What’s A Nursing Home License Worth?
What is a nursing home license worth to a corporation or group of investors pooling their money to buy facilities? It’s of enormous value. Without a license granted by a state, nursing home real estate – the primary purpose of an investment in the business – is worthless. The value of these intangible assets are noted on nursing home corporation balance sheets as “Right-of-Use-Assets.” For instance, Brookdale Senior Living noted $788 million of “Operating lease right-of-use assets” in 2020 and $1.2 billion in 2019. The Ensign Group noted $1.0 billion in both 2020 and 2019 on its balance sheet as “Right-of-Use Assets.”
A limited number of licenses are available, which enhances their value. We can expect a modest decrease in the number of long-term care facilities and number of beds across the United States. More emphasis on keeping individuals at home and out of institutions has gained some traction. Any downward trend in institutionalization of patients on a long-term basis will increase the value of licenses merely because of supply and demand.
State Agencies Responsible for Licensing Are Handing Out Valuable State Assets Without Adequate Expectations of Transparency, Responsibility, & Quality of Services from Recipients
Although industry lobbyists constantly and consistently claim that providers are struggling financially due to inadequate Medicaid reimbursement, they have never presented objective (audited) financial data to support their hardship pleas. Conversely, an abundance of evidence is available from required Security & Exchange Commission reports that executives, board members, and major shareholders are being abundantly rewarded.
It is time for the public to insist that high paid industry lobbyists such as former Governor Mark Parkinson of Kansas either cease their incessant misinformation about the financial hardship of providers or provide audited financial data that contradicts publicly available financial information. Contrary to the effective, well-funded, industry narrative and political strategy, overwhelming evidence suggests that investors are becoming fabulously rich from land and buildings, the value of which is based mostly on taxpayer funded “poor people’s medicine,” i.e., Medicaid. A variety of complicated sections of the U.S. tax codes further add to cash flow from government funds into the pockets of investors. Not the least of these tax advantages is depreciation appearing on corporate financial statements (there are many others, but that’s a subject for a future blog post).
It is my contention that states are not leveraging the value of their licenses on behalf of federal and state taxpayers. Indeed, over the past few decades, major industries such as real estate, finance, insurance, skilled nursing/long-term care have captured legislatures at the federal and state level through generous political contributions and an army of lobbyists. Therefore, state regulators tend to take a very laisse faire approach to oversight. Due diligence in the issuance of licenses is lax and revocation of licenses for negligent care is rare.
Will Long-term Care Investor Ephram Lahasky Be Granted Licenses to Operate Diversicare Facilities in Kansas? It Is Time for Advocates to Put Legislators, the Governor, and State Agencies on Notice: We are Watching!
Diversicare Inc. is one of the rather small number of publicly listed nursing home chains. For the most part, it is a “failed company” due to poor management. This corporation was on the brink of bankruptcy until generous federal and state COVID subsidies breathed new life into it. Entering the COVID pandemic in 2020, the company’s stock was trading at about $1.60. By Spring of 2021, the stock was trading around $3.50 per share. A couple of weeks ago, I noticed that Diversicare shares had shot up about 250% in one day.
An investor by the name of Ephram Lahasky had offered to buy the company for $10.00 per share. According to media reports, Lahasky has a record of running substandard nursing homes. He is not welcome to buy long-term care facilities in states where his past surfaces. A Lexis/Nexis search uncovered a host of suspect activities and federal investigations pertaining to Lahasky owned facilities (see for instance, Sean D. Hamill, “Lawsuit: Nursing Home Reported False Data: Owners Also Own Brighton Rehabilitation and Wellness Center In Beaver County,” Pittsburgh Post-Gazette, August 27, 2020 Thursday).
We must insure that Lahasky is thoroughly vetted by the Kansas Department of Aging & Disability Services before licenses are granted to him for the six Diversicare facilities now licensed to operate in Kansas. According to the following section of Kansas statutes, it would be illegal for the current licenses to be merely transferred to a new owner of the property:
39-928. Issuance of license, when; inspections and investigations; reports; time license effective; nontransferable; display; contents of license.
Each license shall be issued only for the premises and persons named in the application and shall not be transferable or assignable. It shall be posted in a conspicuous place in the adult care home. If the annual report is not so filed and annual fee is not paid, such license is automatically canceled. Any license granted under the provisions of this act shall state the type of facility for which license is granted, number of residents for which granted, the person or persons to whom granted, the date and such additional information and special limitations as are deemed advisable by the licensing agency.
History: L. 1961, ch. 231, § 6; L. 1972, ch. 171, § 5; L. 1980, ch. 182, § 11; L. 1989, ch. 126, § 1;
Public officials have a fiduciary responsibility to citizens when they award rights to their states’ valuable resources. A license to operate a long-term care facility infuses more value into real estate than taxpayers realize. Investors benefitting from a state-granted license owe taxpayers quality services equal to the financial rewards they will reap.