NAFTA & Nursing Home Wages in the Rio Grande Valley

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Dave Kingsley

The Ensign Group’s $10.82 per Hour CNA Labor in Brownsville, Texas

The Alta Vista Rehabilitation & Healthcare Center pictured above is owned and operated by The Ensign Group – the largest (and rapidly expanding) American nursing home chain. This facility came to the attention of those of us working on a study of The Ensign Group (hereinafter referred to as Ensign) by The Center for Healthcare Information and Policy – a recently incorporated 501(C)(3) nonprofit dedicated to healthcare research.

In collecting data on Ensign’s 2021 cost reports, we noticed that base CNA wages for this facility were excessively low at $10.82 per hour. Typically, 2021 CNA base wages (hourly wage excluding fringe benefits) average approximately $17.00 per hour with $13.00 at the very low end of the distribution.

Brownsville is in the Rio Grande Valley of Texas, connected by a bridge across the Rio Grande River to Matamoros, Mexico. The North American Free Trade Agreement liberalized the process of obtaining a work permit in the U.S. for Mexican citizens. Therefore, residents of Matamoros cross the bridge every day to work in Brownsville, Harlingen, and other Texas cities on the border. The minimum wage in Mexico is approximately 50 cents (U.S.) per hour.

Workers earn about $2.00 U.S. in the auto Maquiladora plants on the Mexican side of the border. Therefore, a wage of nearly $11 per hour is very attractive to Mexican citizens attempting to care for themselves and their families. It is in the best interests of the Mexican workers and the nursing home industry to garner CNA training and work permits for the border workforce. My interviews with workers in the U.S. nursing home system suggest that the Mexican culture and respect for elders lend themselves to a very capable and excellent immigrant workforce from Mexico.

However, the abject poverty of Mexico is an opportunity for exploitation of workers by the nursing home industry. It is important for U.S. legislators and regulators to take a serious look at this problem.

Why is Ensign Paying their Brownsville Workers Excessively Low Wages?

Why is Ensign Paying their workers less than a living U.S. wage? Because they can. Because the nursing home industry is financialized, protection and enhancement of shareholder value is the industry’s moral and ethical summum bonum – the highest and guiding ethical value of the corporate culture.

Although the Brownsville facility netted $2,298,733 operating income on net patient revenue of $8,847,305 (26% net after expenses for interest, taxes, and depreciation), employees did not share in that financial success. The company expended $1,573,153 on nursing care. If they had increased that by 50%, their net would have been reduced to 17% – which would thrill the owners of any enterprise. The facility also reported nearly a million dollar allocation to the Ensign home office and related parties. Furthermore, we usually note that CNA hours comprise around 60% of total nursing hours. At Alta Vista, 91,889 hours of the total 112,566 nursing hours were allocated to CNAs – 82%.

The labor mark up on the more than impressive earnings from this facility by a $3+ billion C corporation benefits investors but is not shared with workers. In other words, the labor market is determinative of wage rates while a price for the service is set by state governments at a level guaranteeing a robust return to shareholders and high executive pay.

The financial structures of corporations operating in the nursing home space are not a major factor in wages, hours, working conditions and staffing. Corporate type, e.g., REITs, private equity firms, C corporations, limited partnerships, LLCs, or any other type of corporation will not drive wages and staffing in this industry. Rather, an attitude toward labor and the perception of the value and worth of people doing the hands on work with patients needing skillful and empathetic care are the deciding factors in how we pay our care givers in nursing homes.

As long as the industry can use its political power to exploit workers, it will. It is ironic that nursing home reform commissions and congressional hearings have ignored the plight of workers while extensively noodling with the industry over ever more complicated billing systems. The industry will find plenty of techniques for leveraging billing systems to their advantage. What they won’t do is invest in a loyal, experienced, and trained workforce.

Government Oversight of Medicaid: The Shift of Power from Federal Agencies to State Agencies has Been a Disaster for Poor Americans’ Health

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Dave Kingsley

Dismantling of the Federal Administrative State

    President Ronald Reagan said this at a press conference in 1986: “The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.’” This might have seemed funny at the time but by 2008 when lax federal governmental oversight of the financial services industry led to economic collapse or when in 2020 a deteriorated public health system led to a raging COVID epidemic, the people of America were screaming back to the government these five desperate words: “For God’s sake help us!”

    President Reagan’s quip was a continuation and acceleration of devolution of power from the federal government to the states that began during the Nixon administration. Consequently, the far-right dream of dismantling the federal administrative state has led to funneling federal grants to states as block grants rather than grants-in-aid, which meant less federal control over how states regulated federal-state funded programs such as Medicaid and welfare in general.   

    Some states are more enlightened than other states in how they administer welfare programs.  But during the Clinton Administration, the mistaken notion that people needing assistance for their daily needs – including medical care – would benefit from some tough love like denial of any services after a few years of receiving it.  Aid to Families with Dependent Children (AFDC a grant-in-aid program) became Temporary Aid for Needy Families (TANF – a block granted program with a much more stigmatizing moniker).  By the late 1990s, President Clinton was declaring that “the era of big government is over” – seven very unfortunate words.

    The idea that poor people down on their luck needed some federal assistance for survival was warped into a philosophy that help from the government would induce dependency and that administrative barriers to assistance and forcing people off of aid would somehow be character building.  As has happened since the era of industrialization began, poor people were more intently looked at as irresponsible and the cause of their own plight.  By the turn of the Century, this philosophy had become de rigueur – even in states given to a more empathetic and compassionate approach to the less fortunate (which could be any of us).

How Have States Handled their Increasing Power?

    So, how have states done with the power devolved to them?  Not well.  As an example, consider the prior authorization of Medicaid that I wrote about in my last blog post.  The HHS, OIG had this to say in their recently released report:  “most State Medicaid agencies reported that they did not routinely review the appropriateness of a sample of MCO denials of prior authorization requests, and many did not collect and monitor data on these decisions.”  This seems like very familiar state regulatory behavior to me.  Having reviewed thousands of nursing home cost reports, I have yet to see one properly filled out (in accordance with GAAP/FSAB accounting principles and federal regulations).  Indeed, they are loaded with deceit, misinformation, and what is either profound ignorance or fraud.  And yet auditing at the state level appears to be practically nonexistent.

    There is no point in using nursing home cost reports for research except to raise issues of state incompetence, lack of oversight capacity, and corporate ability to game the system. The same can be said about the giant insurance corporations contracting with states as MCOs.  Indeed, Anthem’s highest MCO denial rate was 34%.  Molina, one of the largest providers had denial rates that ranged from 17% to 41%.  Aetna, Centene, and UnitedHealth denial rates were 5% to 29%, 3% to 23%,  and 7% to 27% respectively.

    The States with the highest rates of denial are Georgia (34%), Michigan (32%), California (29%), Mississippi (27%), New Jersey (27%), Virginia (26%), and Wisconsin (25%).  One can only imagine how difficult and frustrating it is for physicians and Medicaid patients in these states to obtain needed medical care.  None of these states used denial data for oversight.

There is Nothing Funny about Government Help:  We Need it Badly!

    My colleagues and I spend our working hours attempting to ferret out information from states regarding Medicaid outcomes data.  To quote Warren Buffet, “It’s like getting red meat out of a tiger cage.”  But we have been communicating with staff – including auditors – in the OIG’s office and will continue that communication.  Our mission is to fight the state/federal barriers to public information.

    The Medicaid program is nominally a $900 billion federal/state expenditure.  But with tax expenditures (i.e., tax subsidies) for corporations in the business, it is a much larger expenditure in federal and state budgets combined than that. Furthermore, nursing home corporations and the giant insurance corporations contracting as MCOs are extracting immense amount of tax dollars without a correlative investment in a loyal, career-oriented work force, and a medical services infrastructure that welcomes and benefits the people eligible to receive it. 

    Centene, UnitedHealth, and the other large providers are lavishing obscene compensation packages on executives and board members (CEOs are usually receiving about $20 to $24 million per year); they have billions of dollars sitting on their balance sheets, they are paying robust dividends to their shareholders (most of which are asset managers such as Vanguard, BlackRock, and State Street, handling pension, insurance, and sovereign wealth funds); and they have devoted billions to capturing government through lax lobbying and election financing.

    No matter how objective and scientific researchers like to be, this is all about politics.  It’s about what goes on inside the D.C. beltway and in state capitols.  Anyone who thinks they can be politically neutral, purely professional, and outside of politics is sadly mistaken.  Making CMS do its job is a political task and will take political organizing.  The same can be said about making state agencies do their job.  You cannot work within the system and change it that way. 

Managed Care & Privatization was Supposed to Save Taxpayers Money & Work Better than Government Administered Medical Care, but That’s Not What is Happening.

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By:  Dave Kingsley

Managed Care for Poor Peoples’ Medicine is a Chimera

    According to a report released by the HHS OIG’s Office last week[1], the massive Medicaid program intended for poor Americans is beset with denial of authorization for care and weak state oversight.  What that means is this:  poor people who are hard scrabble poor enough to qualify for Medicaid and have the moxie and luck in navigating the bureaucracy to the point of approval for the program, are far too often denied the treatment physicians think they need.  The gigantic insurance companies contracting with states to run their Medicaid programs are denying care at double the rate of Medicare denials under managed care (i.e., Medicare Advantage).

    It is not difficult to understand why an undue administrative burden is placed on poor people for both qualifying for government health care in the first instance and then for receiving needed care once they are admitted to the program.  Powerful insurance companies have a financial incentive to deny a large proportion of care medical professionals think Medicaid recipients need. Furthermore, a lobby for poor people is nonexistent; they are powerless; and they can be pushed around and/or ignored by state bureaucrats.  Nevertheless, a puzzling and mistaken conventional wisdom proclaims that a corporatized and privatized system is a far more efficient and effective way to deliver taxpayer funded medical services.  It is past time that the conventional wisdom undergoes strong pushback from medical professionals, academics, and the media.

Background

    During the 2000 aughts (starting about 2010), states relying on the concept of “managed care” in which insurance companies (known as MCOs) are paid a “capitation rate,” i.e., a specific amount per enrollee, turned over their Medicaid programs to insurance corporations.  If the insurers keep their costs below the total dollars committed for enrollees, they make money.  Patients are, however, required to utilize medical services within “network.”  They must use a medical practice or hospital that is part of the contracting MCOs network of physicians and other medical providers.  Furthermore, care must be authorized by the MCO.

    The size of federal expenditures for Medicaid has resulted in mushrooming revenue for major healthcare insurers such as UnitedHealth, Elevance, Cigna, Centene, and Aetna.  In the early 2000s, no health insurers were in the top 30 corporations listed on the Fortune 500.  By 2022, nearly one-third of the top 30 Fortune 500 companies were related to healthcare insurance and managed care contracting.

    The idea of managed care began with the concept of health maintenance organizations (HMO) such as Kaiser Permanente and Ross Loos.  Individuals can join an HMO, pay the premium and expect low deductibles and co-pays.  However, the HMO or MCO in the case of Medicaid managed care have a network of physicians and other providers.  Enrollees must “stay within network” and receive authorization from an insurer (MCO) for a host of medical services their primary physician thinks they need.  This opens the door to tremendous power of insurance behemoths over Americans’ healthcare needs.

Has Privatization & Corporatization Through the Managed Care Concept Been Beneficial to the Health of Americans?

    As I mentioned, it is conventional wisdom that private, for-profit corporations can do a better job of administering taxpayer funded healthcare than government agencies.  But managed care is not working out in accordance with the widespread belief the government will pay less for healthcare if the profit motive incentivizes better care at a lower price.  Medicare Advantage costs fifteen percent more per enrollee than traditional Medicare.  Medicaid MCOs are paying robust dividends, buying back billions of dollars worth of their stock, and rewarding executives with exorbitant compensation packages while well baby care, infant mortality, heart disease, diabetes, and access to addiction treatment are not significantly improving across the Medicaid eligible population.

    Aetna, UnitedHealth, Centene, and other major insurance companies are reaping huge financial rewards by keeping per capita costs low. That would not in itself be a bad thing if outcomes were improving.  Perhaps having some healthcare is better than nothing.  No doubt, people receiving Medicaid benefits have better health outcomes than people with nothing.  But that is not the point.  Comparing poor people with no health insurance to poor people with Medicaid is illogical.

    Medicaid is lower tier medicine.  So those individuals lucky enough to qualify for it and actually receive it are treated as second class citizens.  So, by virtue of carving out a form of medical care for poor people – which is seen as welfare or a “handout” – the system can exploit them for financial gain while denying them the quality of care every other citizen deserves even though every form of healthcare received by Americans is heavily subsidized in some way or other by government.

Follow Us at the Center for Health Care Information & Policy (a newly formed nonprofit at https://chipcenterus.org/) and on this Blog as We Expose the Illogic and Folly of Privatizing U.S. Healthcare

[1] HHS OIG Report: “High Rates of Prior Authorization Denials by Some Plans and Limited State Oversight Raise Concern About Access to Care in Medicaid Managed Care.” https://www.oig.hhs.gov/oei/reports/OEI-09-19-00350.asp#:~:text=Overall%2C%20the%20MCOs%20included%20in%20our%20review%20denied,rates%20greater%20than%2025%20percent-twice%20the%20overall%20rate.

H.H.C. OF MARION COUNTY v. TALEVSKI DECISION ISSUED ON THURSDAY:  THE SUPREME COURT HANDS NURSING HOME PATIENTS AND THEIR FAMILIES A MAGNIFICENT HUMAN RIGHTS VICTORY!

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Dave Kingsley

Thanks to Susie and Ivanka Talevski, Seven Supreme Court Justices, and Individuals and Organizations Filing Amicus Briefs, the Federal Nursing Home Rights Act Has Been Strongly Reinforced.

    In a decision written by Justice Ketanji Brown Jackson and reported on Thursday, the U.S. Supreme Court held that unambiguous provisions of the Federal Nursing Home Rights Act (FNHRA) are enforceable by private individuals under Section 1983 of the Civil Rights Act of 1871 (H.H.C. of Marion County v. Talevski[1]). This is a big deal because it means that practices such as use of chemical restraints and arbitrary transfer are illegal and a cause for action in federal courts.  Patients and their families cannot be restricted only to medical malpractice suits in state courts and/or to state administrative remedies.

    Susie Talevski, an attorney, initially filed a suit in Federal District Court on behalf of her mother Ivanka after her father Gorgi Talveski was arbitrarily transferred to a facility an hour and a half from their home.  The transfer occurred after the Talveski family consulted with outside physicians and hired a neurologist to evaluate the regimen of drugs administered to Mr. Talveski.  It appeared that his health deteriorated after the drug regimen was initiated and improved after six powerful psychotropic medications were terminated from the regimen.

    In conversations with Susie and her colleagues in Indiana, I’ve learned that it is very difficult to navigate the Indiana tort liability laws and even make it into state courts with a suit against a nursing home.  As in most states, awards for victims of medical malpractice are capped and not more than a hand slap in Indiana.

    Furthermore, as most of us who advocate for nursing home patients know, there is no real remedy at the state level in most states for any type of redress when abuse and neglect occur. Administrative remedies through state agencies tend to end up in the “nothing to see here” file.

    In the final analysis, patients and families have the best chance for redress in federal courts when nursing homes illegally violate rights granted by FNHRA.  I applaud Susie’s courage in fighting this case all the way to Supreme Court.  In agreement with H.H.C. of Marion County’s claim that she didn’t have standing to sue in federal court, the district court threw out her case.  She appealed to the 7th Circuit, which overturned the decision of the district court. H.H.C. of Marion County appealed, and the Supreme Court granted certiorari.

H.H.C. of Marion County v. Talevski Should not be Below the Radar, but it is.

    On Thursday, the Supreme Court voting rights decision and the indictment of former President Donald Trump grabbed all of the headlines and H.H.C. of Marion County v. Talveski seems to have escaped media notice. I hope this case is discussed widely and in depth by advocates and scholars.  The back story and the legal implications of the case are far more extensive and complicated than I want to deal with in this brief blog post. Protection of the right to be free from chemical restraints and capricious behavior of nursing home providers should not be left to state tort law and/or the whim of state agencies, many of which have a propensity to protect the interests of the industry at the expense of patients and families.  Certainly, Indiana has one of the most anti-consumer torts laws in the U.S. 

    It was shocking to read the argument of the U.S. Solicitor General on behalf of the provider (H.H.C. of Marion County) before the Supreme Court.  She claimed that administrative channels at the state level were sufficient to insure FNHRA rights. This naivete on his part is one more example of how out of touch federal administrative agencies are in assuming that individuals are not in serious jeopardy of having their rights violated or ignored within individual states.

The ”Medicaid Unwinding:” An Orwellian Euphemism for Abject Cruelty & Profound Ignorance

    Fortunately, the Talevski family, the 7th Circuit, and seven Supreme Court justices could see that individual civil rights granted to all U.S. citizens by Congress should be protected in the federal courts under the Civil Rights Act of 1871, Section 1983.  The precedents for this case have pertained mostly to Medicaid rights in general. 

    During COVID, the Federal Matching Percentage (FMAP) for state Medicaid programs was increased by a hefty percentage for the purpose of preventing the administrative burden on Medicaid beneficiaries who are required to reapply each year and prove their eligibility for the program.  As a condition for receiving the FMAP uplift, states could not disenroll individuals from the Medicaid program.  The number of people receiving Medicaid benefits, i.e., had access to medical care, grew at a vast rate.  That program ended on May 1st, and now the so-called unwinding, i.e., kicking people off, has resulted in a precipitous drop in enrollees. 

  With weak state regulation of healthcare providers, it is likely that states will regularly violate the rights of U.S. residents to medical care.  Especially in states with far-right wing legislatures, harassment of poor individuals and families needing medical care and other assistance is ordinary and ongoing.  In Arkansas, a state that tried for a waiver from CMS to force Medicaid enrollees to undergo drug tests, the current governor, Sara Huckabee Sanders, has come up with “Arkansas Renew” as the Orwellian label for her disenrollment program.

    All realms of human rights and civil rights are critically important if we are to retain a semblance of Democracy.  Drugging and disappearing people into out of the way institutions is one of the most chilling and horrifying practices imaginable in any society.  Certainly, it is characteristic of fascist, authoritarian governments.  That it happens on behest of corporations attempting to optimize return for shareholders, executives, and other special interests, doesn’t make it any less odious.

[1] https://www.supremecourt.gov/opinions/22pdf/21-806_2dp3.pdf.

Gray Panthers’ Statement on the American Nursing Home System: “Restructure the Industry and Defund the Existing System.”

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Dave Kingsley

Reissuing an Important & Elegantly Written Document by the National Council of Gray Panthers Networks.

    A couple of years ago, the Gray Panthers issued a statement on the nursing home industry in the United States.  Entitled “Restructure the Industry and Defund the Existing System,” it was elegantly written and to the point of what we need in public discourse regarding the suffering of institutionalized disabled and elderly Americans in long-term care – suffering due to the precedence of shareholder value over humane care.  Hence, the document is well worth reading today since recognized reform movements in Washington, D.C. over the past couple of years have been sympathetic to the industry and unwilling to confront the truth.

    The authors were too modest to take credit and list their names on the statement.  I assume that Jan Bendor, Art Persyko, Lydia Nunez, and Clint Smith had a hand in writing it.  But perhaps it involved more members or perhaps all of the GP Senior Housing Committee.

    The following are excerpts from the summary:

    “The ‘enemy’ is a monster created by federal policy, allowing for-profit corporations to own chains of long-term care facilities, and lavishing on the owners the incentives and benefits in our tax laws regardless of their performance in caregiving.”

    “These corporations are engaged in buying and selling of real estate with very favorable tax rewards.  The corporations can practice medicine and also profit from Medicare, Medicaid, and other programs that can be hijacked for the corporation’s benefit rather than for the benefit of those in their care.”

Problems & Recommendations

    In stating the problems on page 2, focus of the statement was on lack of accountability for the massive loss of life due to COVID, weak regulation by government agencies, underpaid staff in understaffed facilities, and the political clout of the industry through lobbying.  Recommendation appropriately included accounting of Medicare length of stay fraud, wrongful discharges that occur, accountability for misreporting of data regarding harm and finances, overuse of antipsychotics.

   Download the Gray Panther Statement on Nursing Homes Here:

2021-08-09-Nursing-Home-Crisis-Action-to-Restructure-NHI-3Download

If the U.S. Moved in the Direction the Gray Panthers are Suggesting, Americans May Not Hate the Thought of Needing Long-Term Care in a “Nursing Home.”

Inside the Washington, D.C. beltway reform efforts are beset with influence from the powerful forces that have a vested interest in keep the nursing home system the way it is. It is time for some honest discussion about why the status quo is only gaining strength with a small tweak here and there that serve as appearances and nothing more.

THE STATE OF NURSING HOME FINANCIAL REPORTING IN POST TRUTH-AMERICA.

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Dave Kingsley

American Tolerance of Corporate Deceit & Predatory Economics is Perplexing

    Misinformation can be harmful and even deadly. We have seen evidence of this maxim during the COVID crisis. We have seen it in the debate over climate change and in so many other critical issues confronting society. In post-truth America, it has become acceptable to put forth any mistruth or unverified and unverifiable claim and escape embarrassing denunciation, excoriation and censure. In no case is this more apparent than in the mistruths spread by for profit corporations in the nursing home business.

    It isn’t difficult to compile objective evidence that nursing home industry hardship pleas of low profits, thin margins, and other such claims are false and misleading.  The American Health Care Association/National Center for Independent Living, the industry’s lavishly funded propaganda organ, consistently spreads the narrative that corporations in the Medicaid and Medicare funded long-term care business are struggling financially and need a significant increase in reimbursements.

    A highly qualified financial sleuth isn’t needed for debunking the industry’s financial narrative of low profits and struggling investors.  Therefore, it may be difficult to understand how nursing home reform commissions and politicians escape public opprobrium for ignoring the patently obvious. However, it should be understandable that the finer points of nursing home finance isn’t on most peoples’ radar. We need to put it on everyone’s radar.

The Nursing Home Industry is Lying to the American People and Getting by with It

    The truth is that the federal and state governments allow for a charade in which facility-specific costs are submitted without any clarity about cash flowing to holding companies and parent corporations. We don’t really know how much Medicaid and Medicare revenue in the privatized nursing home system is extracted for dividends, and executive pay. ONE BIG EXCEPTION, HOWEVER, IS THE ENSIGN GROUP.

    With an annual revenue in 2022 of over $3 billion, the Ensign Group is the largest single provider of nursing home care in the United States.  It is also the only publicly listed company that earns revenue solely from Medicaid and Medicare funded long-term care.  More importantly for understanding the financial realities of the nursing home business, it is a publicly listed corporation and therefore must file financial reports with the Securities & Exchange Commission (SEC).

    The Ensign Group annual 2021 10-K report submitted to SEC notes a net income of 8.5 percent and earnings before interest, taxes, depreciation, and amortization (EBITDA) of 13.7 percent.  However, an examination of their six facilities in Kansas reveal a combined net revenue of $55,567,680 and a combined operating negative net of -3,201,123 (-5.7%).  Five of the six facilities reported a negative net income.

Facility-Specific Cost Reports:  How the Big Lie Works.

     A review of Ensign Group cost reports in one state, i.e., Kansas, provides insight into how the misleading state-specific and facility-specific financial  system works.  Ensign operates six facilities in the state of Kansas.  Comparing the facility-specific cost reports to the consolidated financial report submitted by Ensign to the SEC is instructive in demonstrating the inadequacy of the cost reports as a measure of financial performance.

    For instance, Table 1 contains cost report data from an Ensign owned facility known as Riverbend Nursing Home in Kansas City, Kansas (incorporated and licensed as Big Blue, LLC). The data indicates that the facility, with a slight negative net operating income, lost money (this is 2021 data). It is typical for facility cost reports to show a very low or negative income but that doesn’t reflect what parent corporations are earning from the operations.

Table 1:  Net Operating Margin

Form CMS 2540-10:  Home Office Allocation & Related Parties

    Parent Corporations with a chain of facilities incorporated as LLCs can claim an allocation to their home office based on corporate expenses for operating each facility.  The “home office allocation” appears to be a large allowance for expenditures that are not fully clarified, not decipherable by the public, and, I believe, not understood by state auditors.  For instance, Table 2, includes claims for Ensign home office allocation and payments to their subsidiaries paid for insurance and real estate.

Table 2: Part I, Riverbend Form CMS 2540-10

Corporate Hubris:  They Don’t Need to Answer Questions Required by Law

    A state auditor with whom I had a conversation recently asked me if I had any insight into the home office allocation that might be helpful for auditing purposes.  This person knew that I had been looking at cost reports across the U.S. and thought practices in other states might be something of a guide.  That the auditor wasn’t sure about how to evaluate funds extracted from revenue and sent up the chain of LLCs (often shell companies) to home offices tells us much.

    The auditor is in fact not the problem.  Statutes governing Part I of Form CMS-2540-10 (42 CFR 413.17) states that “such cost must not exceed the amount a prudent and cost conscious buyer would pay for comparable services, facilities, or supplies that could be purchased elsewhere.”  Commonsense suggests that pricing goods and services sold to related parties requires some sophisticated and extensive analyses. Do states have the regulatory capacity to do that?  Advocates and scholars need to raise that issue with legislators and demand to see any evidence supporting decisions to approve claimed expenditures to related parties.

Part II of Form CMS 2540-10:  How Vague Can They Be?

    Part II of Form CMS 2540-10 requires far more detail than shown in Table 2, which reflects the exact data submitted by the Ensign Group for its facilities. For instance, the statute requires that an entity listed in Column 4 “enter a percent of ownership in the provider.”  That may not be a logical question because Ensign corporate owns everything.  Gateway Healthcare is a shell company that merely hides the flow of capital, avoids taxes, and protects the facility from liability.  Theoretically, Gateway owns 100% of Riverbend, but Ensign owns 100% of Gateway (an LLC incorporated in Nevada).

Therefore, Ensign’s facility-specific cost reports merely ignore statutory reporting requirements. That appears to be acceptable to state auditors. This kind of “catch us if you can” hubris is typical when an industry has an extraordinary amount of money to spread around in Washington and the 50 state legislatures.

Table 3: Part II, Riverbend Form CMS 2540-10

Summary:  CMS Allows States to Regulate Nursing Homes & Looks the Other Way

    CMS is not likely to fix the corrupt and inadequate nursing home financial reporting system. They will noodle with advocates and mull over all sorts of well-founded and sensible proposals but without pressure from legislators to counter the industry’s power in Washington and in the 50 states, the status quo will prevail. 

The political will just isn’t there at the national level. We need to change that.  Advocates are likely to make more progress at the state level by compiling cost reports in their respective states and take their analyses to the media and state representatives.     The critical – life and death – nature of this problem should lead the public to revolt if they understand it and have the evidence to clearly see that the industry narrative is false.

  Lack of staff and poor quality of care leads to shortened lives and considerable suffering.  That could be fixed by stopping the excessive extraction of cash sent up the line to investors and executives. That will only be stopped by a narrative based on verifiable fact and a coordinated effort to spread that narrative in the media and among state legislators. Financial data may not seem interesting on the evening television news or in the print media.  But we are obligated to make it understandable, interesting.

The AHCA/NCAL & Brown University Long Term Care Data Cooperative: A Horrifying Move by the Nursing Home Industry to Control Nursing Home Data Analytics.

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What is the Long Term Care Data Cooperative?

    The lavishly funded American Health Care Association/National Center for Assisted Living publishes Provider Magazine – a very slick piece of propaganda, the purpose of which is promotion of the nursing home industry.  In the November/December 2022 issue, the magazine included an article entitled Where Innovation Meets Data: The Long Term Care Data Cooperative.

    This newly minted institution is, according to the author, “the first of its kind in the world.” The author provided – unwittingly, I’m certain – a scary and chilling description of this so-called “innovation:” “Formed in partnership by AHCA/NCAL and Brown University and funded by the National Institute of Aging, the Cooperative is an effort to improve the quality of care within skilled nursing care centers through a new – and collaborative – approach to gathering and sharing patient data.” 

    According to the article this is a “large-scale effort” in which any long-term or post-acute center can enroll.  The data will apparently come from multiple electronic record (EMR) software vendors “into a single repository of information.”

Who Gets the Data?

    Given the industry’s money and political power, advocates, researchers, and activists should be very wary of any flow of data through the health care system controlled by the AHCA/NCAL.  I can think of no other government data set collected from taxpayer funded contracts that is controlled by an industry as opposed to the funding agency.  This cooperative – industry front organization – will provide the data to “vetted federally funded researchers.” 

    And how will the vetting process work?  According to the article, it will work this way:  “Researchers will need to move through an extensive approval process to gain access to the Long Term Care Data Cooperative, which will include input from participating providers, who have the opportunity to review each application and decide on appropriate uses of data.”

Advocate, Researchers:  Reread the Above Quote and Think Seriously About It!

    If providers and the AHCA/NCAL decide who has access to the data and how it is used, this entire enterprise will benefit the industry without any commitment to evaluation of care on behalf of the U.S. taxpayers.  Those of us with an allegiance to science, integrity, and research ethics and who have had access to large government datasets, can quickly recognize how scientifically and ethically flawed this process is.

    Think about what the industry has been able to pull off with the imprimatur of Brown University and the National Institute of Aging.  A government agency is funding industry control over data that belong to the people of the United States.  This has huge scientific, democratic, and moral implications.  This is not the way the government should work, and as far as I know, has ever worked in relationships with qualified researchers.

Why is Hospital Data So Accessible While Nursing Home Data is So Inaccessible?

    My department chair at Kansas University Medical Center asked me to design a course on large datasets and statistics – essentially a data analytics course for PhD students.  I did that. In that endeavor, I used the H-CUP hospital dataset, which I purchased each year for $300 from the Agency for Health Quality & Research (AHRQ).  The file included approximately 200 variables and eight million cases (de-identified patient data).

    The process for obtaining this dataset is rather simple (see:  https://hcup-us.ahrq.gov/).  Researchers simply need a legitimate purpose for using the data and be willing to sign a data use agreement.  No hospital corporation had any role in vetting users of the data nor a say in the the nature of the research.  Although I retired from KUMC, I can continue to obtain the data and have indeed ordered it on occasion.

Democracy Requires Openness and Information to Which the Public Has Access

    When residents of a country are shut out of the flow of information critical to knowledge of how their taxes are utilized, they have no say in governance, and, therefore, no real democracy.  They cannot advocate intelligently and effectively for their rights as funders of programs that should benefit them.  When they are kept in the dark and subjected to what monied interests choose to tell them, they lose their right to expect a competently run program for which they are paying.

    When powerful industries withhold, misrepresent, and misuse data, the taxpaying public will of necessity be cheated.  In a democracy, residents have a right to know the results of programs which they need and for which they are paying.  However, as authoritarianism grows, concentrated wealth and power increasingly filter information. 

    The AHCA/NCAL misrepresents financial data on behalf of its corporate members with impunity.  They not only get a pass on their lack of integrity, their claims regarding providers’ financial hardships due to low Medicaid reimbursement are repeated by some well-known economists in peer reviewed journals.  Never have I seen evidence provided for these claims.  Conversely, I can produce, and have, produced an abundance of evidence to the contrary.

    It is critically important that advocates, activists, and, hopefully, journalists confront the industry’s misrepresentations.  Their propaganda is deadly.  Rather than provide adequate care, too many nursing homes extract maximum cash while providing minimal care.  It seems to me that AHCA/NCAL-Brown University data enterprise is configured to continue that unsavory characteristic of long-term care industry.

THE HEALTH CARE INDUSTRY:  CONCENTRATED WEALTH INEVITABLY TRANSFORMS INTO CONCENTRATED POWER

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It is estimated that healthcare expenditures in the United States have grown to twenty percent of GDP.  In 2022, the Bureau of Economic Analysis indicated that U.S. GDP had grown to $25.46 trillion (https://www.bea.gov/news/2023/gross-domestic-product-fourth-quarter-and-year-2022).  Hence, we can assume that in 2022, approximately $5 trillion was expended for U.S. healthcare.

In the taxpayer funded, privatized, medical care system in the United States, the growth of corporations with revenues from Medicare, Medicaid, Obamacare, and other tax subsidized healthcare (e.g., employer provided health insurance) has been astounding. The size and number of healthcare related corporations listed on the Fortune 500 top 30 in 2020 compared to 2000 is a reflection of the dominance and power of companies such as UnitedHealth, CVS, McKesson, Cardinal Health, and others appearing in the 2022 Fortune 500 top 30.

As the table below indicates, absolutely no healthcare related corporation was ranked among the top 30 corporations in revenue in 2000. In a mere two decades, nine of the 30 largest U.S. companies were in some facet of the medical/healthcare sector. Note the following corporations in the table and their Fortune 500 2022 ranking: CVS Health (4), UnitedHealth Group (5), McKesson (9), Amerisource Bergen (10), Cigna (12), Cardinal Health (15), Walgreen/Boots Alliance (18), Elevance Health (20), Centene Corporation (26).

Given the money in politics and decreasing capacity of government agencies to monitor and hold corporate behemoths accountable, the growth of health/medical related enterprises should be alarming. These are not capitalist enterprises. Rather, they are government sponsored enterprises much like Fannie Mae and Freddie Mac and should be regulated as such.

Furthermore, money is power and much of the “inside the Washington, D.C. beltway” activity related to studies, commissions, and general policymaking involving academics and other professionals has been rigged through power politics to insure the perpetuation and preservation of the participants – hence, preservation of the status quo. Let’s take the nonprofit Better Medicare Alliance as an example. This front group has roped in scholars, professional associations, and other duped entities in a cooperative effort to sell Medicare Advantage to the public on behalf of the industry.

Currently, the Biden Administration is attempting to reduce Medicare Advantage billing fraud that will save the Medicare Trust Fund billions. That legitimate and laudable effort on the President’s part was attacked in an ad during the last Super Bowl. The ad was paid for by Better Medicare Alliance. Check out this outfit’s “ally list” and its list of “scholars.” Conflicts of interest involving scholarship, corporate board service, and coopting of scientific institutions by superrich foundations with Wall Street leaning board members should be exposed along with a network of think tanks presenting a charade for the purpose of enhancing revenue from government programs.

FORTUNE 500 RANKINGS:  2000 & 2022
RANK
(2000)		CORPORATIONREVENUE*RANK (2022)CORPORATIONREVENUE*
1General Motors18.91Walmart572.8
2Walmart16.72Amazon469.8
3Exxon Mobile16.43Apple366.8
4Ford Motor Co16.34CVS Health292.1
5General Electric11.25UnitedHealth Group287.6
6IBM8.86Exxon-Mobile285.6
7Citigroup Inc8.27Berkshire Hathaway276.1
8AT&T6.28Alphabet257.6
9Phillip Morris Inc6.29McKesson238.2
10The Boeing Company5.810AmerisourceBergen214.0
11Bank of America5.111Costco195.9
12SBC Communications4.912Cigna174.1
13** 13AT&T168.9
14The Kroger Co4.514Microsoft168.1
15State Farm Insurance4.415Cardinal Health162.5
16Sears, Roebuck, & Co4.116Chevron162.5
17AIG4.117Home Depot151.2
18Enron4.018Walgreens/Boots Allian.148.6
19Teachers Insurance & Annuity3.919Marathon Petroleum141.0
20Compaq Computers3.820Elevance Health138.6
21Home Depot3.821Kroger137.9
22Lucent3.822Ford Motor Co136.3
23Procter & Gamble3.723Verizon133.6
24Hewlett-Packard3.724J.P. Morgan Chase127.2
25MCI World Com3.725General Motors127.0
26Fannie Mae3.726Centene126.0
27K Mart3.627Meta118.0
28Texaco3.628ComCast116.4
29Merrill-Lynch3.529Phillips 66114.9
30Mogan Stanley Dean Witter3.430Valero Energy108.3
* In Billions of dollars. **#Number 13 not noted on Fortune 500 list.

UnitedHealth Corporation is Piling Up Cash & Buying Back Stock. But the American Peoples’ Health for Which they are Paid to Improve is Deteriorating

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The Basics of UnitedHealth Financial Performance in 2022

With revenues of $324.2 billion in 2022, UnitedHealth (UH) is the fifth largest corporation in the United States (behind Walmart, Amazon, Apple, and CVS Health). Practically all of UH business is related to tax-funded health care such as Medicare and Medicaid. As one of the largest players in the move toward Medicare and Medicaid managed care, this company has had phenomenal growth in the past two decades (as have CVS Health and Centene Corporation).

UH revenue increased by 26% between 2020 and 2022 (from $257.1 billion to $324.2 billion). The company’s 2022 balance sheet notes $23.4 billion in cash and cash equivalents – an increase of $2 billion over 2021.

Capital Resources & Uses of Liquidity: No Indication of Allocation to Employee Wages & Working Conditions, R&D, or Improved Care

The Company’s 10-K states that “Increased cash flows provided by operating activities were primarily driven by changes in working capital accounts and increased net earnings.” (page 28). Given UH’s massive revenues from government expenditures and a robust operating margin of 8.8%, taxpayers, need to be aware of how the company’s surplus capital is allocated. Like any corporation, UH has debt obligations but expects to finance those from current operations. So, accumulated capital is available for other purposes.

On page 78, the 10-K indicates that he board of directors (which includes Washington, D.C. policy maven and healthcare influencer Gail Wilensky – see below) authorized expenditures of $7 billion for common stock repurchases in addition to $5 billion in 2021 and $4.5 billion in 2020. So, the company pumped up its share price during COVID-era by repurchases of stock totaling $16.5 billion.

In addition to a 2022 stock repurchase of $7 billion, UH increased the company’s quarterly cash dividend $5.80 per share to $6.60 per share. With 950 million share outstanding, approximately $6.27 billion in cash was paid to shareholders. Over 20% of the stock is owned by three asset management firms – Vanguard (8.44%), BlackRock (7.4%) and FMR LLC (5.165) – indeed, Institutional investors/asset managers own the bulk of the equities market. Retail investors own less than 10% of the equities traded on U.S. exchanges.

Stock Buy Backs Were Illegal in the U.S. Until 1982. They Should Still be Illegal – Especially When They Are Repurchased With Earnings From Tax Funded Medical Care

Stock repurchases are a thinly veiled form of stock manipulation and insider trading. Furthermore, this form of financialization of corporate activity benefits a small number of very wealthy Americans but is damaging to the overall economy. Earnings passed through to shareholders without retaining cash for employees, R&D, and long term investment puts downward pressure on economic growth and wages and fuels maldistribution of wealth, which has reached crisis proportions in the U.S.

Taxpayers have a right to fairness and equity in the use of capital earned through tax funded healthcare. They must demand that stock repurchases stop. Furthermore, the people of the U.S. have a right to a fair allocation of excess cash earned through healthcare for which they are taxed.

Board Members & Executives Should Be Held Accountable: It’s Not Their Money

Until the early 1980s, executives were compensated mostly in the form of salaries. As executive and board compensation has evolved, salary is now a small part of corporate compensation. Most executives and board members receive pay in the form of stock options and incentive stock awards. Philosophically, executives merit compensation if they enhance shareholder value and corporate financial success. As this philosophy has taken hold in the U.S. over the past 40 years, these rewards have become disconnected from productivity.

The boards and executives of healthcare corporations are focused on earnings and cash flow in the short term – not on reinvestment of excess earnings in long term improvement in the health of the U.S. population. As a matter of fact, life expectancy has been declining in the U.S. Although most states have contracted with these mammoth corporations to improve the cost and output of Medicaid systems, there is no substantial evidence that is happening. Furthermore, Medicaid, the poor peoples’ medicine they are charged with improving, is still stigmatizing and dehumanizing.

Each year, recipients are forced to run an administrative gauntlet of humiliating and frustrating reapplication that is much different than anything higher SES Americans experience in application for entitled health care. It appears that heart disease, poor prenatal care, diabetes, drug addiction, and other major chronic and acute diseases have not been reduced by Medicaid managed care. Nor is there evidence that a massive shift of U.S. healthcare dollars to corporations will lower the outrageous per capita cost of healthcare.

Despite failure to improve the overall healthcare of Americans, corporate boards continue to reward executives with lavish salaries and shareholders with high dividends. They justify that on financial grounds – not on success in improving overall health of the people.

Concentrated Wealth Leads Inevitably to Concentrated Power: Connecting Dots Inside the Washington, D.C. Beltway

Corporations are vying in the Washington, D.C. maze of politics, lobbying, and corruption to capture as much of the trillions in Medicaid, Medicare, Obamacare, and other forms of government healthcare expenditures. They can pay for the influence they need in chasing ever increasing expenditures for healthcare.

I noticed that one Gail Wilensky, PhD is a UH board member. This caught my attention because Dr. Wilensky is a very influential policy maven about town in Washington. She has a very thick resume consisting of scholarly publications, served as a chair of MedPAC, held other high level government positions, and is generally a highly respected healthcare influencer. However, she receives about a half million in compensation per year as a UH board member and has accumulated over 51,000 shares of UH stock, which closed at $481.90 today (3/27/2023). Hence, the stock that she hasn’t sold and is still holding is worth about $24.6 million.

Dr. Wilensky also serves on the board of Quest Diagnostics and a smaller healthcare corporation (ViewRay). The following is her biography appearing on the Quest Diagnostics website:

“Dr. Wilensky, is a Senior Fellow at Project HOPE, an international non-profit health foundation, which she joined in 1993. From 2008 through 2009, Dr. Wilensky served as President of the Defense Health Board, an advisory board in the Department of Defense. From 1997 to 2001, she was the chair of the Medicare Payment Advisory Commission. From 1995 to 1997, she chaired the Physician Payment Review Commission. In 1992 and 1993, Dr. Wilensky served as a deputy assistant to the President of the United States for policy development relating to health and welfare issues. From 1990 to 1992, she was the administrator of the Health Care Financing Administration where she directed the Medicare and Medicaid programs. Dr. Wilensky is a director of UnitedHealthcare Group and ViewRay, Inc. She served as a director of Manor Care Inc. from 1998 until 2009, Gentiva Health Services, Inc. from 2000 until 2009, Cephalon Inc. from 2002 to 2011 and SRA International, Inc. from 2005 to 2011. Dr. Wilensky also served as a Commissioner of the World Health Organization’s Commission on the Social Determinants of Health and as the Non-Department Co-Chair of the Defense Department’s Task Force on the Future of Military Health Care. She has been a director of Quest Diagnostics since January 1997. Dr. Wilensky has extensive experience, including in strategic planning, as a senior advisor to the U.S. government and private enterprises regarding healthcare issues and the operation of the U.S. healthcare system.”

Dr. Wilensky is merely one example, one individual among the ethically challenged thousands, caught up in the government-to-corporation-to government loop. Going from Senate staffer to the Senate Finance committee and on to K Street and a lobbying job for Big Pharma, United Health, or some other powerful Wall Street entity has become normalized. The American people are paying the price for the consequent maldistribution of power and wealth in taxes and poor health. The poor pay more.

Centene Corporation’s Annual Financial Report Indicates That Poverty is Profitable for Investors

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The Biggest Player in Poverty Medicine Had a Banner Year in 2022

    Among all U.S. corporations, Centene Corporation is ranked 20th in revenue. It is also a major player in the Medicaid Managed Care business.  The other leading corporations contracting with states in the $800 billion Medicaid program include United Health, Aetna/CVS, Anthem, and Molina. Most states have moved or will be moving to managed care and contracting with an MCO.  The big five have approximately half of that business now.  It is likely that the Medicaid MCO market will become increasingly concentrated and oligopolistic over the next few years.

    Centene can be said to be solely in the Medicaid managed care business.  According to its recently released annual 10-K report to the Securities and Exchange Commission, 97% of Centene 2022 revenues of $144 billion were derived from Medicaid and Medicare contracting – practically all of it from Medicaid.  The company’s cash flow statement notes $6.3 billion net cash from operating activities, which is a major indicator of “profitability.”  However, that is not the whole story regarding enhancement and protection of shareholder value.

Taking Care of Shareholders by Keeping Stock Price Propped Up

    Cash and cash equivalents on Centene’s balance sheet increased from $10.8 billion in 2020 – the early stages of the ongoing COVID pandemic – to $12.7 billion at the end of 2022. Taxpayers need to ask questions about how that hoard of cash is allocated.  I have tracked the company’s stock since late November of 2021 when the equities market began to tank.  It closed at $73.77 on November 29, 2021 and has been quite resilient despite the market decline since that time – trading in the high $70s and $80s.

    The strength of Centene’s stock price is most likely due to a $3 billion stock buyback. In 2022, the company’s board “authorized increases to the Company’s existing stock repurchase program, including $3.0 billion in June 2022 and an additional $2.0 billion in December 2022.” (see page, 34 of 10-K*).  With those increases, the Company was authorized to repurchase up to $6.0 billion.

    Stock repurchases, which are thinly disguised forms of stock manipulation/insider trading, were unfortunately deregulated during the Clinton Administration.  This financial maneuver benefits only shareholders and executives and does nothing for long-term investment in workers, R&D, patient quality, and other productive activities.  The benefits for executives and board members who have been awarded generous stock options involve strategies for exercising their right to sell stock based on insider knowledge (of which the public is unaware).

    Since the financial deregulation allowing loose rules about stock buybacks a corporate buyback frenzy has been underway. Free money handed out by the Federal Reserve from 2008 until Fed Chair Powell reversed course to quell inflation pumped $trillions into speculative finance, much of which was borrowed for stock repurchase. Consequently, the U.S. economy has been damaged and wealth has become increasingly maldistributed by the diversion of cash to a wealthy few that could be reinvested in long-term growth benefitting employees and overall economic growth. It seems to me to be the height of governmental irresponsibility to not regulate this kind of activity on the part of corporations which are rewarded for managing poor peoples’ health care.

Politically Powerful Board Members & Executive Board Compensation

    The revolving door from government to business is starkly obvious on the Centene board, which includes two powerful former congressmen – Tommy Thompson and Richard Gephardt. Mr. Thompson is also a former Secretary of Health and Human Services.  The Centene Proxy Statement for 2022 has not been issued to the public yet (we expect to see it within a month).  However, the 2021 Proxy Statement indicates that Mr. Thompson’s compensation in cash and stock totaled $403,046.  Mr. Gephardt’s compensation totaled $426,923.  The fine print below the compensation table states that both Mr. Thompson’s and Mr. Gephardt’s compensation included use of the company aircraft and other perks.

Executive Compensation

    The late Michael Neidorff had been Chief Executive and Chairman of the Board in 2019, 2020, and 2021 with compensation for those years of $26.4 million, $24.9 million, and $20.6 million respectively.  His replacement, Sarah M. London joined the board in 2021 as vice chairman and received 2021 compensation of $15.2 million.  The seven top executives received a total of $80 million in compensation in 2021.

Conclusion

    Medicaid expenditures in the U.S. will reach $1 trillion within the next few years.  Along with expenditure on military activities, this poverty program will remain one of the two biggest programs funded by U.S. income tax payers.  With expansion of Medicaid under the Affordable Care Act, we anticipate that growth of tax-funded  poverty medical care will be rapid in the years ahead.  This raises the question of evaluation of these expenditures and public discourse about the quality of care.

    My initial foray into availability of state and federal data regarding the effectiveness and regulation of MCOs leaves me with considerable doubt about what taxpayers and legislators know about outsourcing medical care for poor people.  It is not difficult for me to uncover the inordinate executive compensation packages, stock buyback information, and financial performance metrics reported by major providers.  However, medical and ethical, questions arise regarding the justification for cash out to investors and executives given the care provided.  I will be sharing my research pertaining to Medicaid expenditures on this blog in the weeks, months, and years ahead. 

*The Centene 10-K can be accessed at https://investors.centene.com/all-filings?cat=1.