Tag Archives: Finance

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

Posted on by

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

Posted on by

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.

THE ENSIGN GROUP AND CENTENE CORPORATION ANNOUNCE DATES FOR PRESENTATION OF 4TH QUARTER, 2022 RESULTS

Posted on by

    The Ensign Group and Centene Corporation have announced dates for presentation of 4th quarter, 2022 results – February 3rd and February 7th respectively.   Ensign and Centene are the two largest and the only publicly listed corporations earning the bulk of their revenue from Medicaid. The Ensign Group is engaged exclusively in long-term and skilled nursing care.  Centene primarily provides Medicaid managed care services to states.

    Given that Medicaid is means-tested and lower tier poverty medicine, it is notable that these two corporations have experienced rapid revenue growth and high earnings while lavishing executives with generous compensation packages.

    In this post, I will review Ensign Group’s 3rd Quarter, 2022, results, which will be a point of comparison for the upcoming 4th Quarter results and cover more of Centene’s financial performance and executive pay in a later post.  The purpose of this post is to focus attention on the dissonance between claims of industry-wide low earnings made by American Health Care Association – the nursing home industry’s propaganda organ – and public information available through the Securities and Exchange Commission.  The AHCA’s claims are not verifiable because closely held corporations aren’t required to make their consolidated financial statements public.


   Selected Ensign Group 3rd Quarter, 2022 Results

  • Revenue, Three Months Ended September 30: 
    $770,005,000 (compared to 668,530,000 2021 3rd Quarter).

  • Revenue, Nine Months Ended September 30:
    $2,215,936,000 (compared to $1,934,319 to 2021).

  • Net Income 3rd qtr. 2022:
    $56,242,000 (7.3%)
    Compared to $48,344,000 3rd qtr. 2021 (7.0%)

  • Net Income, Nine Months Ended 2022:
    $2,215,936,000 (compare to $1,934,319,000).

Executive Compensation

    We will not know Ensign executive compensation until the company releases its proxy statement in April.  The following are 2021 compensation data for executives:

  • Barry R. Port, CEO:  $7,421,472 (13.9% increase over 2020 compensation).

  • Suzanne Snapper, CFO: $6,532,955 (19.5% increase over 2020).

  • Chad Keech, CIO: $4,275,539 (17.7% increase over 2020).

  • Spencer Burton, President and Chief Operating Officer: $5,029,146 (9% increase over 2020)

Ensign Stock Has Been Increasing During Stock Market Down Year:

    Between late 2021 and the end of 2022, the NASDAQ had declined by 30%.  It was a bad year.  However, Ensign stock was trading at $77.20 on November 29, 2021.  It closed at $94.00 yesterday (February 1, 2023) – a 22% increase.

    Christopher Christensen, CEO Emeritus owns $1,478,499 shares of Ensign stock).  The value of Mr. Christensen’s stock increased in value by $24,838,783. 

    The three beneficial owners: BlackRock (15.1% or 8,340,870 shares), Wasatch Advisors (11.1% or 6,121,470 shares) and Vanguard (11% or 6,104,354 shares).

We must insist on truthful information from the industry receiving taxpayer funds for providing medical care to Americans experiencing poverty. As the only public information we are receiving suggests, investors and executives are excessively rewarded while wages and salaries for direct care workers remain seriously low. If the bulk of financial information is hidden behind a veil of secrecy, taxpayers and their representatives do not have a voice in determining what we should be receiving for what we are paying.

A right-wing religious PAC just received a $1.6 billion donation, and the medical-industrial complex will now be a whole lot harder to fight.

Posted on by

By:

Dave Kingsley

Leonard Leo and the Marble Freedom Trust

As head of the Federalist Society, Leonard Leo has had a major role in picking Catholic right-wing Supreme Court justices such as Alito, Roberts, Kavanaugh, and Barrett.  Leo is himself a fanatic, right-wing, Catholic who has no respect for the separation of church and state.  This brand of Catholicism works well with the Christian Nationalist Movement[1] that cuts across most fanatical, fundamentalist, Protestant sects.  

Although the Federalist Society is an organization for the promotion of legal conservatism and includes a variety of far-right believers in a sort of faux libertarianism and assorted other rightwing philosophies, Leo has locked in the Notre Dame law school theocrats as a powerhouse in the grooming and promotion of suitable candidates for future government legal positions and jurists.

Barre Seid, a Chicago industrialist, and ardent libertarian, has donated his entire company – Tripp Lite – to the Marble Freedom Trust, a 501(c)(4) political entity controlled by Leonard Leo.  The Marble Freedom Trust sold the company to the Eaton Corporation for $1.6 billion. This intersection of radical, libertarian, industrialists and the assortment of theocratic movements does not bode well for those of us who are working to deindustrialize healthcare, and other government functions.  The religious right shares many values of super-rich, self-proclaimed libertarians such as the Koch brothers. They believe that wealthy industrialists are godly insofar as they either share or are willing to tolerate the Christian Nationalist value system.

History has taught us that major religious institutions and industrialists are willing to accommodate regimes and politicians that serve their interests no matter how corrupt, anti-democratic, and debasing to the public interest.  The Supreme Court’s decision in Citizens United has already placed corporate political activities in a protective bubble.  We can look for corporations threatened with movements for reform to look to the current lopsided court and politicians on the make to protect their interests.

Therefore, Marble Freedom Trust money will be directed toward politicians and court actions that place property over people, profit over health, capital over labor, and the super-rich over the broad mass of citizens.  This will make changing a life-shorting, inhumane nursing home system far more difficult.  Gouging the public for life-saving medications and denial of medical care to the uninsured will be difficult to end. Let’s face it, we cannot ignore politics in our quest for social justice. 

[1] Christian Nationalism has been studied and reported on by journalist Katherine Stewart.  In her book, The Power Worshippers, she discusses this movement’s belief that the U.S. is a Christian Nation, and that the U.S. should be ruled in accordance with what they consider “Christian values.”  The values they endorse include are anti-gay, anti-democratic, pro-super wealthy, and freedom from government, except when they want to leverage government for imposing their radical beliefs on the rest of society.

The “medical industrial complex” is not capitalism, so let’s change the narrative.

Posted on by

By:

Dave Kingsley

Genuine Capitalist Enterprises are Not Operating in Anti-Competitive, Government Rigged, Systems.

As a proponent of capitalism, I resent the U.S. privatized, government-funded, health care system and the implication that it is a suitable representative of a capitalist system.  It is not.  The system of nursing homes, hospitals, and clinics through which patients pass for care is a financialized[1], corrupt, rigged, system.  Furthermore, some services important to society should not be industrialized under the farcical notion that return on capital will drive quality care.

Reformers have failed to create a narrative to defeat the financiers’ mantra that privatizing appropriate government services will increase quality and productivity.  History has taught us a very clear lesson:  industrialization and privatization of medical care and a host of other government services are unproductive and lead to excess extraction of capital, lower productivity, and reduction of innovation and reinvestment.

You Can’t Shame the Shameless

There is an unfounded belief that exposing bad operators in sensational mainstream media articles will force a change for the better in nursing homes and hospitals.  The misguided view that the medical-industrial complex will be moved by horror stories reminds me of an old T-Shirt in my closet with the following silkscreened on it: “We Don’t Care, We Don’t Have to Care, We’re EXXON.”  You could substitute the words medical-industrial complex, The American Health Care Association (AHCA), Ensign Group,” Welltower Corporation, Centene, United Health, and thousands of other corporate associations and entities for EXXON on such a T-Shirt.

Nursing home and hospital corporations don’t care about the shaming they deserve because politicians in federal and state legislatures have their backs.  Furthermore, they have captured the agencies charged with regulating them.  The Center for Medicare & Medicaid Services, and 50 state agencies are dominated by the industry and their well-financed lobbying organizations (not to mention the FDA, the FTC, the CFTC, etc.).  You can shame private equity as a business model, scurrilous operators, low wages/salaries, understaffing, and other outrageous practices, but financiers in the healthcare business are, for the most part, shameless. 

For at least a decade, I have been urging advocates to form a narrative and political strategy.  Playing rope, a dope with an industry that has a very well devised, effective, and well-funded narrative will change nothing.  The nursing home industry has a narrative based on falsehoods, which are comprised of frames related to the hardships endured by noble businessmen and investors.  Frames in which the industry purports to be suffering from low Medicare/Medicaid reimbursement, and low net income (profits) are blatantly false and misleading.  Regardless of how unbelievable the frames comprising industry propaganda, they are never seriously challenged by the constellation of nonprofit and government entities representing the elderly.  Furthermore, do-gooder commissions charged with studies of nursing homes, hospitals, and other health care subsystems generally whitewash and paper over the unethical, inhumane, and anti-democratic nature of the entire medical-industrial complex.[2]

Let’s Get Technical

I propose that advocates create frames that can be integrated into and support this narrative: “The privatized U.S. healthcare system is not fair, capitalistic, or ethical.”  Frames accusing industrialists of manipulation of markets, financial machinations, pay offs/bribes to legislators, and covering up corruption through well-funded lobbying entities such as the AHCA (nursing home lobby) are necessary but risky for professionals who want to go along to get along.

Industry moguls and their minions in government know from 70 years of history that their propagandistic efforts work well. They have been able to convince the public that privatized, for profit, services are better than non-profit and government services.  This mantra has gained traction and is embedded deeply in the American zeitgeist.  It will take a concerted effort across a broad array of nonprofit advocacy organizations to destroy a narrative based on industry lies and complex financial maneuvers.

However, before advocates can suitably frame messages for the media and legislators, a considerable amount of research, data collection, and analysis must be undertaken.  Data and evidence related to “rent seeking,”[3] “net operating income,” and “cash flow,” is necessary for debunking the “low net,” “thin margins,” and other hardship frames of the industry.  The nursing home system must be unraveled and explained as a network of capital flows from taxpayers and other sources through Real Estate Investment Trusts (REITs), private equity firms, LLCs/LLPs, and C-Corporations.

It is necessary to show how excessive capital flows through nursing homes and hospitals to investors and executives.  REITs have been existing under the radar and never discussed at legislative hearings (See my blog post: “Real Estate Investment Trusts (REITs) are Big Players in the Nursing Home Industry:  That Should Concern All of Us” February 13, 2021).  We must recognize how the entry of private equity and REITs around 2000 literally transformed the industry.

Advocacy research must include data from cost reports submitted by facilities to CMS and state agencies.  Falsehoods in these reports are pervasive.  Nevertheless, it is important to organize the data to make a case and support our frames pertaining to corruption and excessive extraction of capital at the expense of care.

We Are on It!

A team of people across the U.S. have come together to initiate solid, evidence-based, research.  With some help from the LTCCC and a lot of volunteer work, a group of us have been organizing data from cost reports and digging into financial machinations, ownership, and the flow of capital from various sources (including taxpayers) to investors, executives, and family wealth. 

We want to direct attention to more than horrendous examples of nursing home abuse and neglect.  The industry justifies poor care with a well-honed, richly funded, propaganda campaign. We should not respond to their “woe is me pleas for increased funding.”  Rather we should follow the money and make the trail available to legislators and journalists that we know will utilize it (think Senator Elizabeth Warren).  I don’t want to engage them in their claim that investors in the nursing home industry are suffering.  My only response to that is investors are not stupid.  If returns were no good in public-funded, skilled nursing care, investors would be investing somewhere else. 

[1] By labeling the system “financialized,” I mean that financial maneuvering for extracting cash takes precedence over increased productivity and quality of services.  Shareholder value is the primary mission of most healthcare private corporations.  Stakeholders are of secondary importance.  Often stakeholders suffer for the sake of enhancing and protecting shareholders’ interests.

[2] While COVID was surging in the Spring of 2020, CMS convened an “independent” commission the management of which was outsourced to the Mitre Corporation.  The report of this commission was a whitewash and papered over general neglect by the nursing home industry which resulted in 200,000 patient and employee deaths.  Contrary to suggesting accountability for lack of infection control and no preparation for a pandemic that scientists had been warning about for decades, the final report recommended more financial assistance for the industry.  Recently, a commission under the auspices of the National Academy of Sciences, Engineering, and Medicine (NASEM) in operation for a number of years entitled “National Imperative to Improve Nursing Home Quality” issued a report of their work. This commission tiptoed around the corruption, deceit, and excessive extraction of capital at the expense of quality care.

[3] “Rent seeking” has evolved in the field of economics to describe corporate efforts to extract wealth without a correlative increase in the production of goods and services.  The nursing home, finance, real estate, lobby is constantly hectoring legislators for an increase in reimbursement without any real, scientific, evidence that the cash flow and return on their investment is inadequate.

DEMOCRACY, CORPORATE FINANCE, & MEDICAL ETHICS

Posted on by

Nursing Home Companies are Making Money but are Not Telling Taxpayers the Truth About it.  Our Deductive Reasoning Skills Can Easily Reveal the Truth.

Welltower Corporation is a major player in the nursing home industry. Indeed, it is the dominant player.  The major share of its $4.72 billion in 2021 revenue is provided by U.S. federal and state governments – from the taxpayers of America.  Their business is senior housing real estate and medical care for people residing in their nursing home properties. 

The public has a right to expect that medical care is the overriding mission of corporations involved in tax funded nursing care. That is not how Welltower executives view their role in the privatized, publicly funded, healthcare system.  In their 2021 annual report they stated, Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in net operating income and portfolio growth (https://welltower.com/wp-content/uploads/2021/04/2020-Annual-Report.pdf, p. 2, accessed 5/21/2022).

Welltower is one of the few nursing home companies listed on a public stock exchange.  As their annual reports and the value of their stock in the current market crash indicate, they are achieving their financial objectives.  As the Dow, S&P, and NASDAQ have tanked in the past few months, shares of publicly listed nursing home-related corporations are at, near, or above their value in late November when the markets began to sink at significant and at times precipitous rates. 

These are solid corporations loaded up with commercial real estate, the value of which is enhanced by guaranteed revenue through Medicare, Medicaid, and generous tax advantages – gratis the U.S. taxpayers.  This is the reason asset managers such as BlackRock and Vanguard have guided $billions of pension, sovereign wealth, and family office, funds, overseen by institutional investors, into asset-laden nursing home companies. As the markets fall, they are not moving money out of these equities and seeking a safer haven (In a blog post today, I provide an analysis of the stock performance of nursing home and other government-funded medical care corporations between the end of November 2021 and the end of May 2022).

The Big Lie from the Nursing Home Industry: “We Aren’t Making Enough Money to Provide Medically Ethical & Humane Care.”

Thousands of privately held corporations in the form of Limited Liability Corporations, Limited Partnerships, and other legal structures own from a few to a hundred or more nursing homes. Examples include, the privately held Pruitt chain, Diversicare, and several other substantial chains operating in various parts the United States.  Years of interviewing employees, families of patients, reading inspection reports and media accounts, have convinced me that medical care in these facilities is substandard to nonexistent.  Abuse and neglect are pervasive.  Most of the care is provided by medically nonqualified and extremely low paid nursing assistants.  Generally speaking, these are inhumane institutions. The thought of ever ending up in one is horrifying to most people.

Industry Prevarication & Misinformation about High Investor Returns

Although, evidence overwhelmingly suggests that investors are reaping huge returns from shoddy care, the American Health Care Association (AHCA) –  the major industry lobbying firm and industry propaganda arm in Washington and the 50 states – successfully promotes a big lie:  “provider net income is so low that they can’t treat patients humanely or pay higher salaries and wages.” On its face, that is absurd. But apparently it hasn’t dawned on legislators, bureaucrats, and the media that investors wouldn’t be investing in a venture with low returns while so many opportunities for high returns are available in the financial markets.

My colleague, professor Charlene Harrington, and I have debunked that argument as it pertains to publicly listed companies. We, like the rest of the public, have access to financial statements required by the Securities and Exchange Commission (SEC).[1]  However, we do not have access to consolidated financial reports for privately held companies. We can’t see their income statements, balance sheets, or cash flow statements. Therefore it is very difficult to evaluate industry claims regarding earnings – difficult but not impossible.

Each of the approximately 13,000 facilities licensed to provide nursing care and certified to be reimbursed by Medicare and Medicaid are required to submit “cost reports, which include revenue, expenses, net income, and a host of other financial metrics.  With the exception of California, these CRs are difficult to obtain. But we have now gained access to every filed CR in the U.S.  Our analysis so far is telling us that the low net claim is a big lie; that fraud is rampant; and, that states are failing to audit the reports.

Low Risk, High Return Fueled by Government Funds with Little Financial Oversight: the Reality of Nursing Home Investing

As we pour over CRs – mostly in California, New York, North Carolina, and Kansa – we see reported net income as a fiction.  We have also come to believe that the low 2020 net of .5% claimed by AHCA and its hired propaganda accounting firm Clifton, Larson, and Allen (CLA) is scurrilous nonsense – unbecoming of the 8th largest accounting firm in the U.S.

 As one example, misinformation, if not outright fraud, is replete in the CRs of 25 Kansas facilities owned by Florida based private equity firm Windward Health Partners, LLC. Although the average net income reported by these facilities is 8.6% – far higher than the average claimed by AHCA & CLA – they are not reporting payments to their own property LLCs. Also, their chain goes goes by the name of Mission Health Communities. What they don’t note on their CR is that MHC is a related party – a management LLC set up as a company they own and are paying to manage their facilities. Hence their net is drastically lowered due to payments to other companies they own.

 Although Mission Health Communities is falsely noted as the owner of these facilities, it exists as the typical private equity squeeze forced on victim companies.  Mission Health Communities is paid a management fee but is, in reality, a separate LLC in the Windward Health Partners portfolio.  That payment, along with a lease payment to a property LLC, and perhaps other payments to Windward owned ancillary services such as therapy, are expensed on the income statement. In effect, these facilities are making payments to entities owned by their parent corporations and reducing their net income reported to the State of Kansas.

According to CRs submitted by Windward, Kansas taxpayers paid the company $103,403,493 in total 2020 revenue. Because of omitted information and opaqueness of the system, only company insiders know how much cash flowed out in the form of lease payments, management fees, and possible other ancillary services. The 25 facilities received an average of $249,063 in COVID relief payments. I say cash because these payments to itself is gravy for partners and limited partners in Windward Health Partners, LLC.

Democracy & Medical Ethics

The people of Kansas have no idea about how their tax dollars are flowing out of their state into investment firms like Skyway Capital Partners of Tampa Bay, Florida – the financial firm that has capitalized Windward Health Partners. That is not because Kansas residents are dumb. Rather they don’t know how government funds flow from facilities to parent corporations structured as private equity, LLCs, C and S corporations, and limited partnerships, because the system is designed to operate behind a veil of secrecy. For the most part, the Kansas legislature and state bureaucrats have been captured by the industry.

Employees at the Kansas Department of Aging & Disability Services are far more protective of industry financial secrecy than they are of the public’s right to know how their tax dollars are being utilized. The deck is stacked in favor of the industry. Getting substantive information from KDADS is like getting red meat out of a tiger cage.

Medical care is substandard in nursing homes across Kansas but shareholder value overrides medical ethics. Indeed, you will be hard pressed to find a physician around a nursing home at any given time. You will also be hard pressed to find more than a hand full of physicians who really give a damn about what goes on these institutions. The medical profession is silent, the bioethics profession is silent, and the voters are kept in the dark. That’s not how democracy is supposed to work.

[1]Kingsley D, Harrington C. (2021) “COVID-19 had little financial impact on publicly traded nursing home companies.) J Am Geriatr Soc. 2021;1–4. https://doi; Kingsley, D Harrington, C. “Financial and Quality Metrics of A Large, Publicly Traded U.S. Nursing Home Chain in the Age of Covid-19, International Journal of Health Services, 1-13, https://doi: 10.1177/00207314221077649.

Data Analytics, The Stock Market, & Healthcare Justice

Posted on by

By:

Dave Kingsley

Current public relations carried on by the hospital and nursing home
industries are based on bogus claims designed to mislead the public. The
variety of wealthy lobbying organizations for the medical-industrial complex
are promoting false narratives based on either an invalid interpretation of
financial data (intentional) or making claims of hardship, e.g. “low net
margins” that are not supported by solid, scientific, factual information
(also intentional).

Big and increasingly dominant hospital and nursing home corporations have
sophisticated data analytic departments on which they rely for management
decisions affecting cash flow and shareholder interests. These multi-billion-dollar
companies determine razor thin margins acceptable for minimal staffing, pay,
food quality, training, and equipment. Even the smaller chains are implementing
productivity enhancement efforts with software designed to determine maximum
acceptable acuity levels for billing and cash flow.

Unfortunately, providers of long-term/skilled nursing care (i.e. nursing
homes operators) are not applying advanced technology and data analytics to
quality of care. I follow industry trade publications and financial reports and
can find no evidence that providers are employing sophisticated analyses to
efforts for optimizing the health and quality of care at a cost that returns a
reasonable value to executives and shareholders rather than a return that can
pass muster with regulators and legislators.

Because much essential financial data pertaining to tax supported medical
care operations are hidden from public view or nearly impossible to wrest out
of government agencies, advocates for patient and employee justice in hospitals
and nursing homes are in an asymmetrical fight with lobbyists. Because the
nursing home industry is more of a real estate/finance industry than a
medical/patient care industry, the lobbying power in federal and state
legislatures constitutes a juggernaut that can only be defeated through an
organized advocacy effort that fights for transparency and fully utilizes what
is available now to feed into a truthful narrative for media, legislative, and
research actions.

What Is The Stock Market Telling Us About The Financial Condition of
Nursing Homes & Hospitals After Two Years of COVID?

Some data pertaining to the financial condition of nursing homes and
hospitals are readily available from the U.S. Securities & Exchange
Commission (SEC). I have been tracking the stock of publicly listed
corporations with operations in nursing homes and hospitals. Most nursing home
corporations listed on a public exchange are real estate investment trusts
(REITs) that are becoming increasingly powerful in the long-term care/skilled
nursing business (they trade and lease real estate but also operate
facilities).

The last three months have not been good for the equities market. Stock
prices have been falling precipitously. But that’s not the case for stocks of
corporations in the business of providing tax funded medical care.

Brookdale Senior Living & The Ensign Group

Let’s consider the two biggest nursing home operators listed on a public
exchange that are not REITS: Brookdale Senior Living and The Ensign Group.
Since late November, the DOW has dropped approximately 3%, the S&P has
declined by 6.5%, and the NASDAQ has fallen by 17%. But these nursing home
corporations have gone in the opposite direction.

Closing price of Brookdale November 29, 2021 – $6.30 Close on February 26,
2022 – $7.00

Closing price of Ensign November 29, 2021 – $77.20 Close on February 26,
2022 – $82.19

So, Brookdale stock is up by 11% and Ensign stock is up 6.5% during the same
period we’ve seen a drop in the markets like we haven’t seen since March of
2020 when they crashed due to COVID but recovered rather quickly.

Most of the REITs heavily involved in the nursing home business have seen
their stock rise during the time that the market has been falling rapidly.
Welltower, the big one, is up 1%. Ventas, the other big one, is up nearly 8%.

Publicly listed hospital corporations are doing well also. HCA stock has
climbed from $229 in late November to $253 at the close yesterday – a 10.5%
increase. Tenet jumped from $74.46 to $85.71 since November 29th – a 15%
increase!

Why is the stock of these hospital and nursing home corporations doing so
well when the market is in correction territory? The primary reason is this:
they are heavily subsidized by the taxpayers. Indeed, their prices are set by
state agencies much like like utility company rates are set. They submit their
costs and are reimbursed for those costs plus increases for inflation and
healthy percentage increases above costs. Furthermore, they are structured for
each facility to pay lease expenses and other ancillary expenses to other
corporations they own.

Don’t believe the industry’s hardship pleas. That is all a lie. It is a
scurrilous behavior indeed for the American Health Care Association – the
nursing home industry lobby – and the American Hospital Association to be
putting out false information to snow the taxpayers who are so generous with
their subsidies for executive pay and shareholder dividends.

Liberals & Democrats Need to Change the Conversation: Too Much of Our Federal Medical Care Funding is Flowing to the Wealthy

Posted on by

By:

Dave Kingsley

Rogue Corporations Scamming the System

You may have never heard of Centene Corporation. But we need to talk about this company which derives most of its revenue from Medicaid – medical care for the poor. With revenue of $111 billion in 2020, it is 24th on the Fortune 500 ranking of corporations (by size of revenues). CEO Michael Neidorff earned $25 million last year – among the five or six highest paid executives in corporate America. Not bad for “welfare medicine.”

Compensation for the top four Centene executives and the board of directors totaled $64 million in 2020. The board includes former congressmen Tommy Thompson (also former head of HHS) and Richard Gephardt. Two very powerful former members of congress.

So, what exactly does this company do for Medicaid? It is known as a “managed care organization” or MCO. The idea underlying the MCO concept is that private, for-profit corporations can do a better and more economical job of managing government funded medical care than government employees. Evidence overwhelmingly points in the other direction but the myth nevertheless persists.

Humana, Cigna, and other corporations have jumped into the MCO business. Let’s face it, the $600 billion+ Medicaid budget has opened opportunities for corporations to rake off untold billions for wealthy investors, executives, and board members, while poor people in states that have expanded Medicaid are humiliated through character tests such as proof they aren’t taking drugs, or too lazy to look for a job. Poor people in Arkansas for instance are facing administrative road blocks and state bureaucracies that see their role as keeping people from receiving benefits.

I’m certain that wealthy executives and investors are enjoying their concierge medicine while poor people can’t get treatment for an abscessed tooth, screening for cancer, diabetes, or medical care that most of us take for granted. This is what the Democrats and liberals need to be screaming about – not means testing and making people prove they are worthy of medicine taken for granted by every citizen in most affluent countries. No doubt, progressives in the U.S. House of Representatives are doing just that. However, silence on this issue from most senators and congresspersons on the Democratic side of aisle is deafening. Forget the now cruel Republican Party. There is no hope there.

This is Not the Democratic Party’s Finest Hour

Posted on by

By:

Dave Kingsley

Democrats Have Both House of Congress & A President’s Proposed Budget We Badly Need: And They Are Blowing It!

Last night I heard an interview with Texas Congressman Henry Cuellar – a Democrat – in which he said that he’s insisting on “means testing” for eligibility in President Biden’s proposed medical care and other programs benefitting ordinary Americans. I’ve heard Senators Manchin and Sinema say the same thing. In other words, people needing child care, medical care, and home based care must prove they are worthy of receiving government assistance to see a doctor, have a place for their child while they work, or need assistance to stay in their home and out of a nursing home.

If past is prologue, this means that American citizens in many states badly needing these humane programs must suffer the humiliation of proving that they are not taking drugs, looking for work if they are unemployed, and too poor to buy these services on their own. This is an anti-worker, anti-people attitude that Democrats need to lose.

As someone who spends a lot of my waking hours researching finances of corporations benefitting from privatized, taxpayer funded, medical programs, I can say with certainty that corporate executives and investors are becoming fabulously wealthy by diverting an excessive amount of Medicare and Medicaid revenue into family and individual trusts for the purpose of avoiding taxes. They undergo no universal character test and yet fraud committed by low and middle income people pales in comparison to what clever CPAs are able scam out of the system on behalf of their high net worth clients.

It is interesting that so many Democrats think that spending a piddly few trillion on its non-rich citizens is excessive in a nation with a $25 trillion economy and a federal budget providing trillions in tax benefits to its wealthiest citizens. In a government funded, privatized health care system, corporations and wealthy investors and their families are able to capture trillions they don’t deserve through dark money and an ability to fund political campaigns.

If conservative Democrats think that catering to the wealthy and demeaning the wage/salary workers of this country is a formula for success, they are delusional. Furthermore, they are weakening a president with a program crucial for staving off crises the likes of which we can’t imagine. This country, this economy, this planet cannot sustain the perverse, toxic, corrupt form of economics and politics exhibited by medical care, agriculture, finance, real estate, energy, and other industrial sectors – it is not capitalism, rather it is a corrupt, debauched economic system in which government and businesses collude at the expense of the public.

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

Posted on by

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

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

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

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

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

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

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

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

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

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

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

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

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

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

You Can’t Trust Industry Research Reports

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

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

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

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

By Dave Kingsley