Dr. Eilon Caspi on Dementia Care

By:

Dave Kingsley

I had the opportunity to hear Dr. Eilon Caspi, an expert on the care of dementia patients, speak about the problem of “dementia patient on dementia patient harm” in skilled nursing facilities. More about what he had to say will be covered on this blog in future posts.  Although I have always thought that the U.S. is unprepared to care for dementia in the burgeoning 65+ population, Dr. Caspi opened my eyes widely by explaining the neglectful treatment of dementia patients that leads to the frequent harm they cause each other.

I will be writing more about what I heard Dr. Caspi speak about at the “Elder Justice Past, Present and Future 2022” Conference in Albany, New York last week. For instance, he discussed how the term “memory care” is a euphemism and misleading and how the design of facilities leads to lack of oversight and care for dementia patients. These will be among the topics I would like to discuss with him and elaborate on for wider dissemination.

Visit Dr. Caspi’s website at http://dementiabehaviorconsulting.com.

The “Elder Justice Past, Present and Future 2022” Conference in Albany, New York: A Synopsis of My Presentation

By:

Dave Kingsley

This past week I spoke at the Elder Justice Past, Present, and Future 2022 conference in Albany, NY.  This conference, organized by the Long-Term Care Community Coalition and supported by the New York Office of the State Long Term Care Ombudsman, was not only a platform for sharing my research and opinions regarding long-term and skilled nursing care, but it was also an opportunity to network with an impressive group of New York professionals providing support to ombudspersons, patients, families, and caregivers.  This blog post includes the main points I attempted to impart to attendees and will continue to impart on a wider scale through this blog, webinars, and podcasts.

I was honored to be included among the other speakers, all of whom gave impressive presentations regarding the legal rights of patients, the state of dementia care, research into corrupt operators, and the availability of data, and other services.  The valuable information provided by each of these highly qualified presenters will be discussed in upcoming blog posts.  I will also discuss the following major points of my presentation in the months ahead:

  • The “nursing home industry” underwent a transformation at the turn of the 21st century as real estate investment trusts (REITs), private equity (PE), institutional investors, and limited liability companies (LLCs) began to define the legal and financial structures of private, for-profit operators.

  • The legal and financial complexification of the “nursing home system/industry” was driven by macro-economic shifts characterized by accumulating pools of capital in insurance, retirement, college endowment, and sovereign wealth funds.  Pressure on legislators by powerful real estate and financial interests to modify tax codes resulted in the entry of REITs, LLCs, and PE firms into the industry in a transformational way.

  • The primary mission of the “big players” entering the industry around 2000 is protecting and enhancing shareholder value.  The large, publicly listed corporations providing LTC/SKN have access to an immense amount of capital from asset managers for institutional investors such as BlackRock, and Vanguard.

  • Chains not listed publicly have developed networks of LLCs for the purpose of escaping liability and taxes, hiding assets, and purchasing goods and services from their related parties, i.e., from LLCs they own.

  • Complex corporate legal structures are designed to hide cash extraction at the expense of patients needing a high level of medical care.  Medical ethics have less priority than shareholder value and most of the time are ignored altogether.

  • Along with the increased dominance of real estate and financial interests with access to immense amounts of capital, the industry has massive resources for influencing legislation and regulation.  Indeed, the power relationship between the industry and advocates is asymmetrical. 

  •  Because of the industry’s financial clout, regulation and oversight of operations are weak and allow for flouting of legal requirements for accurate financial reporting and other procedures.  In the field of political economy, we call this “agency capture.”  The lobbying and political juggernaut comprised of finance, insurance, real estate (FIRE) swamps any effort by the advocacy community to transform the system.  This is the 800-pound gorilla in the room that is far too often ignored.

  • Patients and families have no well-organized lobby with a political narrative and strategy.  Hence, the industry can push its weight around without significant opposition from the advocacy community.  Most legislative hearings and investigations these days are a sham because the industry’s false, propagandistic, narrative of financial hardship and low reimbursement is taken at face value without adequate pushback from those invited to testify on behalf of patients.

I did not, in this post, discuss cost report research by the Long-term Care Community Coalition in collaboration with Tallgrass Economics.  Thanks to Richard Mollot’s leadership, we have been able to collect, organize, and analyze data from cost reports submitted by 525 New York LTC/SKN facilities. We have been led to conclude that the proportions of reported net income and other financial metrics are so extra ordinary and unbelievable that auditing by the state is seriously deficient. My experience in conducting cost report research across the U.S. suggests that New York is not unique in this regard.  Our data has opened up avenues for further research into the actual extraction of cash by investors as they obfuscate the flow of capital through blatantly erroneous cost reports.  This phenomenon will be a major feature of this blog in the days, months, and years (unfortunately) ahead.

Nursing Home History as Pablum:  Creating a Comfortable Reality for the Powerful

By:

Dave Kingsley

A commission to study the nursing home system, conducted under the auspices of the National Academies, of Science, Engineering, & Medicine (NASEM), recently released its report entitled The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff.[1] The report included a very brief history of the nursing home system – a 400-year history reduced to a couple of pages.  Furthermore, it is a history that will not upset officials, proprietors, investors, executives, politicians, and others who are benefitting from the status quo. 

Basically, the commission is feeding the public historical pablum.  Left out of the multi-century account are such salient features as ongoing and intensifying financialization, and pivot points such as the 1950s-60s’ development and codification of “the medically indigent,” the role of states’ rights, and the influence of racist, segregationists.  Also excised were many significant changes of 1980s-90s such the transformation of macroeconomic and corporate philosophy from managerial capitalism into what is known as “agency theory,” – basically meaning that shareholder value is not just the highest ethic of capitalist management but the only ethic.

Between the late 1990s and early 2000s, capital markets and tax codes were conducive for the entry of real estate investment trusts (REITs), private equity (PE), and other corporate legal structures (e.g., limited liability companies or LLCs) into the senior housing market.  Large pools of capital had been accumulating through pension, college endowment, sovereign wealth, and insurance funds that needed to flow into businesses that would provide desired yields and return on investment.  These funds are managed by institutional investors such as Vanguard and BlackRock.  The number and size of publicly listed companies have grown considerably over the past two decades as REITs have expanded their power and financial dominance in the senior housing market.  To ignore these players in the industry is to ignore the proverbial 800-pound gorilla in the room.

These changes have been accompanied by massive investments of cash into political campaigns and politicians’ coffers by PACs, Corporations, and lobbying firms representing the medical-industrial complex, Wall Street, and real estate.  What worthwhile history would tiptoe around the corruption wrought by money in politics?

It is easy to become known as a radical and marginalized. Taking a hardnosed stand regarding the truth is an annoyance.  History is written from a “point of view” of the powerful and their version of events. They choose the people, places, and things to include and exclude.  Challenging those points of view will typically evoke hostility.  This is currently noticeable in the backlash to “critical race theory.”  African Americans would benefit greatly from a factually accurate history of race in America, which would facilitate an honest look at institutional racism still pervasive in the United States – including in the nursing home system. It would also be helpful to the elderly to have a movement that could be called critical elder theory – perhaps CET would be an appropriate acronym.

Unfortunately, humans are beset with psychological defense mechanisms that serve the avoidance of truth and lend support to the creation of a comfortable reality.  There are many defense mechanisms recognized by psychoanalysts.  However, four main defenses in history: denial, rationalization, repression, and fantasy are essential for understanding how official bodies such as commissions paper over reality and prevent real change. 

Fantasy is seeing the world not as it is but as the way we would like it to be.  No American wants to think that the elderly, as humans, are only worth what the treatment in a typical nursing home would suggest.  We believe we are better than that.  Our creed does not permit widespread shortening of life and suffering because of financial considerations.  Somehow the incongruence between our creeds and our deeds must be reconciled.  So, we retreat into a fantasy world in which medically fragile and frail elderly and disabled persons are living in as system with a few tweaks can be fully staffed and made into a “home-like culture” (a vague term if ever there was one).

Fantasies can only be maintained through denial of reality (out of sight-out of mind), repression (just don’t think about it), and rationalization (Medicaid reimbursement is too low).  Human nature being what it is, these defenses operate mostly at a subconscious level. 

Window dressing called “home culture” as it has been conceived and implemented thus far will not substantively change the structure and function of the nursing home system as it has evolved.  However, it will assuage our consciences.


[1] National Academies of Sciences, Engineering, and Medicine 2022. The National

Imperative to Improve Nursing Home Quality: Honoring Our Commitment to

Residents, Families, and Staff. Washington, DC: The National Academies Press.

https://doi.org/10.17226/26526

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.

DEMOCRACY, CORPORATE FINANCE, & MEDICAL ETHICS

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.

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

Medicaid is a Disgrace

By:

Dave Kingsley

The Medicaid Program Has Roots in Segregation & Racial Hatred

Among economically wealthy and technologically advanced countries in the world, Medicaid is a medical system unique to the United States.  The program was conceived and forced on the American people by segregationists in the Democratic Party during the Johnson Administration.  Segregationist Congressman Wilbur Mills, powerful chairman of the House Ways & Means Committee in the 1950s and 60s, was able to hold President Johnson’s Medicare legislation hostage until he agreed to a poverty medical care system which gave states considerable power over administration of programming and qualifying criteria.

Segregationists from states such as Arkansas, Alabama, Georgia and other states of the deep South saw poverty medicine for which people would have to prove to a state agency that they were eligible, as a means for keeping poor people – especially poor African Americans – from receiving health care. In the 1960s, the segregationist South was still the agricultural South which relied on cheap labor.  Furthermore, intense Jim Crow hatred of Southern African American citizens was incompatible with anything that might raise their status above a level of serfdom and humanize them. (See Jill Quadagno One Nation: Why the U.S Has No National Health Insurance, 2005, pp. 13-14; Gerard Boychuk, National Health Insurance in the United States and Canada:  Race, Territory, and the Roots of Difference, 2008, pp. 59-79; my chapter “Implementation of Medicaid-Funded Long-Term Care:  The Impact of Prior History on the Development of the Nursing Home Industry,” in Max Skidmore & Biko Koenig, Anti-Poverty Measures in America, 2019).

Medicaid is means-tested.  Americans must prove that they are impoverished to qualify.  This characteristic of the program has made state agencies and their bureaucrats the gateway to medical care for poor people who are required to experience the humiliating process of proving that they are too poor to get health care without government welfare.  One’s poverty must be so deep that only the poorest of the poor can qualify. In most states, the program is stigmatizing as legislatures and bureaucracies pile on humiliating barriers such as “proof of looking for work,” drug testing, and other criteria that should have nothing to do with receiving needed medical care.

Funding for Long-term & Skilled Nursing (Nursing Homes)

It is often said that placing nursing home funding in Medicaid for individuals unable to self-pay the daily rate in most facilities – or have spent down their life savings until they are impoverished – was an afterthought – that there was no purpose or rationale to making it a Medicaid program.  That was the position taken by Bruce Vladeck in his excellent but now outdated history of the system. (Unloving Care: The Nursing Home Tragedy, 1980).  I don’t believe that. 

It is my opinion that legislators like Mills and Senator Kerr from Oklahoma could foresee the major real estate industry that nursing home care would spawn.  Privatization (corporatization) was well on it way when Congressman Mill and Senator Kerr conceived and were able to get the Kerr-Mills medical program for seniors through congress in 1960.  It was also means-tested and was the precursor to Medicaid.  Nursing homes care was an integral component of Kerr-Mills.  Kerr had ties to the nursing home industry and Mills was an ardent believer in utilizing government funds and tax codes for incentivizing private economic expansion (as opposed to expansion of government, non-profit growth).

Medicaid has Become a Perverse Toxic Program that Enriches Investors & Corporate Executives

In December 2021, the Center for Medicaid & Medicare Services announced that Medicaid expenditures had reached $671 billion.  A large proportion of these funds reimburse corporations for nursing home care, which is mostly substandard and despicable.  Revenue for the industry includes not only the ample reimbursement member companies receive for patient care but also all of the capital gains from real estate which derives value from a license to operate a nursing home.

Although states and the federal government tolerate and even facilitate a veil of secrecy regarding finance and the flow of capital through lending institutions and from reimbursement, enough evidence can be found to suggest that substandard care is enriching corporations and executives.  For instance, Welltower, a major Real Estate Investment Trust and operator of nursing homes paid its CEO $20 million in 2020.  Investors in publicly listed nursing home related corporations have received high earnings during COVID.  Stock of the publicly listed corporations in the business has continued to increase while the markets have been decreasing.

A huge amount of capital flowing through the Medicaid system isn’t reinvested in a better health care system.  It is pocketed.  Much of what is pocketed can’t be seen because the government allows investors in privately held companies hide their finances.

Another Commission to Study the Nursing Home System Isn’t the Answer

People who are appointed to prestigious commissions to study the nursing home system aren’t given to speaking truth to power.  Indeed, appointing a group of academics and other professionals to a commission sponsored by the National Academy of Sciences and important foundations will not solve the problem we all have, i.e., dread of ever being in a nursing home.

It is very risky for most people on a commission to tell the truth, which is that the medical system in the United States is driven by greed.  Money in politics is resulting in domination of government bureaucracies and legislators by the very people who need to be regulated.  Money is power and has become an increasing factor in U.S. politics. 

Recommendations to tweak this that or the other thing in a system so corrupt and inefficient that nothing less than total transformation will change much of anything will likely only reinforce that system. Recommendations to increase staffing will be resisted by the industry and frustrate advocates, unions, and the public because any change will be window dressing.

I don’t want to see a recommendation for “more transparency.”  I want the privately held companies to open their books and provide the same information that publicly listed companies provide to the Securities and Exchange Commission.  The truth of the matter is that the nursing home industry, indeed the entire health care industry, has become financialized.  Taxpayers are not receiving the increase in productivity and quality that matches the tax dollars they are forced to pay for their own care.

Data Analytics, The Stock Market, & Healthcare Justice

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

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.

House Subcommittee on the Coronavirus Ignores Nursing Home Deaths. That is a Human Rights Violation.

By:

Dave Kingsley

U.S. House Committee Eliminates 141,000 Patient and 2,177 employee Nursing Home Deaths From Reality: Nothing to See There.

According to the Center for Medicare & Medicaid Services (CMS), 141,084 nursing home patients and 2,177 employees have died from the Coronavirus pandemic (https://data.cms.gov/covid-19-nursing-home-data). The House Select Committee on the Coronavirus under the leadership of Congressman James Clyburn – one of the three most powerful Democrats in the House – addressed 249 deaths in meatpacking plants but totally ignored nursing homes.

I have carefully read the Subcommittee’s recently released report More Effective, More Efficient, More Equitable and can find absolutely nothing about the biggest loss of life in an institutionalized population in the history of the United States (see: https://coronavirus.house.gov/news/press-releases/select-subcommittee-s-year-end-staff-report-highlights-oversight-work-releases). Adobe Acrobat PDFs have a search function. Having utilized that function on the report, I can say with certainty that words such as nursing homes, long-term care, skilled nursing, nursing home industry, or any other word that would suggest that elderly and people with disabilities institutionalized in these facilities were of any concern whatsoever to the subcommittee.

How can 141,000 patient and 2,177 employee deaths in one institutionalized population – which constitutes about one percent of the U.S. population in any one year but nearly 20 percent of the COVID-19 deaths since the pandemic appeared in 2020 – be erased from reality? Whose interests are being served by these types of hearings in Congress? Indeed, there has, in fact, been no real serious investigation by the U.S. Congress or any state legislature into the nursing home coronavirus tragedy (at least none that I have found).

The Nursing Home COVID Tragedy Was Avoidable. Therefore, It Is an Atrocity and a Human Rights Violation.

Elderly and disabled Americans were allowed to die because an industry failed to spend the money necessary to save them. The U.S. government has turned over the care of frail and disabled people to an industry well paid to care for them. It is well known and scientifically proven that the industry charged with responsibility for patients in nursing homes has consistently placed shareholder value above medical care. That fact has been demonstrated repeatedly and consistently for the past 70 years that federal and states funds have supported a privatized long-term care and skilled nursing system.

Here are the facts:

Epidemiologists and other scientists renowned in the field of emerging diseases have warned for decades that pandemics like we have experienced in the 2000s would become worse (e.g. See Laurie Garrett, The Coming Plague).

SARS taught the world a lesson about pandemics and the vulnerability of nursing home patients. Hong Kong and other Asian countries took steps to counter future pandemics. The Hong Kong Guidelines were well known throughout the world and yet the U.S. nursing home industry and government regulatory agencies ignored those guidelines while the industry created sophisticated legal and financial structures to drain ever more tax and reimbursement dollars out of the system for the benefit of executives and shareholders (See: https://www.cmaj.ca/content/192/19/ES11; https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7899229; https://www.ncbi.nlm.gov/pmc/articles/PMC723424/; https://www.theguardian.com/world/2020/may/19/mps-hear-why-hong-kong-had-no-covid-19-care-home-deaths.)

Political contributions suggest that the nursing home industry has tremendous sway over congressional and agency oversight. For instance, of the top 100 2019-2020 contributions to Congressman Clyburn – which total over $1 million dollars – approximately half came from corporations and lobbying groups with a vested interest in nursing home finance.

The American Health Care Association – the nursing home corporation lobbying organization – contributed $10,000 to Congressman Clyburn in the 2019-2020 cycle, but it is important to recognize that the nursing home industry is primarily a finance-insurance-real estate as well as a medical industrial complex with interlocking interests between real estate, finance, and medical sectors of the economy. Therefore, consider the following donations to Chairman Clyburn in 2019-2020:

American Healthcare Association (nursing home corporation Lobby): $10,000

National Association of REITs: $10,000

National Bankers Association: $10,000

American Hospital Association: $10,000

National Association of Realtors: $10,000

Johnson & Johnson: $10,000

KMPG: $10,000

Investment Corporation Institute: $10,000

USAA: $10,000

CVS Health: $10,000

Capital Financial: $10,000

Deloitte: $10,000

Abbot Lab: $10,000

Eli Lilly: $10,000

Bank of America: $10,000

Pfizer: $10,000

Pensare Acquisition Group: $10,000

Prudential: $19,000

AFLAC: $34,925

Government & Industry Abuse of An Institutionalized Population is A Human Rights Violation Causing A Massive Number of Fatalities. Government Officials Must Be Held Accountable. But there is No Organized Political Movement to Force that to Happen.

The U.S. government has a long history of looking the other way while widespread abuse and neglect continues pervasively throughout a privatized nursing home system funded with taxpayers’ hard earned dollars. Furthermore, over that 70-year history, an aging enterprise has been spawned by the Older Americans Act and do-gooder contributions to 501C3 organizations. We have Area Agencies on Aging, all sorts of aging-related professional organizations, gerontology professional groups, advocacy groups, the AARP, and countless other special interest organizations have settled into a comfortable relationship with government agencies responsible for regulating nursing homes and the industry itself, which has a high powered PR machine. An ongoing game of rope-a-dope between the industry and advocates over minor tweaks to a system that should be ended not mended takes place ad nauseum, ad infinitum in legislatures across the land.

Nursing home neglect and abuse continues on a regular basis while shareholders and executives get fabulously rich from Medicaid and Medicare funded commercial real estate. It appears, however, that a coalition of so-called senior advocacy organizations cannot mobilize to force congress to take a hard look at the COVID-19 nursing home tragedy that didn’t have to happen.