By:

Dave Kingsley

Here is a message to the media:  high net worth individuals and their financial managers do not invest in long-term care because it is a poor investment.  Furthermore, corporations will not continue in a line of business that is a losing proposition for their shareholders.  Nevertheless, journalists keep writing articles in which they promote a false narrative concocted by the long-term care industry and spread by the American Health Care Association. I call it the “nursing home industry hardship narrative.”

An egregious example of this false narrative appeared in the Kansas City Star recently.  Writing about the assistance requested from the National Guard by long-term care facilities, Star journalist Sydney Hoover said this: “Nursing homes in Kansas have long struggled financially, with many unable to pay competitive wages, or even basic utility bills.” The article went on to say that the “pandemic has exacerbated those difficulties, as the cost of personal protective equipment increases and staff shortages grow.” (“Kansas nursing home officials push for staffing aid – and calling out National Guard,” https://www.kansascity.com/news/coronavirus/article248477490.html).

This article cited no empirical evidence or any credible research that supports this typical industry “hardship narrative.”  I have been researching Kansas nursing home ownership for years – probably to an extent no one else has – and the only evidence of bankrupt and insolvent facilities pertains to chains taken over by private equity firms or white-collar criminals and looted.  Conversely, plenty of evidence exists to suggest that the long-term care business is an attractive investment.

It is incumbent upon agency employees, the media, and advocates to debunk the industry’s hardship pleas.  The evidence is not difficult to find.  Publicly listed companies are required to file quarterly and annual financial reports with the Securities & Exchange Commission. They are also required to file a “proxy report” on an annual basis, which includes executives’ and board of director’s compensation.

The largest long-term care facility owners are real estate investment trusts.  Welltower is the dominant REIT long-term care corporation in revenue (Over $5 billion in 2019).  It’s 2020 proxy report indicates that CEO compensation was $17 million in 2019.  Board member compensation ranged from $250,000 to $350,000. 

The Ensign Group – not an REIT – is one of the largest long-term care corporations in number of facilities.  Its 2020 revenue has increased quarter over quarter.  Like most of the other publicly listed corporations, the Ensign Group has had robust earnings, has paid dividends, and has not drawn down its rather impressive stash of cash. These companies are sitting on $billions in cash and equivalents and are not overly debt ridden.  Like the rest of corporations listed on a stock exchange, the value of Welltower, Ventas, Ensign Group shares tanked in March but have since recovered to near prior highs.

The 10-Q reports for these publicly listed long-term care corporations also indicate that they have been receiving a considerable amount of COVID relief from the federal government through the CARES Act.  For example, the VENTAS 3rd Quarter 10-Q states that the corporation applied for $35 million under Phase II of the Provider Relief Fund.  They further stated that “HHS recently announced a new $20 billion Phase III General Distribution allowance.”   

There seems to be little doubt that these highly subsidized corporations will land solidly on their feet as the pandemic is brought under control.  It is interesting to note the following statement by VENTAS regarding its liquidity during the COVID pandemic:

Since the start of COVID-19 pandemic, we have taken precautionary steps to increase liquidity and preserve financial flexibility in light of the resulting uncertainty.  See ‘Management’s Discussion and Analysis of Financial Condition and Result of Operations, Liquidity and Capital Resources; Recent Capital Conservation Actions.”  As of November 5, 2020, we had approximately $3.2 billion in liquidity, including availability under our revolving credit facility and cash and cash equivalents on hand, with no borrowings outstanding under our commercial paper program and negligible near-term debt maturing (Form 10-Q, page 9).

Fourth quarter 10-Qs, 2020 annual reports, and proxy statements will be issued early in February. At that time, we will have a clear picture of the financial condition of the publicly listed “players” in long-term care.  We will be analyzing those and reporting on the finances of the major providers in the industry.  These reports are hundreds of pages of financial information. Writing about them is a daunting task.  However, we will take small bites for posting on Tallgrass Economics Finance & Politics.

Our detailed analyses of long-term care provider finances will be uploaded to a new website – The New Economics & Politics of Aging at http://neweconomicsofaging.org/. If we do not begin to push back on industry propaganda, the future of long-term care looks bleak for patients and families.  The victimhood bestowed upon long-term care corporations during the COVID-19 pandemic will, if left unchallenged, strengthen their position with the public, politicians, and agencies charged with regulating them. Conversely, it will weaken the hand of advocates, the public, and families as they attempt to transform the current long-term care system from a business for extracting federal and state dollars at the expense of care into a truly humane system that values the lives of the elderly and disabled.

By

Dave Kingsley

Will we Just Bail Out the Industry & Move On?

Because it was a white wash, I have been critical of the CMS Commission on COVID in Nursing Homes. On September 16, 2020, the Trump Administration issued a press release with the title “Independent Nursing Home COVID-19 Commission Findings Validate Unprecedented Federal Response.” Probably another 100,000 patients will have died in long-term care institutions between that “big lie” (typical of autocratic regimes) and when the pandemic is under control.

Although the report shamefully let CMS, state agencies, and the industry off the hook for dereliction of their duties, the claim that it validated the federal response was blatant propaganda. I’m dismayed that I haven’t heard that from the advocates, scholars, lobbyists, and industry representatives who served on the commission.

Here’s the truth: staffing in many facilities has deteriorated to the point that the industry is calling for help from the National Guard. Apparently, they are receiving that help because nurses and other employees are leaving to work in hospitals and clinics. In addition to receiving an unknown amount of payroll protection assistance under the CARES Act and other supplemental payments, owners now want the National Guard to pick up slack in their workforce (see Sydney Hoover, “Kansas Nursing Home Officials Push for Staffing Aid” https://www.kansascity.com/new/coronavirus/article248477490.html). Apparently this military assistance has already been provided in some areas such as San Diego.

If that is what is required to save as many lives as possible, I’m all for it. However, I will keep agitating for a reckoning when the pandemic is under control. I want to know how much extraction of federal and state funds has taken place for the sake of investors and at the expense of saving lives. The best we can do in determining that is look at the financial statements of for-profit enterprises or the 990s of the non-profits. If facilities are owned by non-public corporations, we will not be able to see what was reasonably extracted. However, publicly held corporations will soon be submitting their 10-K reports to the Securities & Exchange Commission.

I will be going through those 10-Ks as soon as they are available. If they reflect what we have seen in quarterly reports for the past year, then we need to ask why so many people died while executives, board members and shareholders gave up very little – if anything. We need to ask why some of the biggest owners sat on a pile of cash and continued to do business as if there were no pandemic.

What we have seen is euthanasia by neglect during the past year. If we do not hold the responsible parties in government and industry accountable, we will see even less regard for human life in long-term care institutions in the future. The industry will be further emboldened to deny treatment for the benefit of high net worth individuals who see long-term care as a good place to park their wealth and keep it from the IRS.

By

Dave Kingsley

Greed is No Longer Acceptable, but That’s Not the Whole Story

In his latest book, Evil Geniuses, Kurt Andersen suggests that the “greed is good era,” kicked off by the likes of Ronald Reagan, Milton Friedman, Ayn Rand, and Ivan Boesky, has run its course.  Andersen covers old territory that many progressive writers have been discussing ad infinitum, ad nauseum for decades, e.g., “the Powell Memo,” the rise of Chicago School free market economic orthodoxy, so on and so forth.

Perhaps greed is no longer de rigueur, but that does not really matter to a small number of Americans who have amassed incomprehensible economic and political power.  That power is centered in the economic sector known as “FIRE:” finance, insurance, and real estate, or, metaphorically speaking, Wall Street.  Indeed, finance now dominates the U.S. economic system.

The goal of financiers and the super-rich is to protect the wealth they have accumulated during the past few hyper-capitalistic decades following the ascendance of Ronald Reagan and Margaret Thatcher. Given the economic injustice Reagan-Thatcher neo-liberalism has wrought and shifting attitudes toward a just and fair economy, the greedy have turned to deceptive and clever political networks within the Washington, D.C. beltway.  As I will demonstrate in a series of blog posts, these networks have been successful in coopting advocacy and professional organizations.

501(c)4 and 501(c)3 organizations such as the Better Medicare Alliance, The Third Way, the Committee for a Responsible Feder Budget, the Concord Coalition, and others are particularly aimed at either privatizing Medicare or reducing Social Security and Medicare benefits. The financing of these lobbying groups can be traced to the late billionaire, private equity mogul, Peter G. Petersen.  The thirty board members of the Third Way – a Democratic Party “think tank” – are practically all financiers.

Better Medicare Alliance

The Better Medicare Alliance was initiated and funded by the insurance industry. This “think tank,” and front group for the insurance industry has a mission of privatizing Medicare through Medicare Advantage. With congressional cooperation, the insurance industry has been successful in shifting Medicare beneficiaries away from traditional Medicare and into Medicare Advantage.  Approximately one-third of all beneficiaries are now in MA. If this movement achieves its goal of killing traditional Medicare, the insurance industry will have achieved immense power over what will soon be a trillion-dollar health care program for the elderly.

The image of the BMA has been concocted to convince the public that it is an advocate for elders and the betterment of their cherished federal health care program.  That is a lie.  But a large number of professional and advocacy group have signed on as allies (https://www.bettermedicarealliance.org/our-allies/).  These allies – too numerous to mention in this post – range from insurance businesses to Area Agencies on Aging, Leading Age, nurses associations, and professional medical organizations.

We Know What Greed Has Wrought, but We Don’t Know How Entrenched it has Become.

In the past few years, a spate of books about the throes of hyper-capitalism have appeared in the popular press. The best among these are The Finance Curse by Nicholas Shaxson and Transaction Man by Nicholas Lemann.  Andersen’s book adds nothing to these and many others.

What all of these excellent writers have failed to see is this:  greed has spread its tentacles throughout the political system in a shadowy network that is rewarding congresspersons with post-career jobs as executive directors of think tanks and on corporate boards.  These so-called “think tanks” are highly influential behind the scenes and are called on by legislators for testimony in congressional testimony and consultation on legislation.  They are the go-to organizations when the press is looking for “expert opinion” on issues and legislation.

The growing elderly population of the U.S. must not ignore these powerful interest groups working against their best interests.  Hence, many future blog posts on Tallgrass Economics, Finance, & Politics will be focused on predatory activities by FIRE interests within the Washington, D.C. Beltway.

By:

Max Skidmore

If an objective observer from outside were looking at America’s political economy for the first time just after the 2020 elections, several astonishing inconsistencies would be immediately apparent. In the presidential election, many supporters of the incumbent – the loser Donald Trump – had first voted for him in 2016 because they believed he was a “good businessman.” Yet under his presidency the economy was failing, his incompetence as a leader was manifest, and conditions under a pandemic literally were lethal, the worst in the world, because he had no idea how to deal with the emergency, nor did it even appear to concern him.

Mr. Trump had, in fact, never demonstrated skill at business; on the contrary, he consistently had failed. Having lost money in businesses, he shifted his attention to television where he appeared on a successful “reality” show, which provided him with a substantial income. In any case, the qualities required to run a business are far different from those needed to guide a government that exists not to profit from, but to benefit, the people.

Apart from Trump, voters often explained their support for Republicans because they believed Republican leadership would bring a strong economy. Yet in administration after administration, the business climate had been better when Democrats were in power, than it was under Republicans. The Republican reputation as better for the economy does not hold up under examination.

Republicans have come to claim that taxes inhibit the economy, and that tax reductions pay for themselves by increasing business activity. President Bill Clinton signed tax increases into law in spite of dire predictions that they would damage the economy, but the economy afterward improved at an astonishing level. His successor, George W. Bush, on the other hand, signed into law huge tax reductions, and what followed was the greatest economic catastrophe since the Great Depression. In other words, basic Republican assumptions are wrong. This does not mean that tax policies are good or bad, but that they do not routinely have the effects that Republicans claim for them. A cursory glance at the actual record makes that clear.

Although Republicans long stressed patriotism and love of country, they recently exposed their party’s thirst for power at the expense of America’s fundamental interests. In response to clear revelations of massive foreign interference in American elections, they tend to deny it, or shrug it off as unimportant if it happens under Republicans. At the same time, they generate fantasy scenarios to charge Democrats as “un-American,” and beholden to foreign powers. Many of the Republicans’ prominent office holders supported Donald Trump as he illegally sought to pressure Republican state officials to “find” nonexistent Trump votes and reverse the results of democratic elections, hoping to retain him in power by overturning the will of the voters. 

The most shocking example of “conservative” contradictions took place on the 6^th of January 2021, when Congress was scheduled to count the electoral vote totals that the states submitted. Donald Trump, still president despite considerable loss of the election, incited his followers to engage in a coup, to storm and take over the Capitol, keeping him in power despite his clear loss.

They did so in massive numbers, vandalizing the seat of national government, stealing items, and taking “selfies” in some of the most presumably secure places in the House and Senate chambers, and offices of the members. They were cleared out, gently, as many observers noted. This was in sharp contrast to the manner in which authorities dealt with civil-rights protests, when peaceful demonstrators were gassed, beaten, and sometimes killed. Quotations from some Capitol Police expressed astonishment, because  they had anticipated no trouble. Conservatives, they thought, did not engage in violence. Even the most cursory examination reveals that political violence in modern America almost always comes from the right¾from white nationalist, neo-Nazi, and other racist groups¾not the left.

Some authorities deny that the riot was actually a coup, because it was too disorganized. That is nonsense. The attempt was to take over the government. Some of the rioters had even constructed a gallows on the grounds of the Capitol, reportedly having planned to kidnap officeholders, conduct mock trials, and then hold public executions. The fact that they were incompetent and failed does not in any way mean that they had not attempted a government takeover¾which by definition was an attempted coup. All the while, Trump still the sitting president, was reported as having enjoyed the spectacle.

This was sufficiently outrageous that a few of Trump’s previously ardent supporters broke with him, and called for his removal, Nevertheless, his most fervent core of support remained, even though the actions violated what they had professed to be their principles. The fact that they had become supporters of Trump, personally (Heil Trump!), and not supporters of whatever principles they purported to profess, is demonstrated that the Republican National Convention, when it re-nominated Trump in 2020 for a second term, for the first time ever, did not even see fit to produce a party platform, merely expressing fealty to their cult leader.

As with deficits, when Republicans are in power, they create huge shortfalls flowing from, among other things, great tax cuts for the wealthy. Yet when Democrats are in power, Republicans become deficit hawks, masquerade as “fiscally responsible,”  and seek to impose austerity in order to block Democratic programs that would help the people. Witness the fervent Republican opposition to “Obamacare,” and the numerous Republican attempts to sabotage the program and keep it from functioning optimally.  

These are merely a few of the plethora of inconsistencies that would be apparent to our outside observer. Perhaps the most glaring of all, and the most irrational from a policy standpoint (as opposed to that of raw power), is the  conservative Republican reaction to Social Security. That warrants an article of its own.

By:

Max Skidmore

As I mentioned earlier, the reaction to Social Security is perhaps the most glaring and irrational of all the obvious irrationalities of Republican conservatives. The program is enormously efficient, with administrative costs less than one cent of each dollar it receives in income. It is arguably the most popular government program in American history, and is far more than a mere retirement program, because it also provides life insurance and coverage for disability.

Not only do some 64 million Americans receive Social Security checks, the checks help beneficiaries of all ages. Almost a third of America’s Social Security checks go to people younger than retirement age. Of retirees, about half of retired couples count on Social Security for half or more of the total income. Of retirees who are unmarried, even more, some 70% get half or more of their income from the system. To put it another way, almost 9 out of 10 Americans who are 65 or older receive Social Security benefits. More than a fifth of retired married couples, in fact, and almost half of elderly singles, receive almost no income except Social Security, which accounts for 90% or more of all their income.

Although there certainly are complexities involved, Social Security’s fundamental principles are quite simple. Wages in covered employment up to $142,800 (for 2021; it varies annually) are subject to a 6.2% tax (FICA). Most employment in the U.S. is covered. The employer matches the amount deducted from wages. That means that an amount equal to 12.4% of each employee’s wages goes into trust funds; a portion of that payment goes to the Disability Insurance Trust Fund, and the rest to the Old-Age and Survivors’ (OASI) Trust Fund. Benefits for eligible  retirees, eligible spouses, other dependents, and the disabled are paid out from the trust funds. The small administrative costs of the system also come from the trust funds. The remainder is invested in government bonds. Those bonds regularly pay interest back into the trust funds.

Remember this also: Social Security’s benefits are inflation protected. They do not lost value as prices rise, and keep pace with inflation, Moreover, one cannot “outlive” Social Security payments, as can happen with private savings. The payments continue, inflation protected, as long as the beneficiary lives.

Think of the enormous damage that would occur if  its opponents managed to do away with Social Security. Think of the millions of Americans who are kept above the poverty line because of Social Security. Among retirees, that figure is around 38%, or more than a third of all retirees in the United States, who would be thrust into extreme poverty without their Social Security.

By law, benefits must come from the trust funds. If the balances in the funds, including incoming monies, were ever inadequate, benefits would be reduced. If that were to happen, though, there would be so much pressure that Congress surely would boost FICA rates to cover the shortfall.

In no instance, do Social Security benefits come from general revenues. Thus, those budget hawks who argue for benefit reductions to help “balance the budget,” either do not understand how the system works, or are deliberately being deceptive. Under current law, reducing benefits would simply build up larger trust fund balances; it would not affect the deficit.

In other words, balancing the budget by reducing benefits would require a change in the law that would divert Social Security money away from the trust funds. That is, workers still would pay for Social Security, but instead of receiving promised benefits, their payments would go to subsidize the wealthy, who profit from steady reductions in their rates of taxation.

Those advocating austerity, if they even think about it, apparently consider this to be fair¾that is, low to middle income workers would be expected to have “skin in the game,” and do the lion’s share of reducing the deficit that results from continuing reductions of tax on the wealthy. That certainly would be wealth redistribution, but it would be redistribution upward; diverting income away from those who have less to those who control the vast majority of wealth in the American economy.

It is correct that for some years reported projections have called for the trust funds to be depleted, usually in the 2030s. The projections come from the annual reports of the Board of Trustees of the trust funds. The Board consists of four ex officio members: the secretaries of health and human services, of labor, and of the treasury along with the commissioner of Social Security. Additionally, the full board includes two more members appointed from the public. If the reported shortfalls were to materialize, at the worst, benefits could be reduced¾and the reduced benefits still would be greater than today’s benefits. Reductions could easily be avoided: taxes could be increased slightly, for example, or the cap on earnings subject to FICA could be raised. Better yet, the cap could be completely removed.

In any case, despite many of the experts, I submit that the worst scenario is unlikely to happen. All the reporting relies on the Trustees’ “Intermediate,” or “alternative II” projections. The reporting virtually never reveals that the reports each year include three projections, not merely the Intermediate. Alternative I is the “low-cost” projection, and it almost always calls for no shortfall. In the past, the performance of the trust funds have generally been closer to the low-cost projection¾the one that projects no shortfall¾than to the more pessimistic one. In fact, recently, even during the pandemic, the trust funds have performed better than the Intermediate projection would have it. Despite this, only the Intermediate projection, with its persistent shortfalls, forms the basis for virtually all reported information on the program’s future.

The Trustees, in fact, produce three separate projections. They say that the Intermediate one is the one they believe most likely to come to pass, but caution that these are simply estimates, not prophecies.

Their Alternative One, or “low-cost” projection, generally calls for no shortfall at all (to be precise, in the 2020 report, it does call for a small and brief shortfall in the 2080s, but that shortfall  quickly vanishes). Hardly anyone, though, has heard of a projection other than the Intermediate. One indication that the Intermediate Projections tend to be too pessimistic, is that even during the pandemic, the trust funds have performed far better than the reported projections have anticipated.

So the question of Social Security’s sustainability is certainly one of political will, not economics. The American economy can easily handle any feasible circumstance. The shortfall from Republican tax cuts, for example, is far greater than any of the Intermediate projections for Social Security.

Thus, the future appears quite bright. Most of what people hear about Social Security’s sustainability is influenced by conservative propaganda that reflects billions of dollars spent to convince the public that Social Security “won’t be there when you retire.” If you hear nonsense about immigrants, even illegal immigrants, come into the country and immediately begin to collect Social Security, what you are hearing is not only wrong, but it completely misrepresents how the program functions. No one collects Social Security unless it is based on a worker’s wages. All benefits are based on a worker’s having worked in covered employment. Ten years of wages are required.

 Social Security is not “going broke.” If the trust funds were depleted, there still would be money coming in to finance benefits. “Bankruptcy” is not an appropriate term for  a program of the federal government that cannot “go broke,” since it can create money as it needs it to pay any bills that it incurs. Remember, when you hear dire warnings about Social Security, those warnings are almost assuredly the result of well-financed propaganda from Social Security’s opponents. Ignore them.

By:

Dave Kingsley

Monetizing Health Care and the Commodity Fetish of Hyper-capitalism

In this age of hyper-capitalism, anything that can be monetized will be monetized.  Financiers are very good at finding ways to turn normal human activity into an investment.  There is no better example of this than A Place for Mom – a private equity-owned firm.  Although this company’s massive advertising blitz featuring Joan Lunden and her ilk have led the public to believe that it is a charitable service, it is a for profit enterprise paid by nursing homes to refer patients to them.

In addition to monetizing every facet of medical care and turning the elderly into commodities, corporations like A Place for Mom are allowed to operate unfettered and free to engage in deceptive advertising.  Due to a lack of regulation, they are also able to operate behind a veil of secrecy.

Free is not Free to Providers & Taxpayers

Essentially, A Place for Mom is paid the equivalent of one month of Medicaid reimbursement for every patient they refer to a facility. As a researcher, I called this outfit and asked if they would tell me the name of facilities to which they made referrals. As everyone knows, there are good, bad, and very bad nursing homes. They will tell me or any other member of the taxpaying public nothing – bupkus, nada.  The information I requested is not public and will not be made available to either potential customers or any citizen requesting it. It is important to know if these types of referral services have deals with specific facilities and what those arrangements would entail. 

Like the long-term care system in general, it is not possible to evaluate these services in practically all states except the state of Washington.  We don’t know if they have a pattern of referring to facilities with poor reputations and desperate for patients to fill beds.  Because their employees sit in cubicles and sell services, their knowledge of long-term care is unknowable.  I was told by one employee that she had only been on the job for one day and had no background in the field senior housing or elder care. That was a lucky break. I’m certain she was educated quickly on what she could reveal to callers.

Regulation & Transparency is Needed

Referral services are escaping regulation in most states. The State of Washington has enacted legislation with record keeping and reporting requirements (https://app.leg.wa.gov/rcw/default.aspx?cite=18.3308&full=true).  Disclosure and records of relationships with both patients and facilities are required by the statute. This could serve as model legislation for initial attempts to regulate and monitor referral services.

The Washington statute doesn’t appear to include public access to the records for investigative journalism, research, and other purposes.  That is, in my view, a weakness that needs to be overcome in future legislature.

Jobs Override the Health & Well-being of Elders & the Disabled

The state of Kansas has provided a $30 million subsidy to A Place for Mom’s shop in the vacated Sprint Campus in Overland Park.  The Gray Panthers of Kansas & Missouri pressured the governor’s office to either squelch these subsidies or support legislation that would force transparency and disclosure of relationships with providers and clients.  Governor Kelly has shown little interest in working with the Gray Panthers on monitoring referral services.  Her letter to the Gray Panthers indicates that the overriding issue for her are the jobs A Place for Mom will bring to Kansas.

By:

Dave Kingsley

Media, Image, & Distortion of Reality

The first known outbreak of COVID in the United States occurred at the Kirkland, Washington long-term care facility owned by Life Care Centers of America, Inc.  Consequently, the company has gained some fame in the mainstream media and has been treated sympathetically as a victim.  Coincidentally, the Kirkland facility also had a CMS Nursing Home Compare quality rating of 5 – the highest – which added credibility to the image of victimhood.  Here is how CBS 60 Minutes Correspondent Bill Whittaker introduced the company on the November 1, 2020 60 Minutes program:

“On the morning of February 29 the world turned its attention from news of the coronavirus in China and Europe, to the Seattle suburb of Kirkland. What was predicted by public health experts had arrived: the first COVID-19 outbreak in the United States. And it was spreading in the most vulnerable of places — transforming a 5-star, skilled nursing facility into the first hot-zone in the country.”

https://www.cbsnews.com/news/covid-19-outbreak-nursing-facility-kirkland-washington-60-minutes-2020-11-01/

The gist of an interview by Whittaker during the program with Nancy Butner, a Life Care Centers VP, was this: the federal government was at fault. When the company called the federal government and asked them to send nurses and other personnel, instead a team of inspectors was sent.  The feds didn’t ride to the rescue.  Given that Life Care Centers, Inc. is one of the largest long-term care chains in the U.S. and funded through Medicaid and Medicare to staff and manage its facilities, this is an odd defense.

Is Life Care Centers, Inc. a Five-Star Company?

Life Care Centers owns and operates 230 long-term care facilities and is typically listed by trade publications as one of the four or five largest chains in the United States.  The company is owned by one man – billionaire Forrest J. Preston – which is an anomaly among the biggest chains. Furthermore, it is the company’s responsibility to properly staff its facilities, implement infectious disease control protocols, and train employees.  It was well known in early January that a rapidly spreading novel virus was spreading in Asia and would most likely make its way to the United States.

A 5-Star rating in one or a few facilities should be considered in context of the Life Care Centers track record.  Out of seven Life Care Centers facilities in Kansas, four are rated 1 – the lowest rating.  However, the Andover facility is a “special focus facility,” which means it is worse than the lowest rating and is so bad that no one should be referred there.  The Overland Park facility has a 2 rating but a “red hand,” which means that patient had suffered abuse.  The Atchison facility has a 5 rating.  So, out seven facilities in one state, all but one has been rated 2 or below, with most being a 1or special focus facility. 

At this time, the Andover, special focus facility, still has half of its beds occupied, which makes one wonder why the state allows it to continue to operate.  Reading the inspection report will literally make you sick (Find Healthcare Providers: Compare Care Near You | Medicare). Furthermore, two of the largest COVID outbreaks attracting media attention in Kansas occurred at Burlington and Kansas City, Kansas Life Care Centers facilities.

Perhaps there is a modicum of validity to the CMS 5-Star rating system, but it is possible on a good day, with the right inspector, to luck out and receive a 5.  Perhaps the highest rating is deserved in one facility while most of the others are rated low.  However, treatment and prevention of infectious diseases should be a corporate-wide policy.  I would, therefore, take the 5 at Kirkland with a grain of salt.

A Huge Case of Fraud by Life Care Centers:  Settled by the Department of Justice for $145 Million

The best way to rob a long-term care facility is to own one.*  On Monday, October 24, 2016, the U.S. Department of Justice announced that it had “resolved allegations” that Life Care had “violated the False Claims Act by knowingly causing skilled nursing facilities to submit false claims to Medicare and TRICARE for rehabilitation therapy (https://www.justice.gov/opa/pr/life-care-centers-america-inc-agrees-pay-145-million-resolve-false-claims-act-allegations). It is impossible to know how many $millions Forrest L. Preston was able to pocket above and beyond the $145 million.

Nor do we know how widespread this type of fraud is in the long-term care industry.  The DOJ brought this action against Life Care Centers because of two whistle blower employees (the whistle blower reward was $29 million).

Given that white collar crime is not usually punished (see Professor Jennifer Traub, Big Dirty Money), it is likely that large amounts of fraudulent billing is robbing patients of funds for care and employees’ of pay. The message from these types of settlements is that there is not much risk or hazard in committing fraud. 

Dirty money flowing into the pockets of owners/investors expands pressure on federal and state budgets.  Consequently, it is more difficult in the legislative process to increase expenditures for actual care. So, a billionaire owning a chain of long-term care facilities and submitting fraudulent claims is not only robbing the government but is also robbing patients and employees.  That simple truth didn’t make it into the 60 Minutes idealized view of Life Care Centers of America, Inc.

*Expropriated from University of Missouri, Kansas City economics professor Bill Black who published a book entitled “The Best Way to Rob a Bank, is to Own One.”