could not create wholly owned taxable reit subsidies (TRSs) for the purpose of owning and managing licensed skilled nursing facilities.  That changed with passage of the “Ticket to Work and Incentives Improvement Act of 1999,” which was ostensibly “intended to amend the Social Security Act to expand the availability of health care coverage for working individuals with disabilities, to establish a Ticket to Work and Self-Sufficiency Program in the Social Security Administration to provide such individuals with meaningful opportunities to work,and for other purposes” (https://www.congress.go/bill/106th-congress/house-bill/180/text).

Often, major pieces of legislation include an assortment of items that have no relationship to the law at its introduction. Tucked into the “Ticket to Work and Incentives Improvement Act of 1999” was Title V (Tax Relief Extension Act of 1999), Subtitle C, Part II, subpart a – “treatment of income and services provided by taxable reit subsidiaries.” From the perspective of how the nursing home industry would be changed in the years ahead, this arcane piece of legislation is a big deal.

With this legislation, “healthcare REIT” entered the lexicon of long-term care. As a new legal corporate structure, healthcare REITs interacted with private equity and well-established chains in a way not yet comprehended by advocates, activists, legislators, and the public in general. A massive amount of skilled nursing real estate has been shifted to these entities that not only own property but also manage operations. Furthermore, financial engineering is in continuous motion with property acquisition and trading, formation of joint ventures, contracting with facility management services, and formation of ownership networks.

REITs Are Spreading their Tentacles throughout the Long-Term Care Industry

If you are familiar with the skilled nursing industry, you will recognize corporations such Sunrise Senior Living, Kindred Healthcare, Brookdale Senior Living, Genesis, and so forth. As you peruse the financial statements of the major REITS such as Welltower (the biggest), Ventas, Healthpeak and others, you will also see those well-know company names as managers of REIT facilities, as joint venture partners, and as buyers and sellers of real estate.

Furthermore, REITs entered the senior housing market in 1999 – not nursing home care alone. Many nursing home facilities are embedded in in Continuing Care Retirement Communities (CCRCs). Some of their properties and operations are stand alone assisted living facilities, or senior apartments.

Federal dollars Flowing into REITs Are Not Only From Medicare & Medicaid

It would be difficult to identify an industry that is as subsidized by federal and state government as the long-term care industry. REITs are subsidized through a steady stream of patients reimbursed through Medicare and Medicaid. With relief from corporate income taxes, and subsidies such as capital gains, depreciation allowances, and interest deductions, REITs are provided with major tax expenditures.

In future posts, I will explain why the amount of public funds flowing into REITs and other legal structures through Medicaid, Medicare, and tax subsidies enriches investors and executives but does nothing to improve conditions in long-term care facilities. It is important for advocates and activists to use financial information to rebut the industry’s claim that operators can’t afford to provide better care. It is probably the case that facility-level management can’t afford to provide higher quality of care. However, that can be attributed to extraction of funds by holding companies, REITs, and other endpoints in the flow of capital from the front door of the facility to the consolidated financial statements of the entities at the top of the chain.

By Dave Kingsley 2/14/2021

Watch this Space for Our Upcoming Interview with Michelle Neufeld, Manager of the Pleasant View Nursing Home in Inman, Kansas – A Home-Like Alternative to the Typical Skilled Nursing Institution

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Five churches of different denominations, coming together in a small town in central Kansas to build a caring alternative to the typical nursing home institution, is a story we want to tell.  Hence, Kent Comfort will be interviewing Michelle Neufeld, the manager of Pleasant View nursing home in Inman, Kansas. The video of the interview will be posted on this blog.

Let’s face it, people overwhelming disdain nursing homes and never want to be in one.  The reason for that widespread attitude is the dehumanizing conditions people experience when they can no longer stay in their homes. The trauma of leaving our lifeworld of living space, family, friends, pets, neighborhood and enter a depersonalized medical institution to share a room with a stranger is something none of us ever want to experience.

I made a visit to Pleasant View during which I had the opportunity to speak with employees and residents.  The high rate of satisfaction in the home is palpable.  So, yes we can! We can provide long-term care that respects the dignity of patients. This enlightened alternative to the current system of long-term care is a model that is feasible.  We want our readers to know about it.

By Dave Kingsley

Nursing Home Corporations are Beginning to Release Fourth Quarter Earnings. Are their Hardship Pleas Merited? Or is it Propaganda?

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The Ensign Group, Inc. (Nasdaq: ENSG) has Reported Robust Fourth Quarter Earnings – Now We Need to Discuss How Well They Protected Patients in Their Care from COVID

The information in this post is based on a conference call and webcast on February 4, 2021 at 10:00 A.M. PT (https://markets.businessinsider.com/news/stocks/the-ensign-group-reports-fourth-quarter-and-fiscal-year-2020-results-1030040511).  When Ensign’s annual 10-K report is available, we will analyze all quarterly reports and their annual results to determine their overall 2020 performance.  We are interested in the amount of revenue the corporation received in the form of CARES Act grants/loans and other subsidization from various federal departments (e.g., HHS, IRS, etc.).

During the 4th quarter (Oct, Nov, Dec), the COVID pandemic spiked to levels unseen prior to that time.  Here are a few highlights from the Ensign release of 4th quarter results, which includes annual results:

  1. Earnings per share of $0.82 represent an increase of 67.3% over the prior year quarter.

  2. Earnings per share of $3.06 represent an increase of 86.6% over the prior year.

  3. Revenue of $2.4 billion for the year is an increase of 18.3% over the prior year.

  4. Medicare days increased by 22.1% over the prior year; hence, skilled revenue increased by 14.7% over the prior year.

  5. Real estate segment income of $31.3 million is an increase of 79.2% from the prior year.

  6. 2020 net income of 174.6 million is an increase of 74.8% over 2019. Fourth quarter earnings of $44.9 million represents an increase of 33.9% over the 4th quarter of 2019.

Although Ensign stock crashed with the rest of the market in mid-March 2020, it has recovered and has been trading in the low $80s.  It closed on Friday, February 5, 2021 at $83.82.  Analysts have rated it as “strong buy” (https://www.msn.com/en-us/money/stockdetails/analysis/fi-a1rzsm).

CEO Barry Port had the following to say about 2020 operating results: “In spite of the continued challenges brought on as the result of the ongoing global pandemic, we are very happy to report another record quarter as we achieved our highest earnings per share in our history.”  He went on to praise the performance of “local teams” in protecting patients from COVID-19.

Whether The Ensign Group Deserves Praise for its Protection of Patients from COVID Remains to be Seen.  What Happened in Kansas City is not Strong Evidence that the Company Placed Care Over Extraction of Cash.

I must say that reading Port’s glowing report of Ensign’s infection and disease control effectiveness, I’m experiencing cognitive dissonance.  Last April, The Ensign Group’s Riverbend facility in Kansas City, KS began to appear in the local media as something of a poster child for COVID-19 deaths in nursing homes (e.g., Laura Bauer, “Two more COVID-19 deaths at Riverbend nursing facility in KCK reported Sunday,” https://www.kansascity.com/news/coronavirus/article241959296.html).

In January of 202 – prior to public awareness of the severity of the pandemic – the Riverbend facility received the lowest rating of 1 out of 5 stars on the CMS Nursing Home Compare website.  The facility was cited for lack of infectious disease control.  Apparently, fixing that problem was not a high priority for the company. As early as January, the world was becoming aware of a novel virus that could become a deadly pandemic outside of China’s borders.

I was interviewed by Fox4 News regarding the Riverbend situation and the nursing home industry in general. My words were reduced to rather meaningless soundbites.  Unfortunately, local and national media are not geared these days to in-depth research and analysis.  After focusing on the scandalous Riverbend deaths for a short period of time, the media jumped to the next scandal and then to the next scandal and on and on – from scandal to scandal.  No adequate analysis of the overall industry has been forthcoming.  Hence, Mark Parkinson and the AHCA can get away with claiming that the industry couldn’t afford to do any better than they have done.

Will the industry escape accountability for the deaths of people entrusted to its care?  Will our government, media, and the public just move on with no serious inquest into how corporations could remain profitable while they allowed perhaps 200,000 people in their facilities needlessly suffer and die? I’m horrified by the thought that the answer to these questions will be yes.  I’m not hearing much interest in pulling back the curtain on the opaque finances of the closely held corporations paid with Medicare and Medicaid dollars to determine what they could have and should have done to protect their patients.

By Dave Kingsley

Don’t Believe Nursing Home Industry Propaganda: Providers Are Doing Fine Financially

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Mark Parkinson’s “Year-of-COVID” Strategy is Clear:  Make Nursing Home Corporations the Victims of the Pandemic Rather than the Negligent Providers they Have Been.

Mark Parkinson, former governor of Kansas, is the CEO of the American Health Care Association (AHCA), which is the well-funded and powerful nursing home industry lobby. I have heard Parkinson interviewed several times on CNN and have seen his comments in various publications during the past year.  His job is to turn derelict nursing home corporations into victims.  In an interview with Skilled Nursing News a couple of days ago he bemoaned the hardship placed on nursing homes by the pandemic.  He relied on a drop in capacity from 80% to 75% but provided no financial evidence how that affected financial performance given the high rate of reimbursement for COVID patients and a plethora of subsidies from federal and state agencies.

No one should fall for the former Kansas governor’s propaganda.  If he were interested in scientific, objective data to justify the victimhood he claims for his corporate members, he would support our demands for transparency.

We know that the big publicly listed corporations have been reporting adequate to robust earnings over the past year.  However, most nursing home corporations are closely held and operate behind a veil of secrecy.  They incessantly employ a false narrative claiming that net earnings are so thin that the current system – much of which entails indecent, and inhumane care – is the best they can do given the amount of reimbursement they are receiving from Medicaid and Medicare.

Because of the passivity of legislators, the public, and advocates in the face of this scurrilous misinformation (propaganda), lobbyists can get away with appearing in front of legislative committees and claim that net earnings are so low that they can’t properly staff facilities or create environments providing decent care.  There is no demand that they open their books and show us the money trail.  

We know that funds flow into facilities from Medicare, Medicaid, and private pay reimbursements.  It flows out through an opaque network of LLCs – generally all owned by the same investors, e.g., private equity firms, real estate investment trusts, family trusts, family offices and assorted other financial entities.  If Parkinson would like for us to accord him any credibility, then he needs to show us the lease, consulting, management, and other contractual arrangements the LLCs have with one another.  

Mark Parkinson, Former Governor of Kansas, is a High Paid Propagandist for the Nursing Home Industry.

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Mr. Parkinson Goes to Washington. His Current Task is to Cover Up Corporate Responsibility for Massive Loss of Life Due to COVID

Mark Parkinson, Former Governor of Kansas & CEO of the American Health Care Association

When Kathleen Sibelius was appointed HHS Secretary by President Obama, her Lieutenant Governor, Mark Parkinson, became governor.  His first major act was to nullify one of his predecessor’s last acts. Governor Sibelius had denied a permit for a dirty, hyper-polluting, fossil fuel, power plant in Southwest Kansas. Parkinson reversed her decision and granted the permit.  That was probably Parkinson’s only significant act as governor.  He finished out what would have been Sibelius’s term and immediately left for a high paying gig in Washington, D.C. – as CEO of the American Health Care Association (AHCA).

The AHCA lobbies on behalf of its nursing home corporation members.  According to the organization’s 2019 IRS 990, it has annual revenues of $40 million – most of which is derived from member dues.  Parkinson’s 2019 compensation was reported on the 990 as $2.5 million. (https://projects.propublica.org/nonprofits/organizations/530260105). 

These days, Parkinson is busy converting AHCA corporate members from negligent providers of care to victims of COVID-19 by pleading hardship on their behalf for what could be 200,000 deaths in the so-called “nursing homes” of America. In the last few days, he was quoted in Skilled Nursing News bemoaning the poor financial outlook for the nursing home industry(Parkinson: Nursing Homes’ Financial, Operational Recovery ‘Completely Tied to Visitation’ – Skilled Nursing News).  As our past and current posts regarding earnings of publicly listed provider corporations have demonstrated and will likely continue to demonstrate, long-term care providers are in fact doing quite well.

The Rights of Nursing Home Patients and their Families are up against AHCA Corporate Members & Their Deep Pockets 

Make no mistake about it, the AHCA, with affiliates in all 50 states, swings far, far, more weight in Washington and state capitols than well-meaning advocacy and activist groups could ever hope for.  Indeed, the power relationship between the industry and advocates is asymmetrical.  That explains why regulation is weak and quality of care remains low.

For instance, according to Section B. of the AHCA IRS 990 (displayed below), $3,197,201 alone was spent on software and public relations/lobbying firms in Washington, D.C.  The software helps link 50 state chapters and coordinate campaign and lobbying activities.  The $2 million plus expenditure for “public affairs,” “audio visual solutions,” “communications,” and so forth in a single year is a component of the industry’s propaganda juggernaut. Much of the rest of the $40 million is spent on Democratic and Republic governor’s associations and other purchases of political influence.

What Does $40 Million Buy the Nursing Home Industry in One Year?

Immense amounts of cash, decades of lobbying expertise, and a high paid staff can guide legislation and regulation in a direction that benefits corporations at the expense of patients, families, and communities.  Stated differently, the AHCA is a well-oiled propaganda machine.

AHCA framing and narratives have been effective in creating a Panglossian viewpoint among the public, media, and even advocates.  Although it is common to hear negative comments about the industry such as it is “greedy,” “puts profits above people,” and other such disparaging remarks, a psychologically complex set of beliefs neutralize this disdain. Industry propaganda has undermined the public’s suspicion that greedy industrialists are pocketing excess amounts of Medicare and Medicaid funds through unjustified cost cutting.

The gargantuan amount of PR money spent by the AHCA and expertise in manipulating public opinion has instilled a subliminal belief among a wide swath of the public.  Their narrative is that the nursing home system is the best there is in the best of all possible worlds.  Stated differently, the industry would have you believe that Medicare and Medicaid reimbursements are too paltry for them provide better care and remain in business.  Their lobbyists and PR mavens brilliantly induce the belief that net earnings are so thin that humane care is financially out of reach.  This is a scurrilous lie.

By Dave Kingsley

Message to the Reactionary Wing of American Politics: There is no Socialism in the United States

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The U.S. Does Not Have a Socialist Economy or a Government Based on Marx’s Political Philosophy. But We do Have “The General Welfare Clause” of the Constitution.

There is no socialism in the United States: bupkus, nada, zip, none whatsoever. The United States has a capitalist economic system. Furthermore, we are a democratic-republic. That will not change in the foreseeable future.  What we also have is constitutionally justified “general welfare” for alleviating suffering of citizens left behind by advancing technology, for meeting fundamental needs of those who have experienced personal or societal catastrophes, and for addressing other threats to the “general welfare” of the populous, e.g., climate change, nuclear waste, and other threats to safety and health of Americans.

The framers of the constitution anticipated the probability of events or trends that would threaten the well-being of citizens on a wide scale. Hence, they included the “general welfare clause” in the constitution as a raison d’etre for federal spending to protect the populous from extensive harm.

Article I, Section 8, Clause 1 of the U.S. Constitution states that:

“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”

Libertarians, Neocons, and Other Right-Wing Groups Claim that the General Welfare Clause is Meaningless.  The Supreme Court Has Clearly Held that they are Wrong

Based on an interpretation of the general welfare clause, the Supreme Court has held that OASDI, Unemployment Insurance, Medicare, Medicaid, TANF, and a Host of other Government expenditures for meeting threats to “we the people” are constitutional (see e.g., U.S. v. Butler, 297 U.S. 1, 1935, Helvering v. Davis, 301 U.S. 619, 1937, Steward Machine Co. v. Davis, 301 U.S. 548, 1937, and New York v. U.S. 504 U.S. 144, 1992).

Those opinions are now part of the warp and woof of U.S. constitutional law. Nevertheless, conservative forces have been pushing a false narrative, i.e., “The Supreme Court is wrong and continuing to improve the welfare of U.S. citizens through government expenditures is moving the U.S. toward socialism.”  This kind of nonsense is coming out of the Hoover Institute, The Heritage Foundation, the Koch-funded Cato Institute and other reactionary, conservative propaganda organizations (see, e.g., John Cogan, “High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs”).

Liberals have Failed to Develop a “Constitutional versus Socialistic” Narrative Based on the Truth. Why is this important?

A radical, reactionary right-wing has always existed in the United States and has, since the rise of communism soon after the dawn of the 20th Century, labeled liberals as communists and socialists.  Indeed, red baiting has been a barrier to improving the lives of U.S. citizens left behind by industrial capitalism.

The “general welfare” clause justifies a safety net for individuals thrust into poverty by technological advancements which reduces the need for labor.  Furthermore, care for an aging population, extension of the benefits of advanced medical care to all citizens, and a morally decent standard of living for our society as it has evolved have been held to be constitutional under the clause by the Supreme Court.

Accusing Democrats and liberals of “socialism” and “radical leftism” should be laughable, but it is working for reactionaries.  It’s working because Democrats and liberals have failed to go on offense with a narrative based on the truth: (1) Federal expenditures are justified by the U.S. Constitution, (2) A capitalistic system will, of necessity, fail to meet the fundamental needs of all U.S. citizens, and (3) A decent system of government in the wealthiest country in the history of humankind has the constitutional duty and obligation to take up the slack between what private enterprise provides and what the entire population needs.

It is amazing to me how well right-wing red baiting has worked to keep people in poverty, without medical care, in substandard long-term care, in bad air, drinking bad water, and in all sorts of other threatening situations.  The liberal side of the political spectrum can do a much better job of framing and development of a narrative. Insofar as the accusation of “socialism/communism,” let’s just apply this metaphor: that dog doesn’t hunt. It is false. Let’s not stay silent in the face of it. Rather, let’s go on offense with our own narrative: “Yes we can afford to create a decent society and have the wealth to bring it about!”

Posted by Dave Kingsley 2/6/2021

The State of Long-Term Care in America: Video interview with Professor Charlene Harrington, UCSF

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Check out our Tallgrass Economics podcast interview with Professor Charlene Harrington. Professor Harrington is a gerontologist, registered nurse, and holds a PhD in sociology. She has made extensive contributions to the scholarly literature pertaining to long-term care, and is well known across the United States for her vast knowledge and presentations before legislative and regulatory bodies. Dr. Harrington has important insights to share pertaining to the current state of nursing home and senior care in America.

Kent Comforts interview with Professor Harrington can be accessed at:

https://youtu.be/_4JXC-cE3SI