By:

Dave Kingsley

Corporate Neglect and Abuse of Nursing Home Patients: A Low Risk-High Reward Practice

    Why do nursing home corporations provide suboptimal and neglectful care while earning robust profits?[i]  Because they can.  Although the “law” is merely the codification of our morals, values, and ethics, it is of little consequence when it is not respected and enforced.  Joe Sopcich’s article that accompanies this post indicates how laws and regulations designed to protect patients in nursing homes are pervasively ignored by providers while agencies of government fail to pursue remedies and hold culprits accountable.

    Joe writes about what desperate family members experience when they seek help from agencies charged with enforcing the rights of nursing home patients and families. This happens to poor and affluent families alike.[ii]  His late  mother was a patient in the skilled nursing facility of a continuing care residential community (CCRC) – one of those retirement places where people can live through and receive services from independent and assisted living to skilled-long-term nursing home care.  The experience described in the article is quintessential.  Neglect of this type is pervasive while agency enforcement of codified patient rights is weak and ineffective.

    The industry benefits financially from lack of oversight and accountability.  Understaffing and low pay results in lower costs and increased cash flow – that is, unjustifiable cost cutting enhances and protects shareholder value. Furthermore, the industry has successfully disseminated and sold a false narrative constructed on a “financial hardship” theme that has no relationship to reality.  Their message is that nursing homes are “running on a thin net,” or earning skimpy amounts for shareholders.  This is nonsense but has not been adequately confronted by advocates and the media.

The Larger Context of Industry Neglect and Government Nonfeasance

    Agencies can fail to hold tax-funded nursing home businesses accountable because the elderly have been devalued by media misinformation/disinformation, junk science, and even by the most prominent scholars and influencers in the field of bioethics. Furthermore, medical technology and science have increased life expectancy while social attitudes toward the elderly have evolved in a rather disturbing way. Older Americans are now seen as a problem for and even a threat to younger age cohorts.

    According to many highly influential economists and bioethicists, the United States simply can’t afford to provide all the healthcare needed by the growing elderly and disabled cohorts in a population of 330 million residents (approximately, based on 2020 Census). Medicare has been demonized as a budget busting monster robbing young people of needed healthcare.  This is not true. Medicare expenditures are not an economic burden and threat to the U.S. economy.

    More disturbing than the harmful misinformation generated by the economists and bioethicists is the lack of interest in and discourse concerning the morals and values of care of such low quality that it amounts to euthanasia by neglect.  This post is the first in a series of posts that will call attention to the nature of a cruel, inhumane, institutional care system for frail patients needing skilled nursing care in the context of current medical and societal values and ethics.  It is the entire money-driven system and the absence of discourse regarding morality that is harming patients and shortening their lives unnecessarily. It is to that issue we want to call attention and about which we want to stimulate discourse.

    Our point of departure in this discussion is the necessity of dehumanizing groups of people before they can be scapegoated and harmed by government policy with the approval of the broader society.

[i] Apart from The Ensign Group, which owns and/or operates approximately 300 facilities, nursing home corporations are closely held.  Therefore, it is not possible to obtain the exact net operating revenue from facility cash flow.  Based on my analysis of cost reports, I would estimate that “free cash flow” or “owners’ earnings” ranges from 10 to 15 percent.  For instance, In 2023, the Ensign Group had net operating revenue of $376.7 million on $3.7 billion in revenue or 10% in free cash flow.  The distribution of earning to investors are increased through avoidance of capital gains taxes.  Furthermore, the operations side of the industry is separate from the lucrative commercial real estate side.  The Ensign Group is sheltering the corporation from capital gains taxes due to property appreciation by forming a captive REIT or by transferring property to an UPREIT.  A large number of executives and investors have individual or family trust for sheltering their compensation and assets.  Black Rock, Vanguard, State Street and other major asset managers are the dominant investors in the Ensign Group, REITs, and private equity groups. See: 0001125376-24-000018 (d18rn0p25nwr6d.cloudfront.net, page 96.

[ii] Joe is the former president of one of the best community colleges in the United States. 

My KDADS Journal

By:

Joe Sopchich

    This incident occurred in the state of Kansas. I made the decision to reach out to KDADS (Kansas Department for Aging and Disability Services) to report the details of my mom’s experience regarding her care, or rather the lack of care. It was recommended to the family that we make contact with KDADS to report the details of our experience and observations regarding our mother’s care, rather the lack of care. Upon reading this report, you will not have learned much, if anything, about how this agency is supposed to advocate for patients in the confines of eldercare businesses within the state. The descriptions of mission and purpose on their website makes all the proclamations one would expect. Despite the advice of many, I filed my complaint.

The journal of events follows:

January 2023 – I am the patient’s son. I thoroughly studied the KDADS website to learn their required procedures for communicating a grievance. It informed me that upon submitting a request for assistance, I would promptly receive an email that provided a case number to initiate the assistance process.

March 20, 2023 – I forwarded my complaint via registered mail to the KDADS office in Topeka. I followed all the protocols as required on the website.

April 11, 2023 – Having received no acknowledgement from KDADS, I called and left a message that I had not heard from them.

April 12, 2023 – I received a call at 8:50 AM informing me they had not received my complaint. I called the local Post Office, and they said it was delivered at 11:57 AM on March 21. I called KDADS at 10:36 MM to give them the exact date and time of delivery. The person looked for it, found it, and apologized for “misspeaking” earlier. I was told it was assigned to a “surveyor” and once the process was over I would be contacted. I figured my complaint was laying on a desk in the KDADS office for 22 days. A number was assigned to the case, #9003.

May 9, 2023 – Upon receiving no further contact from KDADS, two calls were placed during the day, neither of which were answered.

May 16, 2023 – Again, a call was placed and not answered. I left a message on the recorder. The call was returned at 1:45 PM to inform me that the investigation ongoing. I was provided with the name, email address, and phone number of the KDADS regional manager.

June 22, 2023 – More than one month has passed with no contact or report from KDADS on the status or outcome of the investigation. Another call was placed at 11:00 AM with a message left to ask for an update. The call was returned later in the day, and this time I was informed that a “surveyor” had not yet been assigned, despite being told two months earlier that an investigator was on the case. I was referred again to the regional director. It was three months since I filed my complaint.

June 23, 2023 – Frustrated, I wrote a letter to the Governor’s office including my original complaint and concerns. I never received an acknowledgement.

June 28, 2023 – I called the regional director’s office at 1:40 PM and left a message. The call was never returned.

July 11, 2023 – I received a call from KDADS. I missed the call. I thought maybe the Governor forwarded my complaint to the KDADS office, hence the call.

July 12, 2023 – I returned the call from the day before and again it was not answered.

July 18, 2023 – The call I referred to in the two previous entries was finally returned at 4:45 PM. The person asked, on the recording, “if there was anything they could do.” This occurred almost five months after I submitted my complaint. 

July 19, 2023 – I returned the call again and had to leave a message due to no one answering. The call was never returned.

August 17, 2023 – Six months after filing the formal complaint, another call was placed to the KDADS office at 2:30 PM. This time I was informed that too much time had passed since my mother had expired when I originally filed the complaint. This was the first time I was told there was a time statute for such complaints, despite the fact that a case number was assigned and an investigation had been supposedly launched. I asked her to have the person I spoke with earlier to call me. I never received a call.

October 17, 2023 – I received a call in the late afternoon from the surveyor who had apparently been assigned to the case even though two months earlier I was informed the case was rejected do to the statute. Upon confirming the case number was correct she told me she was about to walk into the SNF facility to examine and review the information on file about my mom. 

December 17, 2023 – Nine months after filing the complaint I received a letter from KDADS informing me that the investigation of the complaint had been completed and the facility was found to be in compliance with regard to all allegations.  The case was closed. The letter also cited various state codifications related to the required confidentially of the findings. They are not available to the public.

All of the dates and details contained in this catalog are accurate according to my recollections. As the saying goes, you can’t make this stuff up. But most important, KDADS once again failed a citizen of Kansas, his loved ones, and, most importantly, my mother. The fact is that in the state of Kansas when it comes to finding accountable care facilities, you are on your own.

    In 2016, the General Accounting Office (GAO) reported the results of its investigation into the reliability and validity of financial information submitted by nursing home corporations.  The GAO was tasked with determining how skilled nursing facilities “spend their Medicare and other revenues.”[1]  In its report, the GAO recommended that CMS undertake two actions: “ (1) improve public stakeholders’ ability to locate and use SNF expenditure data and (2) ensure the accuracy and completeness of the data.”[2] According to the report, “HHS concurred with the first but not the second recommendation, citing resource considerations.”[3]  The agency’s partial concurrence is farcical.  What is the benefit of making financial data available to the public if the data is inaccurate and unreliable?

    HHS disagreement with a reasonable recommendation by the GAO that CMS demand honest cost reports from contractors, should evoke the public into a profound and angry reaction. For an agency with a FY 2023 request for discretionary budget authority of $127 billion and $1.7 trillion in mandatory budget authority[4] a project for making financial data easily accessible to the public is de minimus in the overall scheme of its expenditures.  The cost of a reasonably accessible database containing well-audited cost reports from each facility would be a trivial expenditure – so trivial that it would have no meaningful impact on government deficits and debt.

    The problem is that the public has not been stunned by the rejection of the GAO investigators’ recommendations and their stated belief that  “CMS should provide reliable SNF expenditure data”[5] because the public has not been made aware of the report or what it contains.  That in itself is puzzling.  A government agency for the responsibility of nearly $2 trillion worth of federal expenditures is shirking its responsibility for informing the taxpayers – the funders – about how their money is spent – let alone whether it is effectively and efficiently spent.  This should be big news but advocates and activists have failed to take advantage of it.

    Consequently, the nursing home system remains a closed system that is troubling to most Americans, but they can’t articulate the financial machinations responsible for the lack of investment by corporations in an adequately paid workforce and quality of care.  Absence of openness in a complex social system funded by government inevitably leads to the bigger problem of corruption.

[1] “Skilled Nursing Facilities: CMS Should Improve Accessibility and Reliability of Expenditure Data,” (2016), Washington, D.C. General Accounting Office, Highlights of GAO-16-700.

[2] Ibid

[3] Ibid

[4] https://www.hhs.gov/about/budget/fy2023/index.html

[5] GAO, Op. Cit.

The RFW Debacle

By:

Kent Comfort

How Ronald Reagan, Milton Friedman and Jack Welch combined to misalign American Capitalism and the Economy

“In the beginning…”, there was Ronald Reagan, Milton Friedman, and Jack Welch. Or at least there are too many people who would like to think that they started a positive economic revolution. We have been living with the damage ever since.

Reagan was a convenient fool and puppet, Friedman was a misinterpreted false prophet, and Welch was just a crook. There you have it, three sacred cows butchered in one sentence!

Each of these men are now deceased, of course, but the legacy of the damage they caused lives on and on.

Reagan was a patsy for the deregulation crowd and that lead to immeasurable loss of many services for the commons. Airlines and railroads are two important examples of industries that no longer serve the public good beyond the extent to which they are forced to. They have been free to strip away humanitarian services and create mini monopolies. A mini monopoly is one which controls specific segments or geographical regions of the markets they serve with the advantage of not having to worry about competitors entering their space. Another prime example of this is the cable TV industry. Your zip code dictates who you have available for your household.

Friedman preached, do anything you want, buyer beware! He included a safety valve in his self-proclaimed predilections that everyone fails to mention if they even knew about it. He realized that many of his ideas contained considerable risk to American society. To protect those members of society who were not equipped to enter the business scrum, he advocated for a version of what we today call UBI, or Universal Basic Income. But his intentions were not necessarily noble. Rather, if the masses could count on some level of economic safety net, the business bandits could go about the task of creating metaphoric strip pits anywhere and everywhere they desired for their personal gain.

Welch rose to the top of a corporate mountain, namely General Electric, and drove it upside down in the ditch while trying to reinvent ancient accounting principles, and pile up a strange combination of acquisitions to create the impression of rapid growth. He ran for the hills just before the consequences caught up with him. For greater details about this travesty, check out a recent book titled “The Man Who Broke American Capitalism” by David Gelles. This might be the best biography about Welch ever written.

The ”everyone else is doing it” momentum took over for the following decades leading up to present time. Welch declared that American business only had one obligation. That was to serve the shareholders. It could be said that because this view became the norm, the words shareholder and stakeholder became no longer interchangeable. The American capitalism model damage is continuing unabated to this day. It does not matter which of the two political party monopolies are in the majority, neither has been willing to give up the largess they collect and instead focus on working to end these rotten practices.

That is an abbreviated overview of how we got to the low point we are at today. Let’s look at the four primary elements of the current capitalist system and how they harm more than help most of us.

They are the formula, the impact, the culture, and the future.

The Formula –

The American business formula can be boiled down to a simple equation: Deliver the least possible value for the highest possible price. If you pause for a moment to think about that statement, it is probably very easy to identify examples you encounter every day.

The skill required by a business entity to benefit from this formula demands that they do not take either end of the equation too far. On the low value end, if that is taken too far, loss of sales results. The same outcome applies to trying to charge too much for the value delivered. The practice becomes one of trying to balance both ends without giving up sales and consequent profits.

Let’s not forget that an important element of this formula has been the suppression of middle-class wages. They have actually gone down when adjusted for inflation, while the executive suite has been raiding the corporate coffers on a level not even imaginable prior to the RFW (Reagan-Friedman-Welch) era.

When one’s master is the shareholder, this is the only perceivable option. If a business is not beholden to masters who would dump their shares in a blink if they do not think it is making enough money, it can instead focus on delivering as much value as possible for the lowest price possible to earn a sufficient profit to sustain the business. That is truly possible and it is more typical of the way business was done before the advent of the RFW era.

A successful business could build a great reputation and be rewarded with repeat business from a satisfied customer. The profits from such high operating integrity could be reinvested both inside and outside the business to grow owner wealth over time. The quarterly report was never a necessity or useful tool.

The Impact –

The long-term impact of the above-described formula has been analogous to the well-known aphorism of the frog sitting calmly in the bottom of a pot of slow boiling water. Many would agree to the fact that the water is boiling today.

What is at the root of the impact? There has been a continuously growing gap between the value of a service and commodity and the escalating prices for them. Consider the “Made in” label on nearly any item in your house. “USA” is nearly non-existent. In fact, it is a selling point to proclaim a product as made domestically today because it is so uncommon.

Of course, the initial benefit to the product originator has been marginally reduced manufacturing costs. America has endeavored to impose regulations on child labor and other forms of involuntary and exploitative servitude that corporations have a history of not hesitating to deploy if there are no barriers. The amoral culture and policies of major corporations give leeway to these practices in the name of growing their profits for the Welchian philosophy of shareholder first no matter what. And China apparently does not aggressively enforce even the most lenient policies they proclaim regarding inhuman workplace conditions. American corporations do not interfere with Chinese labor practices and economic practices. The American people who consume the output of Chinese factories enjoy the perceived low out of pocket cost and do not question or challenge how or why they benefit from that. That is the nature of slow-boiling pots of water. The short-term benefits cloud the horizon of long-term damage.

Is this practice limited to only the multi-national corporate giants? Unfortunately, the answer is no. Here is a story that has been duplicated nationwide for decades. Yep, it is another slow-boiling pot story. Only this time, it is about a thriving midwestern family-owned multi-generational business that produced a globally popular product that you, the reader very likely have in your toolbox as you read this. If you don’t, then you may not even have a toolbox. This is the Vice Grip story. You have a pair, right?

The invention of this remarkable tool was accomplished by William Peterson in the late 1930’s. The product went through a series of refinements through the World War II years and began achieving popularity initially with farmers following the war. The location of this business was in the small agricultural community of Dewitt, Nebraska. The business grew and thrived under the able management of Dewitt’s son and two grandsons. They were a very generous family who employed and promoted people within the company until they had over 300 souls toiling away to supply a hungry market for a great tool. Community families prospered, sent their children to college, and everything about this saga epitomized the American dream. Until…..

Later generations of the Peterson family chose not to continue working in the business. Going away to college and seeing new horizons has a way of doing that to young people from small towns. So, the company was put on the market for sale, and according to the story it was a quick and easy sale. The new owners decided to close the Dewitt factory and move manufacturing to…wait for it….China! Those 330 employees were suddenly out of work. Multiply that number by and average household of four, and the negative impact to a small community is clear. Dewitt, Nebraska will never been the same.

A superbly handcrafted and high standard tool became a lower grade high volume throwaway tool, and copious profits were piled up consequently. If you were fortunate enough to have in your possession a Dewitt manufactured version of the Vice Grip, you probably still have it and it is still working as designed. If you have the Chinese made version, find and original version to compare it to. It will be clearly different.

This decline in value offset by increase in cost is not limited to your personal toolbox or any other product in your household. Consider your experience today with what is fictionally called customer service.

When you have the misfortune of needing to call your source for service, most often the individual on the other end of the call is offshore, entirely ignorant about the service or product you are having a problem with and trying to search for answers on their computer literally as they speak with you. You are nearly always placed on hold for two or three minutes several times during the call, so the support person to research what you are calling about because they do not know anything.

Most major American corporations who have products or services that require customer support use these offshore call centers. They are drastically cheaper than maintaining a state-side call center. But the damage their reputations incur often necessitate contracting with yet another specialty business. That would be the “reputation management” service.

It is uniquely American that reputation management is a growing industry. Companies are willing to spend millions having their soiled reputations professionally laundered instead of spending those same millions providing a higher quality service or product in the first place. Does that make any sense?

The Culture –

What is the downstream effect of the formula and impact described above? How does it degrade the culture of the nation and people? This is where the most severe damage is realized. Unless one is in a coma, awareness of how much cultural and economic deterioration has been accumulating during the last five decades is being realized and talked about at every tier of our social hierarchy. Virtually no one is content with the national homeostasis that has devolved during this time. Correspondingly, no one has any idea what to do about it. The social and economic deterioration was so gradual and so multi-layered that everyone has just acclimating to it while it has marched through our lives.

Disillusionment and a sense of being violated and cheated has led to a growing distrust in the institutions and commercial sources we believed we could rely on. That trust has eroded to the point that everyone has become more wary of everyone else.

When we feel powerless, fear becomes the primary emotion that guides all decisions. Strength and empowerment never emanate from fear. I would be willing to wager that most of the personal firearms sales today are motivated by little more than fear. Personal firearms are not rational protection from the kinds of fear most of us carry around. They are a symbol or metaphor for the sense of helplessness we feel in our daily environment.

The Future –

What will it bring us? That was a trick question. The better question is what kind of future we are going to bring ourselves. Whether we are individually and collectively proactive, or passive, the future is on the way. And even in passive mode, what comes will be of our making. Inaction is a form of action.

Nothing I have written about so far is unchangeable or irreparable. We made it what it is, and we can make it something else. There has to be a public will, supported by a public awareness that we are the masters of our lives and collective culture. We have been lazy. We have become addicted to the prevailing status quo, even if it is hurting us.

The regression and distrust that so many Americans live within today will have to change because nature is not static. Evolution is still very real. We can hope that history is not our guide or window of what is to come. The reason for that statement is that throughout history, sovereignties that degraded in the manner discerning humans are witnessing ultimately collapsed. Not talking about just a dip that they recovered from. They melted down into a form of dark ages that eventually led to a period of rebirth. The reset button was finally pushed after sufficient decay purged the prevailing policies that led to that downfall. I challenge anyone to find an exception to that. The best anyone will be able to do is recognize varying scales of collapse, not exceptions to collapse itself.

Are we ready to agree yet that the kind of social leadership that brought us to this threshold is not what is needed to lift us out of it?

Are we getting closer to agreeing that political parties have no solutions to the predicaments we live with today?

Can we imagine an electoral purge on a national scale that removes every electee from their perch and replaces them with new blood?

Can we turn a deaf ear to all the tired arguments about why experience matters and we need our incumbents to retain the power they have appropriated?

Can we become more personally engaged at the community level to initiate the paradigm shift that must and will happen even if we do nothing?            

I know I need to become more intimate with each of those questions in my own life, and I hope you will join me. Your comments and thoughts are encouraged and appreciated.

By:

Dave Kingsley

Stocks Have Been Dropping Rapidly Since the End of November – But Not in the Nursing Home Business. Why?

The nursing home industry has a well-funded, highly effective, lobbying-propaganda arm that has been effective in convincing the public that providers are not paid enough to provide decent, medically ethical care. That is a lie. The evidence is overwhelming that the industry’s hardship pleas are merely a propaganda effort at squeezing ever more money out of the taxpayers without providing a correlative improvement in care.

The stock market is one of the many sources of evidence supporting my claim that the nursing home industry is doing just fine during these economic uncertain times. Although the the Dow, S&P, and NASDAQ have dropped precipitously since the end of November, stock prices of the major players in the nursing home industry have held their own or have made major upward swings. For instance, the Ensign Group stock increased by nearly 10% during the same period that the DOW fell 7%, the S&P dropped 10%, and the NASDAQ declined by 17%.

The stability (see discussion of volatility below) and steady upward trend of stock overall in the public-funded long-term care/skilled nursing business suggests that the industry is not subject to the vicissitudes of the overall “market economy.” That is indeed the case because it is an industry that is not part of a market economy. The corporations in the nursing home industry listed on a public exchange are not capitalist enterprises. They are a growing part of the U.S. economy that is a partnership between government and corporations in which corporations have steadily gained the upper hand over government.

The characteristics of the government-corporation partnership – otherwise known as corporatism or statism – is guaranteed revenue, a restricted market, i.e. no competitive market in which prices are negotiated. Nursing home corporations are reimbursed for their costs plus adjustments for inflation. Furthermore, the underlying source of revenue is derived from commercial real estate, i.e., the facilities in which patients are maintained with minimal care.

The power of the industry over its government partner has allowed for financial machinations and accounting maneuvers that hide a significant portion of gains in revenue, operating margins, and, most importantly, cash flow from facilities to parent corporations. States are responsible for auditing cost reports submitted by facilities for the purpose of determining daily Medicare and Medicaid reimbursement rates. The auditing and financial oversight of cost reports are weak – allowing extremely flawed cost reports to pass audit review.

The lucrative nature of commercial real estate with a generous government guarantee of producing revenue plus a stable stream of government funds into medical services have not gone unnoticed by institutional investors such as BlackRock and Vanguard. The overwhelming voting shares in nursing home industry corporations are owned by these asset managers. Hence, pension funds, college endowments, and other large pools of capital have been invested in multi-billion dollar corporations that are setting the trends in long-term/skilled nursing care in the U.S.

Volatility is a Big Deal in the Markets: It Tells Us a Lot About the Past & Future of a Company.

Stocks have been mostly trending down in the past few months due to supply chain crisis, oil price fluctuations, conflict in the Ukraine, inflation hysteria, and uncertainties related to COVID. The market has also been highly volatile, which means stock prices are swinging widely in price. I won’t go into great detail about the technical aspects of volatility. Suffice it to say that a volatility of 1 means that the stock doesn’t move up and down much but a volatility of 0 means it never fluctuates – a theoretical situation that doesn’t happen.

Stock may trend up over time but it will tick down and up on the way up. If it swings widely that suggests that it is far more speculative and traders are buying and selling it at a rather rapid pace. For instance, stocks listed on the NASDAQ with recent IPOs tend to be more volatile because they tend to be risky tech stocks back by venture capitalists willing to take a chance on the next big thing.

Stock of a corporation with a guaranteed market in which competition is restricted and earnings are robust will increase over time with only minor day-to-day fluctuations. That is what is noticeable about the stock in corporations comprising the nursing home industry. Not all of its members have increased their stock price over the past few months, but even the few that have lost ground have not seen the kind of downward swings seen across the board on the Dow, S&P, and NASDAQ.

By:

Dave Kingsley

What’s A Nursing Home License Worth?

    What is a nursing home license worth to a corporation or group of investors pooling their money to buy facilities?  It’s of enormous value. Without a license granted by a state, nursing home real estate – the primary purpose of an investment in the business – is worthless.  The value of these intangible assets are noted on nursing home corporation balance sheets as “Right-of-Use-Assets.”  For instance, Brookdale Senior Living noted $788 million of “Operating lease right-of-use assets” in 2020 and $1.2 billion in 2019.  The Ensign Group noted $1.0 billion in both 2020 and 2019 on its balance sheet as “Right-of-Use Assets.”

    A limited number of licenses are available, which enhances their value.  We can expect a modest decrease in the number of long-term care facilities and number of beds across the United States.  More emphasis on keeping individuals at home and out of institutions has gained some traction.  Any downward trend in institutionalization of patients on a long-term basis will increase the value of licenses merely because of supply and demand.

State Agencies Responsible for Licensing Are Handing Out Valuable State Assets Without Adequate Expectations of Transparency, Responsibility, & Quality of Services from Recipients

    Although industry lobbyists constantly and consistently claim that providers are struggling financially due to inadequate Medicaid reimbursement, they have never presented objective (audited) financial data to support their hardship pleas.  Conversely, an abundance of evidence is available from required Security & Exchange Commission reports that executives, board members, and major shareholders are being abundantly rewarded.

    It is time for the public to insist that high paid industry lobbyists such as former Governor Mark Parkinson of Kansas either cease their incessant misinformation about the financial hardship of providers or provide audited financial data that contradicts publicly available financial information.  Contrary to the effective, well-funded, industry narrative and political strategy, overwhelming evidence suggests that investors are becoming fabulously rich from land and buildings, the value of which is based mostly on taxpayer funded “poor people’s medicine,” i.e., Medicaid.  A variety of complicated sections of the U.S. tax codes further add to cash flow from government funds into the pockets of investors. Not the least of these tax advantages is depreciation appearing on corporate financial statements (there are many others, but that’s a subject for a future blog post).

    It is my contention that states are not leveraging the value of their licenses on behalf of federal and state taxpayers.  Indeed, over the past few decades, major industries such as real estate, finance, insurance, skilled nursing/long-term care have captured legislatures at the federal and state level through generous political contributions and an army of lobbyists. Therefore, state regulators tend to take a very laisse faire approach to oversight. Due diligence in the issuance of licenses is lax and revocation of licenses for negligent care is rare.

Will Long-term Care Investor Ephram Lahasky Be Granted Licenses to Operate Diversicare Facilities in Kansas? It Is Time for Advocates to Put Legislators, the Governor, and State Agencies on Notice:  We are Watching!

    Diversicare Inc. is one of the rather small number of publicly listed nursing home chains.  For the most part, it is a “failed company” due to poor management.  This corporation was on the brink of bankruptcy until generous federal and state COVID subsidies breathed new life into it.  Entering the COVID pandemic in 2020, the company’s stock was trading at about $1.60.  By Spring of 2021, the stock was trading around $3.50 per share.  A couple of weeks ago, I noticed that Diversicare shares had shot up about 250% in one day.

    An investor by the name of Ephram Lahasky had offered to buy the company for $10.00 per share.  According to media reports, Lahasky has a record of running substandard nursing homes. He is not welcome to buy long-term care facilities in states where his past surfaces.  A Lexis/Nexis search uncovered a host of suspect activities and federal investigations pertaining to Lahasky owned facilities (see for instance, Sean D. Hamill, “Lawsuit: Nursing Home Reported False Data: Owners Also Own Brighton Rehabilitation and Wellness Center In Beaver County,” Pittsburgh Post-Gazette, August 27, 2020 Thursday).

     We must insure that Lahasky is thoroughly vetted by the Kansas Department of Aging & Disability Services before licenses are granted to him for the six Diversicare facilities now licensed to operate in Kansas.  According to the following section of Kansas statutes, it would be illegal for the current licenses to be merely transferred to a new owner of the property:

39-928. Issuance of license, when; inspections and investigations; reports; time license effective; nontransferable; display; contents of license.

Each license shall be issued only for the premises and persons named in the application and shall not be transferable or assignable. It shall be posted in a conspicuous place in the adult care home. If the annual report is not so filed and annual fee is not paid, such license is automatically canceled. Any license granted under the provisions of this act shall state the type of facility for which license is granted, number of residents for which granted, the person or persons to whom granted, the date and such additional information and special limitations as are deemed advisable by the licensing agency.

History: L. 1961, ch. 231, § 6; L. 1972, ch. 171, § 5; L. 1980, ch. 182, § 11; L. 1989, ch. 126, § 1;

Public officials have a fiduciary responsibility to citizens when they award rights to their states’ valuable resources.  A license to operate a long-term care facility infuses more value into real estate than taxpayers realize. Investors benefitting from a state-granted license owe taxpayers quality services equal to the financial rewards they will reap.