Category Archives: Cost of health care

Government Oversight of Medicaid: The Shift of Power from Federal Agencies to State Agencies has Been a Disaster for Poor Americans’ Health

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By:

Dave Kingsley

Dismantling of the Federal Administrative State

    President Ronald Reagan said this at a press conference in 1986: “The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.’” This might have seemed funny at the time but by 2008 when lax federal governmental oversight of the financial services industry led to economic collapse or when in 2020 a deteriorated public health system led to a raging COVID epidemic, the people of America were screaming back to the government these five desperate words: “For God’s sake help us!”

    President Reagan’s quip was a continuation and acceleration of devolution of power from the federal government to the states that began during the Nixon administration. Consequently, the far-right dream of dismantling the federal administrative state has led to funneling federal grants to states as block grants rather than grants-in-aid, which meant less federal control over how states regulated federal-state funded programs such as Medicaid and welfare in general.   

    Some states are more enlightened than other states in how they administer welfare programs.  But during the Clinton Administration, the mistaken notion that people needing assistance for their daily needs – including medical care – would benefit from some tough love like denial of any services after a few years of receiving it.  Aid to Families with Dependent Children (AFDC a grant-in-aid program) became Temporary Aid for Needy Families (TANF – a block granted program with a much more stigmatizing moniker).  By the late 1990s, President Clinton was declaring that “the era of big government is over” – seven very unfortunate words.

    The idea that poor people down on their luck needed some federal assistance for survival was warped into a philosophy that help from the government would induce dependency and that administrative barriers to assistance and forcing people off of aid would somehow be character building.  As has happened since the era of industrialization began, poor people were more intently looked at as irresponsible and the cause of their own plight.  By the turn of the Century, this philosophy had become de rigueur – even in states given to a more empathetic and compassionate approach to the less fortunate (which could be any of us).

How Have States Handled their Increasing Power?

    So, how have states done with the power devolved to them?  Not well.  As an example, consider the prior authorization of Medicaid that I wrote about in my last blog post.  The HHS, OIG had this to say in their recently released report:  “most State Medicaid agencies reported that they did not routinely review the appropriateness of a sample of MCO denials of prior authorization requests, and many did not collect and monitor data on these decisions.”  This seems like very familiar state regulatory behavior to me.  Having reviewed thousands of nursing home cost reports, I have yet to see one properly filled out (in accordance with GAAP/FSAB accounting principles and federal regulations).  Indeed, they are loaded with deceit, misinformation, and what is either profound ignorance or fraud.  And yet auditing at the state level appears to be practically nonexistent.

    There is no point in using nursing home cost reports for research except to raise issues of state incompetence, lack of oversight capacity, and corporate ability to game the system. The same can be said about the giant insurance corporations contracting with states as MCOs.  Indeed, Anthem’s highest MCO denial rate was 34%.  Molina, one of the largest providers had denial rates that ranged from 17% to 41%.  Aetna, Centene, and UnitedHealth denial rates were 5% to 29%, 3% to 23%,  and 7% to 27% respectively.

    The States with the highest rates of denial are Georgia (34%), Michigan (32%), California (29%), Mississippi (27%), New Jersey (27%), Virginia (26%), and Wisconsin (25%).  One can only imagine how difficult and frustrating it is for physicians and Medicaid patients in these states to obtain needed medical care.  None of these states used denial data for oversight.

There is Nothing Funny about Government Help:  We Need it Badly!

    My colleagues and I spend our working hours attempting to ferret out information from states regarding Medicaid outcomes data.  To quote Warren Buffet, “It’s like getting red meat out of a tiger cage.”  But we have been communicating with staff – including auditors – in the OIG’s office and will continue that communication.  Our mission is to fight the state/federal barriers to public information.

    The Medicaid program is nominally a $900 billion federal/state expenditure.  But with tax expenditures (i.e., tax subsidies) for corporations in the business, it is a much larger expenditure in federal and state budgets combined than that. Furthermore, nursing home corporations and the giant insurance corporations contracting as MCOs are extracting immense amount of tax dollars without a correlative investment in a loyal, career-oriented work force, and a medical services infrastructure that welcomes and benefits the people eligible to receive it. 

    Centene, UnitedHealth, and the other large providers are lavishing obscene compensation packages on executives and board members (CEOs are usually receiving about $20 to $24 million per year); they have billions of dollars sitting on their balance sheets, they are paying robust dividends to their shareholders (most of which are asset managers such as Vanguard, BlackRock, and State Street, handling pension, insurance, and sovereign wealth funds); and they have devoted billions to capturing government through lax lobbying and election financing.

    No matter how objective and scientific researchers like to be, this is all about politics.  It’s about what goes on inside the D.C. beltway and in state capitols.  Anyone who thinks they can be politically neutral, purely professional, and outside of politics is sadly mistaken.  Making CMS do its job is a political task and will take political organizing.  The same can be said about making state agencies do their job.  You cannot work within the system and change it that way. 

Managed Care & Privatization was Supposed to Save Taxpayers Money & Work Better than Government Administered Medical Care, but That’s Not What is Happening.

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By:  Dave Kingsley

Managed Care for Poor Peoples’ Medicine is a Chimera

    According to a report released by the HHS OIG’s Office last week[1], the massive Medicaid program intended for poor Americans is beset with denial of authorization for care and weak state oversight.  What that means is this:  poor people who are hard scrabble poor enough to qualify for Medicaid and have the moxie and luck in navigating the bureaucracy to the point of approval for the program, are far too often denied the treatment physicians think they need.  The gigantic insurance companies contracting with states to run their Medicaid programs are denying care at double the rate of Medicare denials under managed care (i.e., Medicare Advantage).

    It is not difficult to understand why an undue administrative burden is placed on poor people for both qualifying for government health care in the first instance and then for receiving needed care once they are admitted to the program.  Powerful insurance companies have a financial incentive to deny a large proportion of care medical professionals think Medicaid recipients need. Furthermore, a lobby for poor people is nonexistent; they are powerless; and they can be pushed around and/or ignored by state bureaucrats.  Nevertheless, a puzzling and mistaken conventional wisdom proclaims that a corporatized and privatized system is a far more efficient and effective way to deliver taxpayer funded medical services.  It is past time that the conventional wisdom undergoes strong pushback from medical professionals, academics, and the media.

Background

    During the 2000 aughts (starting about 2010), states relying on the concept of “managed care” in which insurance companies (known as MCOs) are paid a “capitation rate,” i.e., a specific amount per enrollee, turned over their Medicaid programs to insurance corporations.  If the insurers keep their costs below the total dollars committed for enrollees, they make money.  Patients are, however, required to utilize medical services within “network.”  They must use a medical practice or hospital that is part of the contracting MCOs network of physicians and other medical providers.  Furthermore, care must be authorized by the MCO.

    The size of federal expenditures for Medicaid has resulted in mushrooming revenue for major healthcare insurers such as UnitedHealth, Elevance, Cigna, Centene, and Aetna.  In the early 2000s, no health insurers were in the top 30 corporations listed on the Fortune 500.  By 2022, nearly one-third of the top 30 Fortune 500 companies were related to healthcare insurance and managed care contracting.

    The idea of managed care began with the concept of health maintenance organizations (HMO) such as Kaiser Permanente and Ross Loos.  Individuals can join an HMO, pay the premium and expect low deductibles and co-pays.  However, the HMO or MCO in the case of Medicaid managed care have a network of physicians and other providers.  Enrollees must “stay within network” and receive authorization from an insurer (MCO) for a host of medical services their primary physician thinks they need.  This opens the door to tremendous power of insurance behemoths over Americans’ healthcare needs.

Has Privatization & Corporatization Through the Managed Care Concept Been Beneficial to the Health of Americans?

    As I mentioned, it is conventional wisdom that private, for-profit corporations can do a better job of administering taxpayer funded healthcare than government agencies.  But managed care is not working out in accordance with the widespread belief the government will pay less for healthcare if the profit motive incentivizes better care at a lower price.  Medicare Advantage costs fifteen percent more per enrollee than traditional Medicare.  Medicaid MCOs are paying robust dividends, buying back billions of dollars worth of their stock, and rewarding executives with exorbitant compensation packages while well baby care, infant mortality, heart disease, diabetes, and access to addiction treatment are not significantly improving across the Medicaid eligible population.

    Aetna, UnitedHealth, Centene, and other major insurance companies are reaping huge financial rewards by keeping per capita costs low. That would not in itself be a bad thing if outcomes were improving.  Perhaps having some healthcare is better than nothing.  No doubt, people receiving Medicaid benefits have better health outcomes than people with nothing.  But that is not the point.  Comparing poor people with no health insurance to poor people with Medicaid is illogical.

    Medicaid is lower tier medicine.  So those individuals lucky enough to qualify for it and actually receive it are treated as second class citizens.  So, by virtue of carving out a form of medical care for poor people – which is seen as welfare or a “handout” – the system can exploit them for financial gain while denying them the quality of care every other citizen deserves even though every form of healthcare received by Americans is heavily subsidized in some way or other by government.

Follow Us at the Center for Health Care Information & Policy (a newly formed nonprofit at https://chipcenterus.org/) and on this Blog as We Expose the Illogic and Folly of Privatizing U.S. Healthcare

[1] HHS OIG Report: “High Rates of Prior Authorization Denials by Some Plans and Limited State Oversight Raise Concern About Access to Care in Medicaid Managed Care.” https://www.oig.hhs.gov/oei/reports/OEI-09-19-00350.asp#:~:text=Overall%2C%20the%20MCOs%20included%20in%20our%20review%20denied,rates%20greater%20than%2025%20percent-twice%20the%20overall%20rate.

THE HEALTH CARE INDUSTRY:  CONCENTRATED WEALTH INEVITABLY TRANSFORMS INTO CONCENTRATED POWER

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It is estimated that healthcare expenditures in the United States have grown to twenty percent of GDP.  In 2022, the Bureau of Economic Analysis indicated that U.S. GDP had grown to $25.46 trillion (https://www.bea.gov/news/2023/gross-domestic-product-fourth-quarter-and-year-2022).  Hence, we can assume that in 2022, approximately $5 trillion was expended for U.S. healthcare.

In the taxpayer funded, privatized, medical care system in the United States, the growth of corporations with revenues from Medicare, Medicaid, Obamacare, and other tax subsidized healthcare (e.g., employer provided health insurance) has been astounding. The size and number of healthcare related corporations listed on the Fortune 500 top 30 in 2020 compared to 2000 is a reflection of the dominance and power of companies such as UnitedHealth, CVS, McKesson, Cardinal Health, and others appearing in the 2022 Fortune 500 top 30.

As the table below indicates, absolutely no healthcare related corporation was ranked among the top 30 corporations in revenue in 2000. In a mere two decades, nine of the 30 largest U.S. companies were in some facet of the medical/healthcare sector. Note the following corporations in the table and their Fortune 500 2022 ranking: CVS Health (4), UnitedHealth Group (5), McKesson (9), Amerisource Bergen (10), Cigna (12), Cardinal Health (15), Walgreen/Boots Alliance (18), Elevance Health (20), Centene Corporation (26).

Given the money in politics and decreasing capacity of government agencies to monitor and hold corporate behemoths accountable, the growth of health/medical related enterprises should be alarming. These are not capitalist enterprises. Rather, they are government sponsored enterprises much like Fannie Mae and Freddie Mac and should be regulated as such.

Furthermore, money is power and much of the “inside the Washington, D.C. beltway” activity related to studies, commissions, and general policymaking involving academics and other professionals has been rigged through power politics to insure the perpetuation and preservation of the participants – hence, preservation of the status quo. Let’s take the nonprofit Better Medicare Alliance as an example. This front group has roped in scholars, professional associations, and other duped entities in a cooperative effort to sell Medicare Advantage to the public on behalf of the industry.

Currently, the Biden Administration is attempting to reduce Medicare Advantage billing fraud that will save the Medicare Trust Fund billions. That legitimate and laudable effort on the President’s part was attacked in an ad during the last Super Bowl. The ad was paid for by Better Medicare Alliance. Check out this outfit’s “ally list” and its list of “scholars.” Conflicts of interest involving scholarship, corporate board service, and coopting of scientific institutions by superrich foundations with Wall Street leaning board members should be exposed along with a network of think tanks presenting a charade for the purpose of enhancing revenue from government programs.

FORTUNE 500 RANKINGS:  2000 & 2022
RANK
(2000)		CORPORATIONREVENUE*RANK (2022)CORPORATIONREVENUE*
1General Motors18.91Walmart572.8
2Walmart16.72Amazon469.8
3Exxon Mobile16.43Apple366.8
4Ford Motor Co16.34CVS Health292.1
5General Electric11.25UnitedHealth Group287.6
6IBM8.86Exxon-Mobile285.6
7Citigroup Inc8.27Berkshire Hathaway276.1
8AT&T6.28Alphabet257.6
9Phillip Morris Inc6.29McKesson238.2
10The Boeing Company5.810AmerisourceBergen214.0
11Bank of America5.111Costco195.9
12SBC Communications4.912Cigna174.1
13** 13AT&T168.9
14The Kroger Co4.514Microsoft168.1
15State Farm Insurance4.415Cardinal Health162.5
16Sears, Roebuck, & Co4.116Chevron162.5
17AIG4.117Home Depot151.2
18Enron4.018Walgreens/Boots Allian.148.6
19Teachers Insurance & Annuity3.919Marathon Petroleum141.0
20Compaq Computers3.820Elevance Health138.6
21Home Depot3.821Kroger137.9
22Lucent3.822Ford Motor Co136.3
23Procter & Gamble3.723Verizon133.6
24Hewlett-Packard3.724J.P. Morgan Chase127.2
25MCI World Com3.725General Motors127.0
26Fannie Mae3.726Centene126.0
27K Mart3.627Meta118.0
28Texaco3.628ComCast116.4
29Merrill-Lynch3.529Phillips 66114.9
30Mogan Stanley Dean Witter3.430Valero Energy108.3
* In Billions of dollars. **#Number 13 not noted on Fortune 500 list.

UnitedHealth Corporation is Piling Up Cash & Buying Back Stock. But the American Peoples’ Health for Which they are Paid to Improve is Deteriorating

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The Basics of UnitedHealth Financial Performance in 2022

With revenues of $324.2 billion in 2022, UnitedHealth (UH) is the fifth largest corporation in the United States (behind Walmart, Amazon, Apple, and CVS Health). Practically all of UH business is related to tax-funded health care such as Medicare and Medicaid. As one of the largest players in the move toward Medicare and Medicaid managed care, this company has had phenomenal growth in the past two decades (as have CVS Health and Centene Corporation).

UH revenue increased by 26% between 2020 and 2022 (from $257.1 billion to $324.2 billion). The company’s 2022 balance sheet notes $23.4 billion in cash and cash equivalents – an increase of $2 billion over 2021.

Capital Resources & Uses of Liquidity: No Indication of Allocation to Employee Wages & Working Conditions, R&D, or Improved Care

The Company’s 10-K states that “Increased cash flows provided by operating activities were primarily driven by changes in working capital accounts and increased net earnings.” (page 28). Given UH’s massive revenues from government expenditures and a robust operating margin of 8.8%, taxpayers, need to be aware of how the company’s surplus capital is allocated. Like any corporation, UH has debt obligations but expects to finance those from current operations. So, accumulated capital is available for other purposes.

On page 78, the 10-K indicates that he board of directors (which includes Washington, D.C. policy maven and healthcare influencer Gail Wilensky – see below) authorized expenditures of $7 billion for common stock repurchases in addition to $5 billion in 2021 and $4.5 billion in 2020. So, the company pumped up its share price during COVID-era by repurchases of stock totaling $16.5 billion.

In addition to a 2022 stock repurchase of $7 billion, UH increased the company’s quarterly cash dividend $5.80 per share to $6.60 per share. With 950 million share outstanding, approximately $6.27 billion in cash was paid to shareholders. Over 20% of the stock is owned by three asset management firms – Vanguard (8.44%), BlackRock (7.4%) and FMR LLC (5.165) – indeed, Institutional investors/asset managers own the bulk of the equities market. Retail investors own less than 10% of the equities traded on U.S. exchanges.

Stock Buy Backs Were Illegal in the U.S. Until 1982. They Should Still be Illegal – Especially When They Are Repurchased With Earnings From Tax Funded Medical Care

Stock repurchases are a thinly veiled form of stock manipulation and insider trading. Furthermore, this form of financialization of corporate activity benefits a small number of very wealthy Americans but is damaging to the overall economy. Earnings passed through to shareholders without retaining cash for employees, R&D, and long term investment puts downward pressure on economic growth and wages and fuels maldistribution of wealth, which has reached crisis proportions in the U.S.

Taxpayers have a right to fairness and equity in the use of capital earned through tax funded healthcare. They must demand that stock repurchases stop. Furthermore, the people of the U.S. have a right to a fair allocation of excess cash earned through healthcare for which they are taxed.

Board Members & Executives Should Be Held Accountable: It’s Not Their Money

Until the early 1980s, executives were compensated mostly in the form of salaries. As executive and board compensation has evolved, salary is now a small part of corporate compensation. Most executives and board members receive pay in the form of stock options and incentive stock awards. Philosophically, executives merit compensation if they enhance shareholder value and corporate financial success. As this philosophy has taken hold in the U.S. over the past 40 years, these rewards have become disconnected from productivity.

The boards and executives of healthcare corporations are focused on earnings and cash flow in the short term – not on reinvestment of excess earnings in long term improvement in the health of the U.S. population. As a matter of fact, life expectancy has been declining in the U.S. Although most states have contracted with these mammoth corporations to improve the cost and output of Medicaid systems, there is no substantial evidence that is happening. Furthermore, Medicaid, the poor peoples’ medicine they are charged with improving, is still stigmatizing and dehumanizing.

Each year, recipients are forced to run an administrative gauntlet of humiliating and frustrating reapplication that is much different than anything higher SES Americans experience in application for entitled health care. It appears that heart disease, poor prenatal care, diabetes, drug addiction, and other major chronic and acute diseases have not been reduced by Medicaid managed care. Nor is there evidence that a massive shift of U.S. healthcare dollars to corporations will lower the outrageous per capita cost of healthcare.

Despite failure to improve the overall healthcare of Americans, corporate boards continue to reward executives with lavish salaries and shareholders with high dividends. They justify that on financial grounds – not on success in improving overall health of the people.

Concentrated Wealth Leads Inevitably to Concentrated Power: Connecting Dots Inside the Washington, D.C. Beltway

Corporations are vying in the Washington, D.C. maze of politics, lobbying, and corruption to capture as much of the trillions in Medicaid, Medicare, Obamacare, and other forms of government healthcare expenditures. They can pay for the influence they need in chasing ever increasing expenditures for healthcare.

I noticed that one Gail Wilensky, PhD is a UH board member. This caught my attention because Dr. Wilensky is a very influential policy maven about town in Washington. She has a very thick resume consisting of scholarly publications, served as a chair of MedPAC, held other high level government positions, and is generally a highly respected healthcare influencer. However, she receives about a half million in compensation per year as a UH board member and has accumulated over 51,000 shares of UH stock, which closed at $481.90 today (3/27/2023). Hence, the stock that she hasn’t sold and is still holding is worth about $24.6 million.

Dr. Wilensky also serves on the board of Quest Diagnostics and a smaller healthcare corporation (ViewRay). The following is her biography appearing on the Quest Diagnostics website:

“Dr. Wilensky, is a Senior Fellow at Project HOPE, an international non-profit health foundation, which she joined in 1993. From 2008 through 2009, Dr. Wilensky served as President of the Defense Health Board, an advisory board in the Department of Defense. From 1997 to 2001, she was the chair of the Medicare Payment Advisory Commission. From 1995 to 1997, she chaired the Physician Payment Review Commission. In 1992 and 1993, Dr. Wilensky served as a deputy assistant to the President of the United States for policy development relating to health and welfare issues. From 1990 to 1992, she was the administrator of the Health Care Financing Administration where she directed the Medicare and Medicaid programs. Dr. Wilensky is a director of UnitedHealthcare Group and ViewRay, Inc. She served as a director of Manor Care Inc. from 1998 until 2009, Gentiva Health Services, Inc. from 2000 until 2009, Cephalon Inc. from 2002 to 2011 and SRA International, Inc. from 2005 to 2011. Dr. Wilensky also served as a Commissioner of the World Health Organization’s Commission on the Social Determinants of Health and as the Non-Department Co-Chair of the Defense Department’s Task Force on the Future of Military Health Care. She has been a director of Quest Diagnostics since January 1997. Dr. Wilensky has extensive experience, including in strategic planning, as a senior advisor to the U.S. government and private enterprises regarding healthcare issues and the operation of the U.S. healthcare system.”

Dr. Wilensky is merely one example, one individual among the ethically challenged thousands, caught up in the government-to-corporation-to government loop. Going from Senate staffer to the Senate Finance committee and on to K Street and a lobbying job for Big Pharma, United Health, or some other powerful Wall Street entity has become normalized. The American people are paying the price for the consequent maldistribution of power and wealth in taxes and poor health. The poor pay more.

Centene Corporation’s Annual Financial Report Indicates That Poverty is Profitable for Investors

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The Biggest Player in Poverty Medicine Had a Banner Year in 2022

    Among all U.S. corporations, Centene Corporation is ranked 20th in revenue. It is also a major player in the Medicaid Managed Care business.  The other leading corporations contracting with states in the $800 billion Medicaid program include United Health, Aetna/CVS, Anthem, and Molina. Most states have moved or will be moving to managed care and contracting with an MCO.  The big five have approximately half of that business now.  It is likely that the Medicaid MCO market will become increasingly concentrated and oligopolistic over the next few years.

    Centene can be said to be solely in the Medicaid managed care business.  According to its recently released annual 10-K report to the Securities and Exchange Commission, 97% of Centene 2022 revenues of $144 billion were derived from Medicaid and Medicare contracting – practically all of it from Medicaid.  The company’s cash flow statement notes $6.3 billion net cash from operating activities, which is a major indicator of “profitability.”  However, that is not the whole story regarding enhancement and protection of shareholder value.

Taking Care of Shareholders by Keeping Stock Price Propped Up

    Cash and cash equivalents on Centene’s balance sheet increased from $10.8 billion in 2020 – the early stages of the ongoing COVID pandemic – to $12.7 billion at the end of 2022. Taxpayers need to ask questions about how that hoard of cash is allocated.  I have tracked the company’s stock since late November of 2021 when the equities market began to tank.  It closed at $73.77 on November 29, 2021 and has been quite resilient despite the market decline since that time – trading in the high $70s and $80s.

    The strength of Centene’s stock price is most likely due to a $3 billion stock buyback. In 2022, the company’s board “authorized increases to the Company’s existing stock repurchase program, including $3.0 billion in June 2022 and an additional $2.0 billion in December 2022.” (see page, 34 of 10-K*).  With those increases, the Company was authorized to repurchase up to $6.0 billion.

    Stock repurchases, which are thinly disguised forms of stock manipulation/insider trading, were unfortunately deregulated during the Clinton Administration.  This financial maneuver benefits only shareholders and executives and does nothing for long-term investment in workers, R&D, patient quality, and other productive activities.  The benefits for executives and board members who have been awarded generous stock options involve strategies for exercising their right to sell stock based on insider knowledge (of which the public is unaware).

    Since the financial deregulation allowing loose rules about stock buybacks a corporate buyback frenzy has been underway. Free money handed out by the Federal Reserve from 2008 until Fed Chair Powell reversed course to quell inflation pumped $trillions into speculative finance, much of which was borrowed for stock repurchase. Consequently, the U.S. economy has been damaged and wealth has become increasingly maldistributed by the diversion of cash to a wealthy few that could be reinvested in long-term growth benefitting employees and overall economic growth. It seems to me to be the height of governmental irresponsibility to not regulate this kind of activity on the part of corporations which are rewarded for managing poor peoples’ health care.

Politically Powerful Board Members & Executive Board Compensation

    The revolving door from government to business is starkly obvious on the Centene board, which includes two powerful former congressmen – Tommy Thompson and Richard Gephardt. Mr. Thompson is also a former Secretary of Health and Human Services.  The Centene Proxy Statement for 2022 has not been issued to the public yet (we expect to see it within a month).  However, the 2021 Proxy Statement indicates that Mr. Thompson’s compensation in cash and stock totaled $403,046.  Mr. Gephardt’s compensation totaled $426,923.  The fine print below the compensation table states that both Mr. Thompson’s and Mr. Gephardt’s compensation included use of the company aircraft and other perks.

Executive Compensation

    The late Michael Neidorff had been Chief Executive and Chairman of the Board in 2019, 2020, and 2021 with compensation for those years of $26.4 million, $24.9 million, and $20.6 million respectively.  His replacement, Sarah M. London joined the board in 2021 as vice chairman and received 2021 compensation of $15.2 million.  The seven top executives received a total of $80 million in compensation in 2021.

Conclusion

    Medicaid expenditures in the U.S. will reach $1 trillion within the next few years.  Along with expenditure on military activities, this poverty program will remain one of the two biggest programs funded by U.S. income tax payers.  With expansion of Medicaid under the Affordable Care Act, we anticipate that growth of tax-funded  poverty medical care will be rapid in the years ahead.  This raises the question of evaluation of these expenditures and public discourse about the quality of care.

    My initial foray into availability of state and federal data regarding the effectiveness and regulation of MCOs leaves me with considerable doubt about what taxpayers and legislators know about outsourcing medical care for poor people.  It is not difficult for me to uncover the inordinate executive compensation packages, stock buyback information, and financial performance metrics reported by major providers.  However, medical and ethical, questions arise regarding the justification for cash out to investors and executives given the care provided.  I will be sharing my research pertaining to Medicaid expenditures on this blog in the weeks, months, and years ahead. 

*The Centene 10-K can be accessed at https://investors.centene.com/all-filings?cat=1.

THE ENSIGN GROUP 4TH QUARTER REPORT:  MARVELOUS IF YOU ARE AN INVESTOR (BUT NOT IF YOU ARE AN EMPLOYEE AND/OR A TAXPAYER).

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    As I noted a couple of days ago, The Ensign Group (Ensign) was scheduled to release its 4th quarter financial report and hold a conference call.  They did that. This blog post will provide a basic overview of their 4th quarter and annual results.[1] I will be reporting on the Centene Corporation and the real estate investment trusts in the weeks ahead.

    It is important to note that the late Roy Christensen, Ensign founder, and current/past Ensign executives were and are very sophisticated financiers.  Christensen founded Beverly Enterprises in the 1960s, sold it, and taught business at Brigham Young University until he founded the Ensign Group in 1999.  Most Ensign executives and board members have an association with the Marriot School of Business at BYU.  There is no other nursing home corporation like the complexly organized Ensign. It is becoming increasingly complex to the advantage of shareholders and executives but apparently not to taxpayers, patients, and employees (as I will demonstrate below).

Highlights of Ensign 4th Quarter Results

  • Earnings per share of $4.14 – an increase of 13.7% over the prior year.

  • Earnings per share for the quarter of $1.06 – an increase of 23.3%.

  • Consolidated revenues for the year were $3.025 billion – an increase of 398.5 million or 15.1% over the prior year.

  • Net income was $60.5 million for the quarter – an increase of 24.1% over the prior year quarter.

  • For the year, adjusted net income was $235.7 million – an increase of 13.8% over the prior year.  Given an annual 2022 revenue of 3.025 billion and a net income of $235.7 million, percent net income was 7.8%.  However, Earnings Before Interest, Taxes, Depreciation & Amortization EBITDA – a more important cash flow statistic – was $383.5 million or 12.6%).

  • The company’s liquidity is increasingly strong with $316 million in cash and cash equivalents on its balance sheet and a $593.3 million line of credit.

It’s All About the Real Estate

    Quarterly reports, annual reports, and proxy statements can become eye glazing for the public.  The way we need to look at Ensign and the rest of the nursing home industry is this:  Medicaid and Medicare (mostly Medicaid) provide revenue that sustains a real estate industry.  Hence, direct care services are robbed for the sake of shareholder interests.

    In the past couple of decades, tax code adjustments have resulted in a financial transformation of long-term and skilled nursing business.  Limited liability entities, private equity firms, real estate investment trusts, and individual/family trusts have blossomed like tulips in Springtime.  Ensign is a cutting-edge bellwether of financialization, and the tax arbitrage associated with it. Let’s take the separation of property from operations (OPCO/PROPCO).[2]  Property has been increasingly separated into  separate subsidiaries of parent corporations or sold to REITs and leased back.  However, Ensign has upped that game.  The following indicates the segmentation of the company into separate entities – most of which were not discussed in the quarterly report.

    The above graphic does not include a couple of later entities – Standard Bearer (a captive[3] REIT) and a captive insurance company.[4]  A spinoff has tax advantages for shareholders.  Added advantages for Ensign in its spinoff of property into CareTrust REIT include avoidance of capital gains taxes and increased corporate assets/value.  CareTrust is an “umbrella partnership real estate investment trust,” otherwise known as an UPREIT.  By transferring property to an UPREIT, rather than selling it, capital gains taxes are avoided, the transferee receives “operating units” (OPUs), and receives returns from the triple net leases to other nursing homes (under triple net leases, leasees pay insurance, maintenance, and taxes – what a deal!). 

    As the above diagram indicates, Ensign undertook a spinoff in 2016 by spinning out its assisted living facilities into the Pennant Group – an Ensign spinoff. Ensign leases property to the Pennant Group and retains a major share of the stock.  This model illustrates the OPCO/PROPCO set up in which property becomes a tradable commodity rather than a necessary tool for producing care.  Finance dominates production.

Financialization

    Financialization throughout the U.S. economy has dampened economic growth.  Furthermore, stagnant wages, a diminishing upwardly mobile middle-income class, wealth transfer to super-rich individuals and corporations, and a low-wage underclass are due to the separation of finance from productivity.[5]  Nowhere is that phenomenon more apparent than in the U.S. government-funded healthcare system.  The massive real estate substrate of industrialized medical care is draining resources from care.  There is no rational justification for exceedingly low pay, and poor care when so few are making so much from the trillions of dollars poured by Americans into the health care system.

Summary

    From a financial and technical perspective, this post has been somewhat superficial.  Nevertheless, we need to outline the overall financialized, industrialized, government-funded U.S. healthcare system and have a very serious public conversation about how the hardworking and patriotic people of the U.S. are being fleeced.  I will be clarifying and filling in the concepts that I have introduced in this post. In the future you will see more regarding UPREITs and OPUs, shell companies (Ensign has over 400 subsidiaries, all are LLCs, all incorporated in Nevada), and other financial machinations that are robbing American taxpayers.

[1] You can listen to the conference call and download the text of the call here:  https://investor.ensigngroup.net/news-releases/news-release-details/ensign-group-reports-fourth-quarter-and-fiscal-year-2022-results

[2] For a very good discussion of REITs, Financialization, and nursing homes, see Rosemary Batt & Eileen Applebaum (July 9th, 2022), “The Role of Public REITs in Financialization and Industry Restructuring.”  Working Paper No. 189.  Washington, D.C.:  Institute for New Economic Thinking.

[3] A REIT with the property of only one corporation – The Ensign Group in this case.

[4] An insurance company that underwrites only the entity that incorporates it.

[5] For a very good discussion of financialization, see:  Rana Foroohar (2017), Makers and Takers:  How Wall Street Destroyed Main Street.  New York:  Crown Publishing.

THE ENSIGN GROUP AND CENTENE CORPORATION ANNOUNCE DATES FOR PRESENTATION OF 4TH QUARTER, 2022 RESULTS

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    The Ensign Group and Centene Corporation have announced dates for presentation of 4th quarter, 2022 results – February 3rd and February 7th respectively.   Ensign and Centene are the two largest and the only publicly listed corporations earning the bulk of their revenue from Medicaid. The Ensign Group is engaged exclusively in long-term and skilled nursing care.  Centene primarily provides Medicaid managed care services to states.

    Given that Medicaid is means-tested and lower tier poverty medicine, it is notable that these two corporations have experienced rapid revenue growth and high earnings while lavishing executives with generous compensation packages.

    In this post, I will review Ensign Group’s 3rd Quarter, 2022, results, which will be a point of comparison for the upcoming 4th Quarter results and cover more of Centene’s financial performance and executive pay in a later post.  The purpose of this post is to focus attention on the dissonance between claims of industry-wide low earnings made by American Health Care Association – the nursing home industry’s propaganda organ – and public information available through the Securities and Exchange Commission.  The AHCA’s claims are not verifiable because closely held corporations aren’t required to make their consolidated financial statements public.


   Selected Ensign Group 3rd Quarter, 2022 Results

  • Revenue, Three Months Ended September 30: 
    $770,005,000 (compared to 668,530,000 2021 3rd Quarter).

  • Revenue, Nine Months Ended September 30:
    $2,215,936,000 (compared to $1,934,319 to 2021).

  • Net Income 3rd qtr. 2022:
    $56,242,000 (7.3%)
    Compared to $48,344,000 3rd qtr. 2021 (7.0%)

  • Net Income, Nine Months Ended 2022:
    $2,215,936,000 (compare to $1,934,319,000).

Executive Compensation

    We will not know Ensign executive compensation until the company releases its proxy statement in April.  The following are 2021 compensation data for executives:

  • Barry R. Port, CEO:  $7,421,472 (13.9% increase over 2020 compensation).

  • Suzanne Snapper, CFO: $6,532,955 (19.5% increase over 2020).

  • Chad Keech, CIO: $4,275,539 (17.7% increase over 2020).

  • Spencer Burton, President and Chief Operating Officer: $5,029,146 (9% increase over 2020)

Ensign Stock Has Been Increasing During Stock Market Down Year:

    Between late 2021 and the end of 2022, the NASDAQ had declined by 30%.  It was a bad year.  However, Ensign stock was trading at $77.20 on November 29, 2021.  It closed at $94.00 yesterday (February 1, 2023) – a 22% increase.

    Christopher Christensen, CEO Emeritus owns $1,478,499 shares of Ensign stock).  The value of Mr. Christensen’s stock increased in value by $24,838,783. 

    The three beneficial owners: BlackRock (15.1% or 8,340,870 shares), Wasatch Advisors (11.1% or 6,121,470 shares) and Vanguard (11% or 6,104,354 shares).

We must insist on truthful information from the industry receiving taxpayer funds for providing medical care to Americans experiencing poverty. As the only public information we are receiving suggests, investors and executives are excessively rewarded while wages and salaries for direct care workers remain seriously low. If the bulk of financial information is hidden behind a veil of secrecy, taxpayers and their representatives do not have a voice in determining what we should be receiving for what we are paying.

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/.

Data Analytics, The Stock Market, & Healthcare Justice

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By:

Dave Kingsley

Current public relations carried on by the hospital and nursing home
industries are based on bogus claims designed to mislead the public. The
variety of wealthy lobbying organizations for the medical-industrial complex
are promoting false narratives based on either an invalid interpretation of
financial data (intentional) or making claims of hardship, e.g. “low net
margins” that are not supported by solid, scientific, factual information
(also intentional).

Big and increasingly dominant hospital and nursing home corporations have
sophisticated data analytic departments on which they rely for management
decisions affecting cash flow and shareholder interests. These multi-billion-dollar
companies determine razor thin margins acceptable for minimal staffing, pay,
food quality, training, and equipment. Even the smaller chains are implementing
productivity enhancement efforts with software designed to determine maximum
acceptable acuity levels for billing and cash flow.

Unfortunately, providers of long-term/skilled nursing care (i.e. nursing
homes operators) are not applying advanced technology and data analytics to
quality of care. I follow industry trade publications and financial reports and
can find no evidence that providers are employing sophisticated analyses to
efforts for optimizing the health and quality of care at a cost that returns a
reasonable value to executives and shareholders rather than a return that can
pass muster with regulators and legislators.

Because much essential financial data pertaining to tax supported medical
care operations are hidden from public view or nearly impossible to wrest out
of government agencies, advocates for patient and employee justice in hospitals
and nursing homes are in an asymmetrical fight with lobbyists. Because the
nursing home industry is more of a real estate/finance industry than a
medical/patient care industry, the lobbying power in federal and state
legislatures constitutes a juggernaut that can only be defeated through an
organized advocacy effort that fights for transparency and fully utilizes what
is available now to feed into a truthful narrative for media, legislative, and
research actions.

What Is The Stock Market Telling Us About The Financial Condition of
Nursing Homes & Hospitals After Two Years of COVID?

Some data pertaining to the financial condition of nursing homes and
hospitals are readily available from the U.S. Securities & Exchange
Commission (SEC). I have been tracking the stock of publicly listed
corporations with operations in nursing homes and hospitals. Most nursing home
corporations listed on a public exchange are real estate investment trusts
(REITs) that are becoming increasingly powerful in the long-term care/skilled
nursing business (they trade and lease real estate but also operate
facilities).

The last three months have not been good for the equities market. Stock
prices have been falling precipitously. But that’s not the case for stocks of
corporations in the business of providing tax funded medical care.

Brookdale Senior Living & The Ensign Group

Let’s consider the two biggest nursing home operators listed on a public
exchange that are not REITS: Brookdale Senior Living and The Ensign Group.
Since late November, the DOW has dropped approximately 3%, the S&P has
declined by 6.5%, and the NASDAQ has fallen by 17%. But these nursing home
corporations have gone in the opposite direction.

Closing price of Brookdale November 29, 2021 – $6.30 Close on February 26,
2022 – $7.00

Closing price of Ensign November 29, 2021 – $77.20 Close on February 26,
2022 – $82.19

So, Brookdale stock is up by 11% and Ensign stock is up 6.5% during the same
period we’ve seen a drop in the markets like we haven’t seen since March of
2020 when they crashed due to COVID but recovered rather quickly.

Most of the REITs heavily involved in the nursing home business have seen
their stock rise during the time that the market has been falling rapidly.
Welltower, the big one, is up 1%. Ventas, the other big one, is up nearly 8%.

Publicly listed hospital corporations are doing well also. HCA stock has
climbed from $229 in late November to $253 at the close yesterday – a 10.5%
increase. Tenet jumped from $74.46 to $85.71 since November 29th – a 15%
increase!

Why is the stock of these hospital and nursing home corporations doing so
well when the market is in correction territory? The primary reason is this:
they are heavily subsidized by the taxpayers. Indeed, their prices are set by
state agencies much like like utility company rates are set. They submit their
costs and are reimbursed for those costs plus increases for inflation and
healthy percentage increases above costs. Furthermore, they are structured for
each facility to pay lease expenses and other ancillary expenses to other
corporations they own.

Don’t believe the industry’s hardship pleas. That is all a lie. It is a
scurrilous behavior indeed for the American Health Care Association – the
nursing home industry lobby – and the American Hospital Association to be
putting out false information to snow the taxpayers who are so generous with
their subsidies for executive pay and shareholder dividends.

A Simple Truth: Nursing Homes are Run By Financiers – Not Medical Professionals

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By:

Dave Kingsley

Nursing Home Investors Care about Cash Flow. They are Not Into Charitable Care.

It’s amazing to me how far nursing home industry lobbyists are getting with their hardship pleas. At this time they are being rewarded by legislatures for letting their workforce deteriorate to a crisis level. There are some simple truths – perhaps simple logic – regarding why qualified, competent medical professionals are hard to find these days.

Let’s start with the cutting edge of corporate finance: the “time value of money.” Investors calculate their free cash flow over five years before investing their money. Their decision is based on yearly cash flow discounted to the present time. This means that they determine what a dollar is worth at the present time versus what it will be worth in 1, 2, 3, 4, or 5 years if invested in a project or business. I won’t bother my readers with the formula for determining “net present value,” but debt financing of real estate and tax arbitrage play a major role in that calculation.

In the case of the nursing home industry, real estate is debt financed. Reimbursement for capital costs such as depreciation and interest typically exceed payment on loan principal and flow into the cash channel that will be “earnings” pocketed by investors. At some point, principals will equal and begin to exceed returns from real estate and debt tax advantages. The property will be flipped at that point.

Keeping food costs low, paying substandard wages, dangerously low staffing, and putting sick, fragile, elderly and disabled people in a room with a stranger are techniques for increasing cash flow from Medicare, Medicaid, self pay, managed care, and whatever other form of third party payer reimbursing care.

Why Would Investors Be in The Nursing Home Business if It Weren’t A Profitable Business?

Because privatized, tax-funded, medical care is financialized (finance overrides medical care) decisions regarding care are frequently and generally based on financial metrics. The quality of care is confined within the parameters of expected cash flow (discussed above). Furthermore, with “cash as King,” immediacy of returns rather than long-term planning and reinvestment for a better medical care system in the future drives decision making about staffing and overall conditions in acute care, long-term, and skilled nursing facilities.

The problem is this: the public, the media, and legislators do not have a good overall view of how the nursing home system works from a financial perspective. Federal and state agencies have been derelict in making accessible, understandable, financial and ownership data available to researchers and the public in general. California is more advanced in this regard than other states but still has a way to go in making the system fully transparent in that state.

In the past few weeks, I reviewed 2020 cost reports of 205 facilities in San Diego, San Bernardino, and Orange counties. I entered data regarding revenue, net income, number of beds, and the proportion of revenue from various third party payers (e.g., Medicare, Medicaid, Managed Care, etc.). As opposed to the claim from a Kansas nursing home lobbyist that providers have a median net income of 1/2 percent, I’m finding a median of close to 7% even though many claims of losses look dubious to me. Furthermore, net income is not a reflection of earnings or cash flow. Depreciation and interest are expensed on the income statement even though these are not cash expenses.

Nothing in the cost reports will tell us how much cash is extracted through real estate transactions. Nor do they indicate how much cash is flowing into parent corporations and holding companies. We know how much that is for public listed corporations – most of which are real estate investment trusts – because we can easily access financial reports they file with the SEC. As my colleague Charlene Harrington and I have pointed out, they were not hurt by COVID in 2020 (“COVID-19 had little financial impact on publicly traded
nursing home companies “J Am Geriatr Soc. 2021;1–4. https://doi.org/10.1111/jgs.17288). We will soon have an article in The International Journal of Healthcare Research regarding the robust financial performance of The Ensign Group since issuing a IPO in 2007.

The late Roy Christensen, founder of both Genesis and The Ensign Group, and his family have become fabulously wealthy by channeling money out of their large chain of facilities into stock options, stock awards, and executive pay. The Ensign Group is rapidly acquiring facilities and undertaking financial maneuvers like spin offs for the purpose of moving property around without incurring capital gains and corporate income taxes. They have also channeled a large share of their hundreds of millions in stock over the years into a variety of family trusts, which keeps their wealth intact and away from the IRS.