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.