The Media & The Republicans Keep Screaming “Tax Increase” As Biden Attempts to Upgrade the U.S.: That’s Propaganda & Misinformation

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Reducing Tax Expenditures is a Not Tax Hike

When the Clinton Administration made major reductions in welfare benefits, Republicans and the media didn’t call that particular policy change a “tax cut.” It was a reduction in benefits for the ostensible purpose of imposing “discipline” on poor people – which was a scurrilous, racist, stereotype. Wealthy Americans and corporations receive far more in government benefits than all programs for the poor combined. Those benefits are dished out through the tax codes.

When individuals and corporations are provided benefits such as mortgage interest deductions on expensive real estate such as a second home in Vail, Colorado, or accelerated depreciation allowances, those are government benefits – they are technically known as a “tax expenditures.” The Budget Control and Reconciliation Act of 1974 requires that tax expenditures be included in the federal budget on the expense side of the balance sheet. The amount of those expenditures in 2019 totaled $1.5 trillion. When we have a handle on the COVID relief for corporations and individuals in 2020, that will most certainly rise to at $2 trillion or higher. Much of that was unnecessarily dished out to corporations that didn’t deserve it, while many small businesses languished without customers, revenue, and a line of credit.

The Debt & Deficit Fetish Is Harmful to U.S. Progress

The “higher taxes” narrative is repeated incessantly by journalists who fail to understand the U.S. tax and budgetary system. Federal programs are not legislated into existence accompanied by a specific tax to pay for them. Rather, debt/bonds are issued, i.e., the government creates money to pay for programs. The amount of debt issued will exceed revenue from income taxes; hence, debt will increase due to a deficit in revenue versus expenditures.

Debt is not a problem unless the amount of money created begins to cause inflation. If that happens, the amount of money in the economic system can be reduced through adjustments to the tax codes. At this time, federal debt is is equal to approximately 100% of GDP or $20 trillion. The official inflation rate has been running at or below 2% for the past ten years (https://www.usinflationcalculator.com/inflation/current-inflation-rates/).

Republican leaders know that a large amount of debt is incurred through tax expenditures. They also know that those expenditures are tilted toward the upper income brackets and therefore increasing maldistribution of wealth. They will claim that these benefits for corporations and wealthy individuals incentivize capital expenditures and investment in job creating businesses. That could be partially the case, but for the most part these give aways are unnecessary and don’t do much for economic growth and job creation.

Mitch McConnell and other Republicans scream about deficits and debt when they want to obstruct a Democratic Administration from succeeding at passing programs beneficial to the country and beneficial to the Democratic Party at the same time. Unfortunately, too many Democrats have acquiesced in and even supported the reactionary debt/deficit fetish. Until liberals/progressives learn to frame the argument in accordance with reality and sound economic theory, misinformation and propaganda will undermine the U.S. as a nation and a society.

Why Has Failed Nursing Home Mogul Joseph Schwartz Not Been Charged with a Crime for Stealing Millions from His Employees?

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Who Are the Real Criminals In the United States?

U.S. prisons are filled with people who shouldn’t be there. Their crimes are relatively minor.  However, the really big criminals who steal millions aren’t locked up.  They are the “white collar criminals.”  Let’s take Joseph Schwartz as an example of a white-collar criminal par excellence. Schwartz is well known in the nursing home system.  He was able to obtain licenses for over 100 skilled nursing facilities in 11 states.  He failed to pay vendors and employees as he pocketed Medicare and Medicaid funds and eventually drove his company – Skyline Healthcare – into insolvency.  In the process of creating a failed company with borrowed money, he stole millions from his nursing home employees. This theft happened several years ago and has been widely reported in the media[i] and yet no arrest has been made and no charges have been filed.

As the New York Times pointed out in an editorial a couple of days ago,

 “In New York, as in many other states, stealing more than $1000 is a felony. A person who grabs a new iPhone, can end up in prison, at public expense, for four years.

    In New Jersey, which has the most stringent standard in the United States, a person can be convicted of a felony for stealing more than $200 – a number that hasn’t changed since 1978.”

Serious Crime Doesn’t Seem to Matter if the Criminal is a Nursing Home Operator and Employees & Patients are the Victims

Schwartz deducted money from employee paychecks for health insurance.  Instead of buying the insurance, he pocketed the money.  As many as 1000 employees were victims of this criminal behavior in several states.  Kansas was one of those states.  I called the Kansas Attorney General’s office to find out if any investigation was underway.  On the second call, I was lucky enough to connect with someone who was kind enough to direct me to an investigator who said he was indeed conducting an investigation, but couldn’t tell me anything about it. 

It is hard for me to understand why an investigation into a crime that occurred years ago is still pending without an indictment or charges dismissed.  Either Schwartz took the money illegally or he didn’t.  It should not be hard to determine that.  Employees allowed him to deduct the money with the understanding he would buy health insurance.  He didn’t. 

If nursing home employees are caught stealing from an owner, I doubt if it would take years to charge them with a crime.  My guess is that they would be handcuffed and walked out of the building to jail.  According to media accounts the only justice available to employee victims of Schwartz is a lawsuit they, themselves, filed.

The Long-term Care System is Beset with White Collar Criminals Who Act with Impunity Because there are No Consequences

I know of no attorney general in any of the states in which Schwartz operated who has filed criminal charges against him. Given the seriousness of the crime and the amount involved, AGs in states like Kansas, Arkansas, Pennsylvania, and Massachusetts are dilatory in carrying out their responsibilities.

Furthermore, I’m appalled at the lack of advocates’ interest in redress for victimized employees of the notorious Skyline venture and its sleazy, criminal owner.  It seems to me that the AARP (not much of an advocacy organization) and other organizations such as Kansas Advocates for Better Care and individuals holding themselves out as advocates for patients and employees would be demanding answers from state AGs regarding the lack of action in holding Schwartz accountable. 

My suspicion is that every state which granted Skyline a license screwed up.  Had they done their due diligence, they would have found a trail of evidence screaming “don’t turn nursing homes over to this shady character.”  My research also suggests that he moved in on Golden Living nursing homes looted by a private equity firm and, like a vulture, treated them as his carrion – to be scavenged and left to rot. States were anxious to unload a bunch of facilities in receivership (left in the wake of private equity looting) and a predator was allowed to move in and create a tragedy on top of a tragedy.

What Does the Schwartz/Skyline Scandal Tell Us About How We View Patients & Employees of Nursing Homes?

During my career in industrial relations, I worked for corporations that considered employee pay sacrosanct.  To us, pay was near and dear – no one fooled with it.  Our hourly employees were valuable stakeholders in the enterprise. They came to work every day in good faith and deserved to be paid for what they did.  Without them, we could not grow the company and earn a reasonable return for shareholders.  We also had respect for the quality of our products and services. We did not cheat our customers.  Indeed, no self-respecting corporation did that. We were driven by a philosophy known as “managerial capitalism.”

The attitude of corporate management began to change in the 1980s.  A ridiculous and theoretically unsound management theory was foisted on the public by conservative economists.  As opposed to managerial capitalism, celebrity economist Milton Friedman and his cohorts convinced the business world and politicians that capitalism works best when corporate management (and government for that matter) attends to one objective:  protecting and enhancing shareholder value.  Friedman was even given a platform on PBS during the 1980s to sell his idea to the public – and they bought it.

This “agency theory” of management has been destructive for both U.S. capitalism and our culture and society.  It has elevated wealth and predatory behavior to an acceptable business strategy.  White collar criminals are only charged with a crime when they victimize other well-heeled white-collar individuals.

The main problem with the overriding value of money and shareholders is that other human beings are devalued.  The least powerful and poorest human beings are devalued the most.  They become prey for institutional needs.  They fill prisons and inhumane nursing homes either because they are seen as of no value or because they can add value to revenue producing real estate.

The goal of a Friedman capitalistic system is to suppress wages and exploit workers.  If they get cheated despite providing sincere hard work, too bad, it’s conducive to shareholder value and OK. One of the many problems with this situation is that the proponents of this form of hyper-capitalism also set about to destroy employee bargaining rights and have made great progress in that endeavor.

Patients and employees in nursing homes depend on government agencies and advocacy organizations for protection. If state AGs won’t hold predators accountable and advocates won’t demand that they do that, institutionalized elders and disabled individuals are defenseless. Furthermore, if operators have no moral hazard they will continue to abuse and exploit both workers and patients.

[i] See, e.g., David Porter, Associated Press  (February 5, 2020), “Failed nursing homes’ operators stole from employees,”; Star-Ledger (Newark, NJ) (February 7, 2020), “Nursing home operators stole $2M from employees’ paychecks, lawsuit claims”); U.S. Fed News (June 27, 2019), “Skyline Healthcare owner, 5 Massachusetts Nursing homes cited for wage theft”; Ann Neuman, The Guardian (July 30, 2020) “Seniors and staff caught in the middle of nursing homes’ quest for profit; The cycle of buying and selling care homes has led to shortcuts, closures, even fraud – and imperiled vulnerable residents’ health”; The Leavenworth Times (February 6, 2020), “Suit: Failed nursing homes’ operators stole from employees.”

The Impact of Voter Suppression on Elderly & Disabled Americans

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The Reason Corporate America is Silent About Restrictions on Voting Rights

Blue Chip corporations such as Delta Airlines, Coca Cola, and UPS, have recently been strong proponents of civil rights for practically every class of citizen suffering from discrimination. They have sent their lobbyists to state legislatures to support anti-discrimination legislation and to pressure legislators for enhanced gay, ethnic, and gender rights. But when it comes to voting rights, corporate America is, for the most part, silent. Why?

It is understandable that more democracy is not in the best interests of corporations as they have evolved over the past few decades. Beginning with the Reagan Administration, the Milton Friedman philosophy of radical shareholder rights became a political movement. Throughout the past 40 years, deregulation has become de rigueur – even among some Democrats. Tax codes have been incessantly modified for increased transfer of wealth from the mass of Americans to ultra high net worth investors.

Corporations may jump aboard with some social responsibility movements, but more democracy is a bridge too far. Indeed, less democracy will be more protective of low corporate tax rates and tax subsidies. The Trump/Republican 2017 Tax Cuts and Jobs Act was an extreme move to subsidize corporations and wealthy individuals. They certainly won’t want to give that up and will fight to keep it.

Voters overwhelmingly favor reforms that would hit corporations in their bottom lines (or in their cash flows). Corporate executives, corporate boards, and major investors do not want to see voters have the power to set things right – to make the system more just and fair. This is not good news for all proponents of democracy, but it is especially threatening to institutionalized elderly and disabled Americans.

Deregulation & Government Capture Are Bad for Elderly & Disabled Americans

Republican voter restriction laws typically undermine the ease of absentee voting, which is of particular importance to people who have difficulty getting out to the polls. Missouri has the most restrictive voting laws in the nation. An absentee ballot must be notarized. It is likely that the draconian voting restrictions (e.g., no early voting) of Missouri will be copied by other states controlled by reactionary Republicans.

Voting restrictions designed to defeat candidates in favor of liberal democracy are particularly dangerous for elderly and disabled Americans, many of whom are institutionalized or could at some point be in need of long-term skilled nursing care. Reactionary conservatives will reward industry with less oversight and increased up-transfer of wealth through privatization and tax expenditures. Money that could be invested in care will be pocketed by investors at the expense of patients – even more so than now. Horrid conditions pervasive in publicly funded skilled nursing facilities will become worse.

The “Reagan Revolution” has not run its course. It has become increasingly fanatical and the politics of the Republican Party have become toxic and sick. Some of the nasty subtexts noticeable during the early phase of the revolution have become glaring and potent in the movement today. For instance, white supremacist, social Darwinist “survival of the fittest,” “winner take all,” “let nature take its course” attitudes can be seen in the treatment of refugees at the Southern border, refusal to increase the minimum wage, lack of safety for workers, and refusal to address debilitating, neglectful care for people in nursing homes – just to name a few manifestations of government for plutocrats rather than for everyone.

In the world of unfettered capitalism and autocracy, the elderly and disabled have little value except as products to be monetized and utilized to add value to revenue producing real estate or to justify excessive prices for privatized medicine. If the current anti-democratic moves on the part of right-wing reactionaries succeed, our lives will be shortened more than they currently are through isolation, segregation, and debilitating institutionalization. Unfortunately, American capitalism has become debauched and only liberal democracy can save us from a very dark future.

Kansas Legislature Grants Nursing Home Corporations Immunity from Law Suits for Failing to Protect Patients in Their Care

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Due to the persistent efforts of LeadingAge, American Health Care Association, and a host of nursing home providers and suppliers, the Kansas legislature passed a bill that protects long-term care providers from law suits for dereliction and negligence during the COVID-19 pandemic. The legislation grants immunity to providers except for “gross negligence” on the part of the staff. Good luck with proving that.

Sympathy expressed for the operators is one of the most disgusting facets of the proponents’ framing of the issues. According to the Kansas City Star, “proponents of the bill argued that nursing homes were not given proper guidance and resources from state agencies at the onset of the pandemic.” Senator Kellie Warren, a Leawood Republican, was quoted as saying, “That we as a state didn’t provide those things but we’re also not going to provide them immunity is an untenable situation for adult care homes” (https://www.kansascity.com/news/politics-government/article250201305.html).

I’ve seen this frame before. The industry is blaming government agencies for not providing them with sufficient training in infectious disease control and for not providing them with personal protective equipment. Providers have been well-reimbursed and investors have extracted excessive funds out of a care system for frail elderly and disabled patients, but they don’t believe they are expected to operate their businesses professionally.

If you follow the press releases on the AHCA/NCAL website, this framing of the issue will sound very familiar. The attitude of the industry is “it’s not our fault, we didn’t know anything about rapidly spreading novel viruses.” Although the long-term care industry has been in the business since 1950, and although it has spawned millionaires and billionaires, operators aren’t capable of taking proper care of people for whom they are paid to be responsible.

I’m wondering what planet I’m living on when I see learned helplessness as an excuse for gross negligence and incompetence. And I say to activists, journalists, and others, please don’t think that the non-profit arm of this business is qualitatively better than the for profits (with the exception of a tiny number of not for profit facilities). The Evangelical Lutheran Good Samaritan chain is the largest non-profit and one of the largest in general. It’s care is as subpar as the low quality for-profits (which is most of them).

LeadingAge: The Non-profit Nursing Home Lobbying Organization is Leading the Charge for Immunity

Rachel Monger, the lobbyist for LeadingAge Kansas, expressed her opposition to an earlier immunity bill in Kansas worked out between Governor Kelly and the legislature. She was of the opinion that the bill did not go far enough in relieving providers of responsibility for neglect and dereliction because “the affirmative defense shield” left providers open to attack. Ms. Monger is of the opinion that the earlier legislation “amount to ‘demoralizing punishment.”

Nursing home advocate: Kansas’ weak COVID-19 legal protections ‘demoralizing punishment’

I’ve seen Ms. Monger in action several times at legislative hearings. For instance, I observed her argument against stiffer regulation of psychotropics. She claimed that the providers had a profit margin of a half percent. In corporate speak, this sounds like child babble, but she was waving the Clifton, Larsen, Allen (CLA) annual report around, which is bogus. I look at these industry propaganda pieces every year.

What are Nursing Homes? What Are Operators Expected to Know?

The attitude of the industry is this: “We’re running medical facilities full of medically vulnerable patients, but we can’t be expected to know much about infectious diseases.” In other words, their business is protecting and enhancing shareholder value – not reinvesting earnings in innovative and higher quality, medically ethical, professional care. It’s about the money. If they say, “it’s not about the money,” it’s about the money. Warehousing people at the lowest possible cost is their mode of running their institutions.

I have been warning and will continue warning ad nauseum, ad infinitum, that by letting the industry off the hook for the 300,000 preventable deaths, the lives of medically fragile people in nursing homes will be seriously endangered. If operators and their corporate holding companies can get away with their negligence of the past year, the message will be this: the lives of people in your care aren’t that valuable, so cut costs, warehouse patients, and extract as much cash as possible out of the system.

The Voters of Missouri Passed Medicaid Expansion. The Republican Controlled Legislature Won’t Fund It

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We, the citizens of Missouri, fought hard to expand Medicaid under the Affordable Care Act. I was one of the 23 people known as the Medicaid 23 who were arrested, tried, and convicted for making too much noise about it one day in the Missouri Senate. Exhortations, demonstrations, and civil disobedience didn’t move the Republican reactionaries running the state legislature, so the citizens collected signatures and had it placed on the ballot. It passed.

But the Republican Party has become so toxic, mean, and anti-democratic that Missouri Republican legislators are refusing to fund health care for our fellow human beings too poor to obtain it under the Affordable Care Act but not poor enough to qualify for Medicaid. “The House Budget Committee voted along party lines not to pass a bill allowing Missouri to spend $130 million in state funds and $1.6 billion in federal money to pay for the program’s expansion” (https://www.kansascity.com/news/politics-government/article250170945.html).

There is no doubt that the white male, racist, rural, religious-fanatic, controlled legislature is out of step with the majority of Missourians. However, gerrymandering, voter suppression, and money to keep urban voters at a disadvantage. A feckless Democratic Party doesn’t help matters much either.

The Medicaid 23

We were a group of community activists who met at Reverend Hartzfeld’s Missionary Baptist Chruch on Linwood Boulevard. Prior to his death a few months ago, Reverend Hartzfeld was the patriarch of the Kansas City African American community. I was honored to be included in the group that decided that decided to carry out a protest at the state senate to express our outrage over the lack of medical care for poor people – for no other reason than they are poor.

Legislators would not meet with us or even respond to our letters, emails, and phone calls. Se we went to the capitol to get their attention. We demonstrated in the gallery while the senate was in session. We were told to shut up and we didn’t. We were arrested, and, after a three day trial, convicted by a white jury in the middle of Missouri. Tony Messenger wrote this in the St. Louis Post Dispatch: “This trial has the foul odor of history.”

Here is a picture of the “criminal” Medicaid 23:

The tall young white man in the front row was one of our lawyers. He is also a Republican in the Missouri House of Representatives. He fought hard for us and was also outraged by our arrest. Reverend Hartzfeld is the man with the cane in the middle of the front row.

Leading Age is Teaming Up with the Nursing Home Industry to Put One Over on U.S. Taxpayers

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In case you haven’t heard of the “Care for Our Seniors Act”, you need to know that Leading Age, which holds itself out as an advocacy organization for nursing home patients, is teaming up with the American Health Care Association/National Center on Assisted living – the industry lobbying organization – to pass this proposed legislation. Despite a couple of good things in the bill, e.g. 24 hour presence of RN in a facility, minimal stockpile of PPE, and some other minor requirements, the proposed legislation is a sham: an industry maneuver to move past the terrible COVID-19 tragedy and squeeze more funding out of Medicaid.

Essentially, Leading Age is helping sweep the industry’s responsibility for the death of 300,000 nursing home patients under the rug. In addition to helping irresponsible providers escape accountability, LA & AHCA/NCAL are pushing for more taxpayer spending on long-term care without any of the needed financial transparency – needed by taxpayers if they are to find out how their money is being spent and how much is being drained out for excessive enhancement of shareholder value.

None of the real advocates I know would be opposed to spending what it takes to make the long-term care system humane and conducive to the well-being of patients. The Care for Our Seniors Act is a slight tweak at best. More likely, it will result in more shortened lives because it will not change the overall quality of care in America’s nursing homes.

Mark Parkinson, CEO of AHCA/NCAL is pushing the legislation by making incessant claims that the industry is in dire financial straits. That is false. His press releases include frames such as heroic and valiant efforts of providers in the face of financial hardship. Parkinson has been claiming that industry revenue will decline by $95 billion over two 2020 and 2021. He has presented no evidence to support that claim, because there is none. The truth is this: long-term care, as an industry, is so heavily subsidized by federal and state governments that it took no real hit in 2020. Providers have landed on their feet as the COVID pandemic is brought under control and will move ahead and continue to drain an excess amount of funds out of care into the pockets of investors.

It is important for advocates to force the long-term care industry to reveal its financial information. We can see the financial statements of publicly listed companies. A review of major public corporations in the long-term care industry reveals something far different than what Parkinson is putting out. The table below is just the beginning of our examination of annual 10-K reports submitted to the SEC.

By:

Dave Kingsley

There Has Been No Meaningful Nursing Home Reform in Kansas. Please Advocates & Legislators Stop Believing there Has Been!

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There appears to be a widespread misperception among activists, advocates, and legislators regarding nursing home reform in Kansas.  It is widely believed that Kansas Senate Bill 15, signed into law by Governor Kelly, would somehow significantly improve the quality of care by keeping rotten apples out of the system.  However, the system is comprised of rotten apples and the legislation touted as the answer to metastasized rottenness will not change that one iota.

What SB 15 does is this: (1) Requires evidence that applicants for a license have sufficient capital to operate for one year, (2) Submit a one-year operating budget, and (3) List all nursing home operations in which they have or have had an interest.  Current bad actors and future bad actors such as Life Care Centers, the Ensign Group, and most of the other providers will have no problem meeting the capital requirements.  Furthermore, their history and past and current operations are no big secret.

What long-term care corporations want to keep secret is their excessive extraction of Medicare and Medicaid funding on behalf of investors – at the expense of patients.  We need financial transparency, but the industry will plant its feet and go to the wall with advocates and activists over an open look at financial statements (except for the few publicly held corporations required to file financial reports with the Securities & Exchange Commission).  Furthermore, state agencies with licensing and monitoring responsibilities have become industry doormats. Therefore, the industry and regulatory agencies teamed up to trick Kansans into believing that some real reform has been enacted.

Anyone who doubts what I’m saying should check inspection reports on Nursing Home Compare.  Begin with the Life Care Center facility at Andover, Kansas, a facility so substandard that it doesn’t rate a one on NHC (it is a “special focus facility”).  The neglect and cruelty cited in the report will make you extremely mad – want to cry, scream, and kick things. The inspection was dated July 7, 2020.  There is no follow up discussed and no change in status.  But Life Care Centers (mainly its sole owner, multi-billionaire Preston Brooks) is still receiving Medicare and Medicaid funding for the Andover facility.

SB 15 was initiated by the industry, i.e., the Kansas Health Care Association.  The Skyline scandal was an embarrassment for the industry and agency toadies giving Joseph Schwartz licenses for 15 Kansas facilities.  They didn’t do due diligence and provided licenses to an unsavory character with a felony record.  He committed more crimes by pocketing deductions from employee paychecks for health care. Eventually, his theft of funding meant for patient care left all 15 facilities insolvent.  SB 15 is a ruse initiated by KHCA lobbyist Cindy Luxem and endorsed by the Kansas Department of Aging & Disability Services.  The public is lulled into believing that the act will result in real reform when in fact it is meaningless.

There has been no evidence that Schwartz didn’t have the capital required by SB 15.  Based on over $150 million in defaulted loans I have found, I believe he was sufficiently capitalized.  There have also been no indictment and prosecution of Schwartz even though he deducted pay from his employees for health insurance and never bought the insurance.  I think Kansas wants the whole Skyline scandal to go away.  It is so sad that so much of the rest of the country has bought into the state’s faux reform.

The Ensign Group, America’s Biggest Nursing Home Corporation, Had a Banner Year in 2020

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The American Health Care Association’s Well-Funded PR Machine Is Promoting a False Narrative.  The Ensign Group’s 10-K Debunks the Industry “Hardship Claim.”

The AHCA – the long-term care industry’s lobbying arm – has a perpetual propaganda machine which incessantly cranks out a hardship narrative.  By operating mostly behind a veil of secrecy, the industry has been able to convince the public and legislators that profitability is so meager that firms are barely making it and, consequently, are on the verge of exiting the business.

Let’s consider the industry’s narrative in the context of what we are learning from publicly listed firms required to file financial statements with the Securities & Exchange Commission (available to the public).   I will begin a series of posts with the consolidated financial statement of The Ensign Group, one of the handful of publicly listed long-term care corporations.  I consider the Ensign Group to be the largest skilled nursing corporation with over 300 stand-alone nursing homes.

Other companies owning and operating skilled nursing facilities have larger annual revenues, but they are Real Estate Investment Trusts with a diverse portfolio in the broader senior housing realm. The Ensign Group owns and operates facilities in buildings it also owns.  For this reason, I’m claiming that it is the “biggest” skilled nursing corporation.

2020: A Banner Year For The Ensign Group

On a February 4th conference call, The Ensign Group reported the following:

  • Earnings per share of $3.06, an increase of 86.6% over the prior year.

  • Revenues of $2.4 billion, an increase of 18% over the prior year.

  • Net income of $174.6 million, an increase of 74.8% over the prior year.  This is “GAAP net income.”  GAAP is Generally Accepted Accounting Principles.  This measure of net income will be significantly lower than non-GAAP measures, a fact with which I don’t need to bother readers.

  • Liquidity, which is of great importance to shareholders, remains strong with $236.6 million in cash and equivalents on hand, and $340 million of available capacity under its line-of-credit facility.

  • The company returned approximately $150 million relief funds provided under the CARES Act.  Given the company’s strong financial condition, it’s interesting that a corporation as large and in solid financial condition would have received these grants in the first instance.

Financial Engineering through Patient Arbitrage

As we unravel the finances of the long-term care industry during the COVID-19 pandemic, we need to access all data pertaining to corporate patient mix.  Furthermore, it’s well-known that patient care reimbursed by Medicare is much higher than reimbursement from Medicaid. Also, premiums are paid for patients with COVID.

 Although there is plenty of evidence that Medicaid is profitable, providers will manipulate their business in favor of Medicare patients.  I call this “patient arbitrage.”  Given that protecting and enhancing shareholder value is the primary objective of long-term care corporations, no one should be surprised by the practice of seeking higher reimbursement patients.

By perusing The Ensign Group financial statements and promotional material, I surmise, reading between the lines, that the pressure on management at each facility to maximize revenue is rather intense. Here is a quote from the February 4th Conference Call:

Port noted that as evidence of the medical communities’ confidence in their local operations’ clinical capabilities, the Company saw a marked improvement in patient volumes, especially with high acuity and skilled patients with a 7.2% and 10.8% increase in Medicare census and 6.2% and 5.7% in managed care census, sequentially from second quarter to third quarter and third quarter to fourth quarter for same store and transitioning portfolio, respectively.

This improvement in our admissions trends not only gives us great confidence that we can continue to perform well as the pandemic stubbornly persists in many of our largest markets, but it also gives us confidence that we are in an excellent position to see occupancies normalize to pre-pandemic levels even while the pandemic continues to impact us and our patients. Because we have been working arm in arm with our hospital and managed care partners during this pandemic to care for both COVID-19 positive and negative patients with complex medical needs, our operations have solidified the critical role they play in the post-acute care continuum as an essential and cost-effective setting for highly complex patients.

Don’t Cry for Long-Term Care Corporations: Demand Accountability!

Most restaurants, movie theatres, and other small businesses in your community could only hope to have the government provided revenue stream as that provided to long-term care corporations throughout 2020 while the COVID scourge killed at least 200,000 people in their care.  As the pandemic is brought under control, it is important to demand answers from our political representatives.  What did providers do for patients and families versus shareholders?  Why were nursing home systems in countries throughout Asia, Australia, New Zealand, and other parts of the world able to keep death in long-term care facilities so much lower than the United States? If our government is not presented with these and other questions along with a demand for answers, patients in nursing homes will remain vulnerable to the next pandemic.

The Long-Term Care Industry COVID Narrative: A Barrage of Unsubstantiated Claims & Falsehoods

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The Scope of the COVID Long-Term Care Tragedy & Lack of an Outcry for Accountability Is Horrifying

Compared to our peer countries in the advanced industrialized world, the United States has been a complete and utter failure in the protection of vulnerable long-term care patients from COVID.  At this time, we can only estimate the total loss of life in skilled nursing institutions, but the number of patient deaths has probably reached 200,000. 

Except for centuries-long assaults on the health of African Americans and Native Americans, and the flu pandemic of 1918, these deaths comprise the biggest medical tragedy in U.S. history.  Certainly, they constitute the most massive loss of life in one demographic group in such a short period of time. If experiences of other countries around the globe are any indication, a large proportion of these deaths were preventable. As I stated in an earlier blog, for instance, S. Korea has had less than 400 deaths from COVID in its long-term care facilities (more about other countries’ COVID losses will be on later posts and one accompanying this post).

An industry was entrusted by the federal and state governments with the care of at-risk elderly and disabled patients.  For the most part, the industry failed.  In addition to cross-cultural comparisons, evidence suggests that the industry was either incompetent, or greedy, and derelict. Nevertheless, there has been not been an outcry from the public, legislators, and regulatory agencies for accountability through some type of 9/11 commission.

The Industry Is on Offense. But What Exactly Does a Claim of $35 Billion Loss in Revenue Mean?

Passivity on the part of individuals and organizations one would expect to speak out about industry dereliction is not only horrifying, but it has also left the media playing field to the industry.  Consequently, the industry’s narrative, based on misinformation and no information, is designed to escape culpability as well as to squeeze a higher level of funding from Medicare and Medicaid.

Having observed industry television interviews, press releases, and print reports in publications such as the New York Times, I am beginning to surmise that the industry’s objective is to depict operators and, consequently, parent corporations, as victims of a natural disaster over which they had no control.  Their propaganda ignores preventative measures that could have been taken while it is focuses on exaggerated financial losses.  

 On February 10th, Alex Spanko reported in Skilled Nursing News that the American Health Care Association (AHCA) had made dire projections of financial losses incurred by the industry throughout the 2020 and 2021:

Nursing facilities will lose a total of $22.6 billion in revenue during 2021, according to a new projection from the American Health Care Association, as occupancy – the primary driver of income for facilities – remains low.

On top of an $11.3 billion decline already seen in 2020, that would brings [sic] the COVID-19 financial toll to $34 billion, or a decline of 24%, even as expenses related to staffing, personal protective equipment (PPE), sit at an estimated $30 billion per year for 2020 and 2021.

Nursing Home Industry Projects $34B in Revenue Losses, 1,800 Closures or Mergers Due to COVI – Skilled Nursing News

Let’s put these claims into perspective. If indeed, total two-year revenue loss of $34 billion could empirically be demonstrated as valid, the impact of that would be de minimis on an industry with revenues of hundreds of billions per year.  However, we need to see evidence supporting the AHCA claims.

More importantly, in evaluating corporate financial performance, factors other than total revenue are essential: (1) Net income may still be robust or even higher in conjunction with a reduction in revenue, and (2) Cash flow, the real metric investors are looking for, may actually be improved in a year in which revenue has dropped.  Furthermore, skilled nursing is often embedded in corporations in the broader senior housing industry. For instance, real estate investment trusts, private equity firms, and other corporations typically own a broad senior housing portfolio of continuous care retirement communities (CCRCs) in which independent and assisted living are combined with a skilled nursing facility, and stand-alone facilities providing apartment housing, assisted living, and skilled nursing.

I love to listen to Dr. Anthony Fauci speaking on behalf of the Biden Administration these days say, “let’s look at the science, let’s look at the data” regarding vaccines. It is a refreshing change from the previous administration.  Hopefully, we can do the same thing when we examine the financial impact of COVID on the long-term care industry.

You Can’t Trust Industry Research Reports

We are lacking sufficient information to substantiate industry claims while at the same time misinformation is distributed across the world of finance.  I do not claim to have my mind wrapped around the entirety of the long-term care industry – it is, after all – an industry that operates behind a veil of secrecy.  However, the data that I’m collecting suggests that the highly subsidized (maybe most subsidized) industry providing skilled nursing is doing well (see my post re: The Ensign Group today).

“Doing well” is my description of consolidate financial statements, including, but not limited to:  revenue growth over a period of years, net income, equity, and cash flow (liquidity, cash/equivalents, lending facilities, etc.).

You can find industry financial information that sells for a very high price.  Take it with a grain of salt.  For instance, IBISWorld, one of the leading sellers of industry information revealed its analysts’ ignorance of the long-term care industry by claiming that Genesis HealthCare, Inc and HCR ManorCare are the “biggest companies” in the “nursing care facilities industry in the U.S.” Beside that claim is a red lock icon, which means if you pay an excessive fee, you can see the data backing the claim (https://www.ibisworld.com/united-states/market-research-reports/nursing-care-facilities-industry/).

.  Don’t waste your money. Genesis is a zombie company that probably won’t survive much longer and has been reduced to a contract managing firm – its property and operating entities are now owned by a Real Estate Investment Trust (REIT).  Like Genesis, HCR ManorCare was bankrupted by a private equity firm and its property was sold to a REIT. These companies don’t represent the industry and analysts indicating that they do are providing bad information.

By Dave Kingsley

Doonesbury on Prevagen

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Snake oil foisted onto elderly Americans through false advertising is an increasing problem. I wrote about a product called Prevagen on August 11, 2020 (see “Predatory Economics 101”). Doonesbury captured the essence of the problem today with humor. I didn’t ask for permission to use this, but if I’m called out for failure to do that, I’ll apologize.

By Dave Kingsley 2/14/2021