Monthly Archives: May 2022

DEMOCRACY, CORPORATE FINANCE, & MEDICAL ETHICS

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Nursing Home Companies are Making Money but are Not Telling Taxpayers the Truth About it.  Our Deductive Reasoning Skills Can Easily Reveal the Truth.

Welltower Corporation is a major player in the nursing home industry. Indeed, it is the dominant player.  The major share of its $4.72 billion in 2021 revenue is provided by U.S. federal and state governments – from the taxpayers of America.  Their business is senior housing real estate and medical care for people residing in their nursing home properties. 

The public has a right to expect that medical care is the overriding mission of corporations involved in tax funded nursing care. That is not how Welltower executives view their role in the privatized, publicly funded, healthcare system.  In their 2021 annual report they stated, Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in net operating income and portfolio growth (https://welltower.com/wp-content/uploads/2021/04/2020-Annual-Report.pdf, p. 2, accessed 5/21/2022).

Welltower is one of the few nursing home companies listed on a public stock exchange.  As their annual reports and the value of their stock in the current market crash indicate, they are achieving their financial objectives.  As the Dow, S&P, and NASDAQ have tanked in the past few months, shares of publicly listed nursing home-related corporations are at, near, or above their value in late November when the markets began to sink at significant and at times precipitous rates. 

These are solid corporations loaded up with commercial real estate, the value of which is enhanced by guaranteed revenue through Medicare, Medicaid, and generous tax advantages – gratis the U.S. taxpayers.  This is the reason asset managers such as BlackRock and Vanguard have guided $billions of pension, sovereign wealth, and family office, funds, overseen by institutional investors, into asset-laden nursing home companies. As the markets fall, they are not moving money out of these equities and seeking a safer haven (In a blog post today, I provide an analysis of the stock performance of nursing home and other government-funded medical care corporations between the end of November 2021 and the end of May 2022).

The Big Lie from the Nursing Home Industry: “We Aren’t Making Enough Money to Provide Medically Ethical & Humane Care.”

Thousands of privately held corporations in the form of Limited Liability Corporations, Limited Partnerships, and other legal structures own from a few to a hundred or more nursing homes. Examples include, the privately held Pruitt chain, Diversicare, and several other substantial chains operating in various parts the United States.  Years of interviewing employees, families of patients, reading inspection reports and media accounts, have convinced me that medical care in these facilities is substandard to nonexistent.  Abuse and neglect are pervasive.  Most of the care is provided by medically nonqualified and extremely low paid nursing assistants.  Generally speaking, these are inhumane institutions. The thought of ever ending up in one is horrifying to most people.

Industry Prevarication & Misinformation about High Investor Returns

Although, evidence overwhelmingly suggests that investors are reaping huge returns from shoddy care, the American Health Care Association (AHCA) –  the major industry lobbying firm and industry propaganda arm in Washington and the 50 states – successfully promotes a big lie:  “provider net income is so low that they can’t treat patients humanely or pay higher salaries and wages.” On its face, that is absurd. But apparently it hasn’t dawned on legislators, bureaucrats, and the media that investors wouldn’t be investing in a venture with low returns while so many opportunities for high returns are available in the financial markets.

My colleague, professor Charlene Harrington, and I have debunked that argument as it pertains to publicly listed companies. We, like the rest of the public, have access to financial statements required by the Securities and Exchange Commission (SEC).[1]  However, we do not have access to consolidated financial reports for privately held companies. We can’t see their income statements, balance sheets, or cash flow statements. Therefore it is very difficult to evaluate industry claims regarding earnings – difficult but not impossible.

Each of the approximately 13,000 facilities licensed to provide nursing care and certified to be reimbursed by Medicare and Medicaid are required to submit “cost reports, which include revenue, expenses, net income, and a host of other financial metrics.  With the exception of California, these CRs are difficult to obtain. But we have now gained access to every filed CR in the U.S.  Our analysis so far is telling us that the low net claim is a big lie; that fraud is rampant; and, that states are failing to audit the reports.

Low Risk, High Return Fueled by Government Funds with Little Financial Oversight: the Reality of Nursing Home Investing

As we pour over CRs – mostly in California, New York, North Carolina, and Kansa – we see reported net income as a fiction.  We have also come to believe that the low 2020 net of .5% claimed by AHCA and its hired propaganda accounting firm Clifton, Larson, and Allen (CLA) is scurrilous nonsense – unbecoming of the 8th largest accounting firm in the U.S.

 As one example, misinformation, if not outright fraud, is replete in the CRs of 25 Kansas facilities owned by Florida based private equity firm Windward Health Partners, LLC. Although the average net income reported by these facilities is 8.6% – far higher than the average claimed by AHCA & CLA – they are not reporting payments to their own property LLCs. Also, their chain goes goes by the name of Mission Health Communities. What they don’t note on their CR is that MHC is a related party – a management LLC set up as a company they own and are paying to manage their facilities. Hence their net is drastically lowered due to payments to other companies they own.

 Although Mission Health Communities is falsely noted as the owner of these facilities, it exists as the typical private equity squeeze forced on victim companies.  Mission Health Communities is paid a management fee but is, in reality, a separate LLC in the Windward Health Partners portfolio.  That payment, along with a lease payment to a property LLC, and perhaps other payments to Windward owned ancillary services such as therapy, are expensed on the income statement. In effect, these facilities are making payments to entities owned by their parent corporations and reducing their net income reported to the State of Kansas.

According to CRs submitted by Windward, Kansas taxpayers paid the company $103,403,493 in total 2020 revenue. Because of omitted information and opaqueness of the system, only company insiders know how much cash flowed out in the form of lease payments, management fees, and possible other ancillary services. The 25 facilities received an average of $249,063 in COVID relief payments. I say cash because these payments to itself is gravy for partners and limited partners in Windward Health Partners, LLC.

Democracy & Medical Ethics

The people of Kansas have no idea about how their tax dollars are flowing out of their state into investment firms like Skyway Capital Partners of Tampa Bay, Florida – the financial firm that has capitalized Windward Health Partners. That is not because Kansas residents are dumb. Rather they don’t know how government funds flow from facilities to parent corporations structured as private equity, LLCs, C and S corporations, and limited partnerships, because the system is designed to operate behind a veil of secrecy. For the most part, the Kansas legislature and state bureaucrats have been captured by the industry.

Employees at the Kansas Department of Aging & Disability Services are far more protective of industry financial secrecy than they are of the public’s right to know how their tax dollars are being utilized. The deck is stacked in favor of the industry. Getting substantive information from KDADS is like getting red meat out of a tiger cage.

Medical care is substandard in nursing homes across Kansas but shareholder value overrides medical ethics. Indeed, you will be hard pressed to find a physician around a nursing home at any given time. You will also be hard pressed to find more than a hand full of physicians who really give a damn about what goes on these institutions. The medical profession is silent, the bioethics profession is silent, and the voters are kept in the dark. That’s not how democracy is supposed to work.

[1]Kingsley D, Harrington C. (2021) “COVID-19 had little financial impact on publicly traded nursing home companies.) J Am Geriatr Soc. 2021;1–4. https://doi; Kingsley, D Harrington, C. “Financial and Quality Metrics of A Large, Publicly Traded U.S. Nursing Home Chain in the Age of Covid-19, International Journal of Health Services, 1-13, https://doi: 10.1177/00207314221077649.

Are Nursing Homes a Good Deal for Investors? Don’t Believe the Nursing Home Industry’s Propaganda: Look at How Their Stock is Doing as the Market Tanks.

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By

Dave Kingsley

The Market has Tanked but Most Nursing Home Stock Made Significant Gains or is Holding Steady At or Near its High of Late November

According to the American Health Care Association (AHCA), the nursing home industry lobbying and propaganda organ, providers struggle to squeeze out a tiny profit from a very tough business. As anyone who reads this blog will surmise, I don’t believe that and have an abundance of evidence to debunk the “low margin/profit big lie.”

One place to look for evidence of the industry’s big lie is the network of stock exchanges and indexes: the NYSE, NASDAQ, DOW, and S&P 500. The performance of nursing home industry shares in relation to these exchanges and indexes are indications of how they are viewed by major investors such as BlackRock, Vanguard, Charles Schwab, and other asset managers for institutional investors such as pension, college endowment, sovereign wealth, and family office funds.

At the close of the market on Friday, May 20th, 2022, the value of assets on the NASDAQ had dropped by 30 percent from its high on November 29th, 2021. The DOW was down by 11%, and the S&P closed 16.2% lower. As the table below suggests, the stock of the small number of publicly traded nursing home corporations has overall fared very well in a market downturn of major proportions. Seven of the 10 corporations that are players in the nursing home industry have minor to very large increases in their share prices since November 29th.

Genesis corporation is no longer listed on a major exchange such as the NASDAQ. At one time, Genesis was the dominant player in the industry. Due to a private equity takeover and subsequent looting, its value (market cap) sank so low that it is now traded over the counter (OTC) as “penny stock” worth 10 cents a share. Hence, a drop from 22 cents a share in late November to 10 cents at the close on Friday, is a 55% drop that has little to do with the overall value of the industry.

COMPANYPRICE 11/29PRICE 5/20% CHANGE
BROOKDALE$6.30$5.48-13
ENSIGN GROUP$77.20$79.03+2.3
HEALTHPEAK$34.06$29.42-13.6
LTC PROPERTIES$31.91$37.28+16.8
NATIONAL HEALTH CARE$65.82$69.86+6.1
NATIONAL HEALTH INV.$52.29$55.78+6.6
SABRA$13.03$13.13+.76
VENTAS$49.12$56.52+15.1
WELLTOWER$82.04$88.11+7.4
GENESIS$0.22$0.10-55.0
CARETRUST$20.18$17.27-14.4

Did You Know?

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By:

Dave Kingsley

  • On July 30, 1943, Marie-Louise Girard was the last woman guillotined in France.  Her crime:  assisting women with abortion.  Many of the women she was helping had been raped by Nazi occupiers.  A 1988 movie, Story of Women, dramatizes her life.

  • Between 1908 and the present time, approximately 400,000 U.S. residents have been forcibly sterilized by state and federal government bureaucracies.  The U.S. Supreme Court upheld the constitutionality of state sterilization laws in the 1927 case of Buck v. Bell, Superintendent 274 U.S. 200.  Oliver Wendell Holmes wrote the majority opinion in which he stated the following: It is better for all the world, if instead of waiting to execute degenerate offspring for crime, or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes.  Three generations of imbeciles are enough.

    Buck v. Bell     is still extant case law – it has never been overturned.  The state of Oregon carried out a state ordered sterilization in 1981.  Over the past few decades evidence of involuntary hysterectomies and tubal ligations carried out on ICE detainees and women prisoners in the California prison system has been consistently surfacing.
     
  • Louisiana House Bill 813, which has cleared the Louisiana House Committee on Criminal Justice by a vote of 7 to 2, defines abortion as homicide, which would carry a penalty of life in prison without the possibility of parole.  Critics of the legislation have argued that the bill will even outlaw use of IUDs as a contraceptive.

  • Aging prisoners have been the fastest growing demographic in the vast U.S. prison system. Human Rights Watch estimates that the age 65 or older inmate population grew an astonishing 94 times faster than the total sentenced prisoner population between 2007 and 2010. The older prison population increased by 63 percent, while the total prison population grew by 0.7 percent during the same period.
    Source: (https://www.hrw.org/report/2012/01/27/old-behind-bars/aging-prison-population-united-states).

Bioethics:  Institutionalization & the Rights of Humans to Control their Bodies.

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By: Dave Kingsley

Involuntary Institutionalization & Human Rights, & Humane Treatment

Individuals institutionalized involuntarily in prisons, nursing homes, immigration detention centers, and juvenile facilities, are vulnerable to abusive, neglectful, and often deadly treatment.  These groups of U.S. residents are overwhelmingly institutionalized under conditions in which authorities, professionals, staffs, and other inmates control their daily routines and other living conditions. They may be subjected to psychotropic drugs, which deprive them of liberty and cause them mental and physical health problems, to violence from other inmates and staff, and medical procedures, which may occur with or without their consent.

In addition to forcible and invasive medical treatment, needed and even preventative medical care is often withheld.  As my previous blog post suggested, leading, establishment bioethicists have theorized – shamefully I might add – that withholding beneficial medical care from the elderly would have a positive effect on the U.S. economy by lowering government budgets. They conclude, therefore, that it is morally justified and medically ethical to intentionally shorten the lives of t elderly and disabled Americans.

The desire of religious and governmental institutions to exercise control over the bodies of human beings under their control has been a threat to human rights throughout history.  Power and control are fundamental principles underpinning forcible sterilization, involuntary psychotropic protocols, denial of birth control/abortion, and torturous incarceration.  Indeed, a woman’s right to terminate a pregnancy or even to use contraceptives such as the “morning after” pill will probably be outlawed in the U.S. within a mere month or two by a Supreme Court, religious extremist, majority.

The elderly, women, ethnic minorities, immigrants, and impoverished classes are a threat to the power and economic interests of white (Euro-American) patriarchal ruling elites.  Therefore, as a ruse in protecting their power and economic domination, establishment elites have devised methods for undermining attempts by the powerless classes to organize and influence change in power relationships.

Criminalizing & Institutionalizing the Poor and Powerless is Profitable

Institutionalization, along with abusive and neglectful treatment of inmates, involve blunt instruments such as drugging, restraining, and hitting.  However, these conditions are facilitated by misfeasance and nonfeasance on the part of government agencies and legislators.  Furthermore, the efficiencies of these management techniques are compatible with privatization. Over the past century, industrialists have recognized opportunities in the commoditization of human bodies in nursing homes, ICE detention centers, prisons, juvenile facilities, and other institutions for the powerless.

Hence the real estate housing inmates and government funds for managing and controlling human bodies within four walls have proven to be quite lucrative.  Investors in prisons, ICE detentions centers, and nursing homes have become fabulously wealthy (or have added an extraordinary amount to their family wealth).  Given the corrupt nature of politics, shameless and blatant purchase of legislators’ approval for the ongoing atrocity of institutionalization for the sake of enriching the already rich, transforming inhumane institutions will be a heavy lift.  We must end them – not mend them through sham recommendations from commissions controlled by the power elite.

Leading Bioethicists Do Not Believe that the Elderly Have Equal Rights in the U.S. Medical Care System

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By:

Dave Kingsley

Nursing Homes & COVID:  200,000 Fatalities in One Institutionalized Population

Last week, the U.S. officially recognized a COVID death toll of one million U.S. residents.  An estimated 200,000 or 20 percent of those deaths have occurred in nursing homes. At any given time, individuals in long-term care/skilled nursing institutions comprise approximately three-tenths of one percent of the U.S. population.  One would think that an investigation would be under way to determine how such a tragedy could occur in one institutionalized population and who is accountable.

There is no doubt that a huge proportion of these deaths were preventable.  However, due to neglect and greed of corporate providers, paid by taxpayers to care for patients in LTC/SKN facilities, and lax government regulation, COVID was allowed to sweep through institutions housing frail elderly and disabled Americans. This resulted in the largest mass fatality of an institutionalized population in the history of the United States.   

Appallingly, interest in accountability for this human rights atrocity on the part of politicians, the media, the medical professions, government agencies, or any other relevant interest group is nonexistent.  Even two commissions on nursing homes – one specifically charged with investigating COVID in LTC/SKN institutions and one under the auspices of the National Academies Science Engineering & Medicine (NASEM released a report barely a month ago) – ignored the issue of industry culpability.

The industry is culpable.  It was well-known that a novel virus was likely to make its way to the United States eventually.  For decades, scientists have been sounding alarms.  Asian countries learned from the SARS pandemic and issued guideline for protecting patients from raging viral pandemics.  Those guidelines were ignored by the U.S. nursing home industry.

Indifference to an unnecessary mass fatality event is occurring in a context of long-developing denigration of the worthiness and value of elderly and disabled Americans.  Religions and their leaders have been absent from and seemingly uninterested in the plight of institutionalized people needing nursing care. Indeed, many deplorable facilities are affiliated with major religious organizations.

And then there is the question of bioethics and decline of Enlightenment and Judeo-Christian ethics as they pertain to persons needing medical care.  Indeed, the current dominant bioethics movement supports withholding beneficial medical care from the elderly for the sake of the market economy and what they erroneously see as federal budgetary constraints.

The Elderly & Human Rights in a Neoliberal Capitalist Society

As a highly visible extremist Catholic majority on the nine member U.S. Supreme Court “legislates” on human rights for a population of 340 million citizens, a small group of America’s most prominent and powerful bioethicists are engaged behind the scenes in a chilling, ageist movement – mostly in academic journals. Few Americans are aware of the proposals for “rationing” medical care concocted by Daniel Callahan of the prestigious Hasting Center on Bioethics, celebrity physician Zeke Emmanuel, and other well-known bioethicists.[1]

The underlying philosophical/ethical, foundation of these physicians’-academicians’ rationale is a toxic, perverse, combination of utilitarianism and neoliberal economics rather than a profound and humane theoretical framework calling for reinforcement of universal human rights based on Enlightenment values and ethics.  The essence of their reasoning is that the U.S. cannot afford all the medical care needed by the U.S. population, therefore some needed care should be directed away from the elderly to young populations who are of more value to society, i.e., from the less productive to the more productive.

A review of the literature clearly exposes two unexamined and flawed premises of this horrifying philosophical/ethical position: (1) the U.S. economic system cannot absorb the cost of needed medical care for all citizens, and (2) the elderly are not as worthy as younger cohorts.  Proponents argue from these premises to the conclusion that it is OK to shorten the lives of elderly Americans for the sake of reducing costs.

Integral to their position is the concept of a “decent minimum level of medical care.”[2]  Schneiderman defines a decent level of medical care as:

“…a level of medical care that enables a person to acquire an education, seek or hold a job, or raise a family.  Or, if the person, because of impaired health, is unable to meet any of these goals, to attain a reasonable level of function within the person’s limits and respectful of the person’s dignity, as well as a reasonable level of comfort, whether it be from pain or other forms of suffering.”[3]

This statement clearly expresses an opinion contrary to humanistic ethics that grew out of the Enlightenment and formed the philosophical underpinnings of liberal democracy. The bioethicists in this movement have a perspective of human beings through the lens of bioethical utilitarianism in which their right to medical care is reduced to their worth in a radical free-market economic system.  As Schneiderman states: “Without the support of society, the individual would not prosper; in return, I argue, the individual has a duty to recognize society’s needs for productive citizenry.”[4]  He proceeds to claim that “The success of the society depends on the productivity and contributions of its individual members.”[5]

The Context of Rationing Bioethics

As prior quotes suggest, a powerful group of bioethicists are valuing humans for the purposes of medical care based on their value to the economic system.  Without operationalizing “productivity” and “contribution,” they presuppose a declining value of aging human beings because of less engagement in and usefulness to the economic sector of society. Wisdom, life experience, leadership ability, and other contributions needed by an enlightened, democratic society are not only discounted, but given no worth whatsoever. 

As Zeke Emmanuel, the most famous bioethicist in the U.S., wrote in the Atlantic, it is best to die by 75 because life is not worth living past that age and all productivity and contributions cease.[6] Dr. Emmanuel equates “living too long” with living beyond our 75th birthday.  He claims that longevity “robs us of our creativity and ability to contribute to work, society, the world.”  That it “transforms how people experience us, relate to us, and most importantly remember us.  Dr. Emmanuel believes we are, after age 75, “no longer remembered as vibrant and engaged but as feeble, ineffectual, even pathetic.

Culling the Herd:  Let the Old Die

At some point in U.S. history, elders were no longer seen as important to the survival of the family, community, and nation.  That sociology and history – the history of transformation of valued elders to useless, dependent old people – has been covered elsewhere.  In radical free market economic systems, individuals not needed are vulnerable.  Public policy tends to reflect the power of industrialists and the economic values guiding politicians.

It has not been uncommon for media personalities to suggest that people dying in nursing homes were probably near death anyway.  So, not a big loss.  As Bill O’Reilly on FOX put it, “they had one foot in the grave any way.”  Some suggested that diseases “cull the herd,” and who better to go than old people. 

In a country as wealthy and advanced as the United States, there is absolutely no reason to deny health care to citizens and other residents based on their worthiness as human beings.  There should be no place in a humane society for “deserving” and “undeserving” people in need of medical care.  Medical ethics require nothing less than deference to physician-patient decisions about needed, beneficial, care.  Unfortunately, in the privatized system now dominating U.S. medicine, the needs of shareholders and executives take precedence over people with medical needs.

[1] See e.g., Daniel Callahan (2009) Taming the Beloved Beast.  Princeton University Press; Lawrence J. Schneiderman (2011) “Rationing Just Medical Care,” American Journal of Bioethics, Volume 11, Number 7, 7-14.; Norman Daniels (2013) “Global Aging and the Allocation of Health Care Across the Life Span” American Journal of Bioethics, American Journal of Bioethics, Volume 13, 2013, 1-2.

[2] Schneiderman, ibid, page 8.

[3] Schneiderman, ibid, page 8.

[4] Schneiderman, Ibid, page 8.

[5] Schneiderman, Ibid, page 8.

[6] Ezekiel J. Emmanuel (2014) “Why I Hope to Die at 75,” The Atlantic, October,2014 Issue. https://www.theatlantic.com/magazine/archive/2014/10/why-i-hope-to-die-at-75/379329/.