Don’t Believe Nursing Home Industry Propaganda: Providers Are Doing Fine Financially

Mark Parkinson’s “Year-of-COVID” Strategy is Clear:  Make Nursing Home Corporations the Victims of the Pandemic Rather than the Negligent Providers they Have Been.

Mark Parkinson, former governor of Kansas, is the CEO of the American Health Care Association (AHCA), which is the well-funded and powerful nursing home industry lobby. I have heard Parkinson interviewed several times on CNN and have seen his comments in various publications during the past year.  His job is to turn derelict nursing home corporations into victims.  In an interview with Skilled Nursing News a couple of days ago he bemoaned the hardship placed on nursing homes by the pandemic.  He relied on a drop in capacity from 80% to 75% but provided no financial evidence how that affected financial performance given the high rate of reimbursement for COVID patients and a plethora of subsidies from federal and state agencies.

No one should fall for the former Kansas governor’s propaganda.  If he were interested in scientific, objective data to justify the victimhood he claims for his corporate members, he would support our demands for transparency.

We know that the big publicly listed corporations have been reporting adequate to robust earnings over the past year.  However, most nursing home corporations are closely held and operate behind a veil of secrecy.  They incessantly employ a false narrative claiming that net earnings are so thin that the current system – much of which entails indecent, and inhumane care – is the best they can do given the amount of reimbursement they are receiving from Medicaid and Medicare.

Because of the passivity of legislators, the public, and advocates in the face of this scurrilous misinformation (propaganda), lobbyists can get away with appearing in front of legislative committees and claim that net earnings are so low that they can’t properly staff facilities or create environments providing decent care.  There is no demand that they open their books and show us the money trail.  

We know that funds flow into facilities from Medicare, Medicaid, and private pay reimbursements.  It flows out through an opaque network of LLCs – generally all owned by the same investors, e.g., private equity firms, real estate investment trusts, family trusts, family offices and assorted other financial entities.  If Parkinson would like for us to accord him any credibility, then he needs to show us the lease, consulting, management, and other contractual arrangements the LLCs have with one another.  

Mark Parkinson, Former Governor of Kansas, is a High Paid Propagandist for the Nursing Home Industry.

Mr. Parkinson Goes to Washington. His Current Task is to Cover Up Corporate Responsibility for Massive Loss of Life Due to COVID

Mark Parkinson, Former Governor of Kansas & CEO of the American Health Care Association

When Kathleen Sibelius was appointed HHS Secretary by President Obama, her Lieutenant Governor, Mark Parkinson, became governor.  His first major act was to nullify one of his predecessor’s last acts. Governor Sibelius had denied a permit for a dirty, hyper-polluting, fossil fuel, power plant in Southwest Kansas. Parkinson reversed her decision and granted the permit.  That was probably Parkinson’s only significant act as governor.  He finished out what would have been Sibelius’s term and immediately left for a high paying gig in Washington, D.C. – as CEO of the American Health Care Association (AHCA).

The AHCA lobbies on behalf of its nursing home corporation members.  According to the organization’s 2019 IRS 990, it has annual revenues of $40 million – most of which is derived from member dues.  Parkinson’s 2019 compensation was reported on the 990 as $2.5 million. (https://projects.propublica.org/nonprofits/organizations/530260105). 

These days, Parkinson is busy converting AHCA corporate members from negligent providers of care to victims of COVID-19 by pleading hardship on their behalf for what could be 200,000 deaths in the so-called “nursing homes” of America. In the last few days, he was quoted in Skilled Nursing News bemoaning the poor financial outlook for the nursing home industry(Parkinson: Nursing Homes’ Financial, Operational Recovery ‘Completely Tied to Visitation’ – Skilled Nursing News).  As our past and current posts regarding earnings of publicly listed provider corporations have demonstrated and will likely continue to demonstrate, long-term care providers are in fact doing quite well.

The Rights of Nursing Home Patients and their Families are up against AHCA Corporate Members & Their Deep Pockets 

Make no mistake about it, the AHCA, with affiliates in all 50 states, swings far, far, more weight in Washington and state capitols than well-meaning advocacy and activist groups could ever hope for.  Indeed, the power relationship between the industry and advocates is asymmetrical.  That explains why regulation is weak and quality of care remains low.

For instance, according to Section B. of the AHCA IRS 990 (displayed below), $3,197,201 alone was spent on software and public relations/lobbying firms in Washington, D.C.  The software helps link 50 state chapters and coordinate campaign and lobbying activities.  The $2 million plus expenditure for “public affairs,” “audio visual solutions,” “communications,” and so forth in a single year is a component of the industry’s propaganda juggernaut. Much of the rest of the $40 million is spent on Democratic and Republic governor’s associations and other purchases of political influence.

What Does $40 Million Buy the Nursing Home Industry in One Year?

Immense amounts of cash, decades of lobbying expertise, and a high paid staff can guide legislation and regulation in a direction that benefits corporations at the expense of patients, families, and communities.  Stated differently, the AHCA is a well-oiled propaganda machine.

AHCA framing and narratives have been effective in creating a Panglossian viewpoint among the public, media, and even advocates.  Although it is common to hear negative comments about the industry such as it is “greedy,” “puts profits above people,” and other such disparaging remarks, a psychologically complex set of beliefs neutralize this disdain. Industry propaganda has undermined the public’s suspicion that greedy industrialists are pocketing excess amounts of Medicare and Medicaid funds through unjustified cost cutting.

The gargantuan amount of PR money spent by the AHCA and expertise in manipulating public opinion has instilled a subliminal belief among a wide swath of the public.  Their narrative is that the nursing home system is the best there is in the best of all possible worlds.  Stated differently, the industry would have you believe that Medicare and Medicaid reimbursements are too paltry for them provide better care and remain in business.  Their lobbyists and PR mavens brilliantly induce the belief that net earnings are so thin that humane care is financially out of reach.  This is a scurrilous lie.

By Dave Kingsley

The State of Long-Term Care in America: Video interview with Professor Charlene Harrington, UCSF

Check out our Tallgrass Economics podcast interview with Professor Charlene Harrington. Professor Harrington is a gerontologist, registered nurse, and holds a PhD in sociology. She has made extensive contributions to the scholarly literature pertaining to long-term care, and is well known across the United States for her vast knowledge and presentations before legislative and regulatory bodies. Dr. Harrington has important insights to share pertaining to the current state of nursing home and senior care in America.

Kent Comforts interview with Professor Harrington can be accessed at:

https://youtu.be/_4JXC-cE3SI

Watch for our Interviews: Coming Soon

By:

Dave Kingsley

To better disseminate information about the current nature of the senior living industry, the condition of Social Security & Medicare, and other issues pertaining to the economics and politics of aging, we will be conducting interviews with professionals, workers, politicians, and others with something important to say about the elderly and the political economy.

Kent Comfort’s interview with Professor Charlene Harrington will be posted in the next day or two. We feel that sharing professor Harrington’s vast experience, accomplishments, and knowledge in the field of long-term care is invaluable for informing all Americans who would like to see the United States move toward a more humane form of care in nursing homes. For instance, her comments on the Norwegian system of long-term care are of importance to understanding what could be instead of what is.

The Financial Performance of “Nursing Home” Corporations during the COVID Pandemic, Part I: The Ensign Group

By:

Dave Kingsley

Introduction

The long-term care industry is paid by federal and state governments to care for medically fragile patients. That is an awesome responsibility. Historically, the industry has failed to provide the level of quality expected in a wealthy, humane, democratic society.  But the irresponsibility and negligence of so-called “nursing home” corporations in the face of a deadly pandemic has resulted in a human tragedy of incomprehensible proportions. Let’s call what happened what it is: gross negligence.

The public needs to know about the providers who have failed the patients in their care.  Hence, with this post, I will commence a series of highlights of companies in the business.  These posts are designed to illustrate the variety of corporations structured as publicly listed corporations, family trusts, private equity firms, family offices, sole proprietorships, and real estate investment trusts (REITs). One purpose of this series is to demonstrate the wide variety of ownership structures.

Throughout the COVID pandemic, I have been interviewed by various journalists about facilities with egregious amounts of COVID infections and deaths.  One task that I assisted members of the press with was tracking down ownership, which is often opaque and somewhat difficult to determine.  Initially, I’m highlighting two of those facilities and their owners: (1) Riverbend in Kansas City, Kansas, owned by The Ensign Group (ENSG) and Avocado Acute Care in San Diego, California, owned by the Jacob Graff Family Trust. This first post pertains solely to The Ensign Group.

The Ensign Group & the Riverbend Post-Acute & Rehabilitation Center

Riverbend Post-Acute & Rehabilitation Center came to the attention of the Kansas City media early in the sweep of the COVID pandemic through long-term care facilities.  According to the Kansas City Star, thirty patients had died from COVID in the facility as early as April.  I was contacted by Fox4 television reporters working on a story about a notorious loss of life in the facility early in the pandemic.

I was interviewed on air about the industry in general, but at the time I was not that knowledgeable about Riverbend ownership.  However, it did not take long to pin down The Ensign Group (ENSG) as the ultimate owner, which is a “holding company” and one of a handful of publicly listed owners in the business.

With over 200 facilities, The ENSG is one of the major players in the long-term care industry.  Given that it wasn’t formed until 1999, it is a rather young company.  Nevertheless, its revenue recently surpassed $2 billion.  Furthermore, a review of its annual 10-K and quarterly 10-Q reports filed with the SEC suggests that it has had robust earnings per share, has accumulated several hundred million dollars in cash and equivalents, and has very little debt (debt to equity ratio is at .15 versus 1.45 for the industry) – a very good position to be in these days.

How is it doing in this pandemic?  According to its third quarter 2020 10-Q filing, revenue was $599,255,000 compared to same quarter of 2019, which was $512,109,000.  It is doing stunningly well.  The ENSG reported 3rd quarter long-term debt of $113,322,000 compared to $325,217,000 as of December 31, 2019.

…earnings per share for the quarter was $0.77, representing an increase of 97.4% over the prior year quarter and adjusted diluted earnings per share for the quarter was $0.78, an increase of 95.0% over the prior year quarter.


https://investor.ensigngroup.net/news-releases/news-release-details/ensign-group-reports-third-quarter-results

At last check today I noticed that ENSG stock today was listed at $74.37 per share – near an all-time high. Here is what the Forex website had to say about the stock:

We wrote about the Ensign Group (ENSG) back in September and stated that gains may be only starting. The premise for our bullishness was the fact that earnings were increasing significantly and the technicals were following suit. Well, this momentum continued in the third quarter as the company reported adjusted net income of $44 million on sales of just under $600 million. In fact, record earnings over the past few quarters have resulted in management increasing its 2020 guidance significantly. Updated guidance for this year comes in at $3.12 per share on sales of approximately $2.435 billion. The maintaining of the top-line numbers illustrates that margins continue to increase. Management expects to do $3.50 in earnings per share in 2021 which would be a 12% increase over this year if met.


https://www.forexabuzz.com/2020/12/ensign-group-market-continues-to-love-this-stock-nasdaqensg/

The annual 10-K reports and 10-Q filings are hundreds of pages of financial and other information. Suffice it to say that the ENSG has been an excellent investment. It is difficult to understand the lack of preparation by management for a pandemic they knew was coming. The 2020 proxy report indicates the CEO’s 2019 compensation was $6 million. Lobbyists for the industry will claim that providers are operating on a low margin, which is a lie and needs to be debunked by advocates. I suggest that advocates never buy the excuse that low quality and grossly neglectful care is caused by a provider’s financial hardship.

 I will conclude with this:  providers have received an immense injection of federal funds through the CARES act and other supplemental payments from the Center for Medicare & Medicaid Services.  No doubt the ENSG has taken advantage of the lending facility provided by the Federal Reserve and Treasury Department and has probably received some outright grants worth $millions.  It is not feasible at this time to sort out just how these programs have enhanced cash flow, but I will be working on this issue in the months ahead.