The Nursing Home Industry Lies, Cheats, and Steals with Government Help:  It’s Time to Stop the Wankery and Demand the Truth!

By:

Dave Kingsley

Wankery:” Definition: (Noun; Vulgar Slang British)  “Pretentious, contemptible, stupid, behavior or material.”  https://www.lexico.com/en/definition/wankery

A Message to Advocates, Activists, Journalists, & Politicians

Over the years, I have observed many legislative hearings regarding nursing home abuse and neglect. In practically every hearing, industry lobbyists claim that Medicaid reimbursement is too low. Therefore, they conclude, the public, patients, and their family members can’t expect better care.  Usually, they pull out their standard narrative of “low net” or “a thin margin.”  In essence, they are claiming that the industry is made up of incompetent businesspeople who have a tendency to invest in losing businesses.

Unfortunately, leading advocates and scholars invited to testify invariably fail to confront the industry’s hardship plea as a lie, which it is.  Basically, Medicaid is fueling a real estate industry undergirded by at least $300 billion worth of revenue producing commercial real estate.  Revenue flowing through thousands of facilities (buildings) is enhanced by a plethora of other businesses billing Medicaid and Medicare for therapies, pharmaceuticals, labor contracting, dietary provisions, management services, and anything else providers can dream up as a cost to taxpayers and as a flow of cash to one of their businesses.

Here is how it works:  the corporate entity (LLC, LP, etc.) with the license to operate a facility, i.e., provide care, also pays for services to other corporate entities owned by the same investors who own the licensed facility.  These are called “related parties.”  The LLC with the license is making a lease payment to the LLC which owns the property.  Often, nurses and nurses’ assistants are provided by a labor contractor – another LLC.  Management of a licensed facility is often provided by a management firm owned by the owners of the licenses, the properties.  This is a form of theft, but it’s legal thievery because the industry has a powerful lobby.

Payments to these related party entities increase operating expenses, lowers net operating revenue, and often result in net operating losses.  Net income therefore is often far lower for each facility because parent corporations are sucking out a huge proportion of revenue through an array of corporations.  So, lobbyists will deceitfully tell legislators that the overall “median” net income percentage (net income divided by total revenue) is a half percent or some such nonsense.

Furthermore, people not well-educated in corporate finance (which, understandably, is most people) won’t know that net income isn’t a valid metric for determining capital flowing from customers – in this case, the government – to shareholders.  A host of accounting gimmicks hide cash flow that certainly does not appear in net income.  However, that is a discussion for a later blog post.  Suffice it to say, low nets and thin margins are the warp and woof of industry propaganda – swallowed, or at least not confronted, by most everyone from advocacy groups to scholars, to journalists.

What Could We Afford if Excess Extraction of Taxers’ Money by the Nursing Home Industry Were Identified & Stopped?

We know that the nursing home business is lucrative for investors, shareholders, and executives.  We know from financial reports submitted to the Securities & Exchange Commission by publicly listed nursing home corporations that executives receive millions per year in compensation and Wall Street investors such as BlackRock and Vanguard are the largest shareholders in publicly traded nursing home stock. 

BlackRock and Vanguard are the leading asset managers on the Planet.  They would not be investing your pension, college endowment, 401K, or other assets in an industry with a track record of paltry returns. 

Some my research colleagues and I have been investing a huge amount of time compiling financial reports (otherwise known as cost reports) to various state agencies.  These reports are pervasively false, misleading, and often fraudulent.  Invariably state agencies fail to audit these documents and legislators seem oblivious to pervasive industry deception. 

Excess cash pouring out of Medicaid and Medicare through licensed skilled nursing/long-term care facilities into investors hidden behind a veil of secrecy could be utilized to keep people out of these God-awful places in the first instance or to make life comfortable for those of us who will be or are now institutionalized under horrible conditions.

The number one duty of advocates is to tell the truth to power and to force the industry to stop lying, cheating, and stealing money that could be directed toward decent, humane, treatment of disabled Americans needing assistance with basic, every day, living.  It is time to get our messaging in order.