Tag Archives: Finance

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

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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

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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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

You Can’t Trust Industry Research Reports

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

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

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

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

By Dave Kingsley

Don’t Believe Nursing Home Industry Propaganda: Providers Are Doing Fine Financially

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Mark Parkinson’s “Year-of-COVID” Strategy is Clear:  Make Nursing Home Corporations the Victims of the Pandemic Rather than the Negligent Providers they Have Been.

Mark Parkinson, former governor of Kansas, is the CEO of the American Health Care Association (AHCA), which is the well-funded and powerful nursing home industry lobby. I have heard Parkinson interviewed several times on CNN and have seen his comments in various publications during the past year.  His job is to turn derelict nursing home corporations into victims.  In an interview with Skilled Nursing News a couple of days ago he bemoaned the hardship placed on nursing homes by the pandemic.  He relied on a drop in capacity from 80% to 75% but provided no financial evidence how that affected financial performance given the high rate of reimbursement for COVID patients and a plethora of subsidies from federal and state agencies.

No one should fall for the former Kansas governor’s propaganda.  If he were interested in scientific, objective data to justify the victimhood he claims for his corporate members, he would support our demands for transparency.

We know that the big publicly listed corporations have been reporting adequate to robust earnings over the past year.  However, most nursing home corporations are closely held and operate behind a veil of secrecy.  They incessantly employ a false narrative claiming that net earnings are so thin that the current system – much of which entails indecent, and inhumane care – is the best they can do given the amount of reimbursement they are receiving from Medicaid and Medicare.

Because of the passivity of legislators, the public, and advocates in the face of this scurrilous misinformation (propaganda), lobbyists can get away with appearing in front of legislative committees and claim that net earnings are so low that they can’t properly staff facilities or create environments providing decent care.  There is no demand that they open their books and show us the money trail.  

We know that funds flow into facilities from Medicare, Medicaid, and private pay reimbursements.  It flows out through an opaque network of LLCs – generally all owned by the same investors, e.g., private equity firms, real estate investment trusts, family trusts, family offices and assorted other financial entities.  If Parkinson would like for us to accord him any credibility, then he needs to show us the lease, consulting, management, and other contractual arrangements the LLCs have with one another.  

Lobbyists for the Nursing Home Industry are Pleading Financial Hardship on Behalf of the Corporations they Represent: Advocates & Activists Need to Debunk that False Narrative

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Dave Kingsley

A Government Funded Service that Requires Heart & Soul has been Turned over to Businesses that have no Heart and no Soul

Corporations in the nursing home industry do what corporations do – they make as much money as they can for their shareholders.  Advocates and activists do what caring people do – they fight for patients with heart and soul against corporations that have no heart and no soul. Profit is profit and care is care, and “ne’re the twain shall meet.” 

In this age of little integrity, corporate behavior has little to nothing to do with social responsibility and everything to do with executives’ perceived obligations to their investors/shareholders and themselves.  In that endeavor, they have no qualms about deceiving the public with misinformation about their finances. A number of times I have attended legislative hearings and listened to lobbyists convince legislators that providers’ net income is so low they can barely stay in business.

Providing low quality care and excusing it with a claim of “running on a thin profit margin” is a typical maneuver of long-term care providers. This is a lie and deserves some intense and strong pushback. It is not hard to find evidence to rebut this falsehood.  For instance, it is my opinion that The Ensign Group is the biggest owner and operator of nursing homes in the United States. I’m claiming it is the biggest because unlike the other large operators it owns the 270 properties (at latest count) it operates, whereas companies like Brookdale have sold their facilities to Welltower and other REITs (they manage them on a contract basis).

The Ensign Group is doing quite well – even during the COVID pandemic. The table below displays the company’s income statement, which includes revenue and net income through the 3rd quarter of 2020 compared to the same period of 2019. Revenue has increased from $1.5 billion during the same period in 2019 to $1.8 billion in 2020. The company’s net income (profit) in the third quarter was $43.3 million compared to $27.8 million in the 3rd quarter of 2019. The 2020 year-to-date net income in the 3rd quarter was $125.2 million compared to $84.4 million in 2019.

It is important to note that net income on the income statement is after depreciation, amortization, taxes, and interest. Calculating earnings after these expenses isn’t the current accepted standard for evaluating corporate performance. Earnings before interest, taxes, depreciation and amortization (EBITA), would be much higher than net income and is a better reflection of the company’s financial strength. There is no point in getting into the weeds on this particular point – it is an important point however. Suffice it to say that the financial data we are able to obtain from publicly listed companies suggest that long-term care is an attractive investment.

Senior Housing will be a Vibrant and Appealing Investment Opportunity for at Least the Next Ten Years

The Baby Boom generation began entering retirement age in 2011 and will swell the 65+ population until 2029, when the last year of the 1946 through 1964 birth cohort enters the magic retirement age of 65. Demographers are predicting that the 65+ demographic will reach 80 million. Real estate and finance sectors of the economy have been granted generous tax advantages. Those are the main undertakings of senior housing/long-term care. Furthermore, guaranteed revenue from Medicare and Medicaid and a powerful lobby for keeping regulators at bay or under control will attract investors to this industry.

Don’t take my Word For it, Look at the Trade Publications

Although the movement for community and home based care will continue to intensify, demand for skilled nursing will remain high due to an increasing 80+ population and advancing medical technology. In a recent article in Skilled Nursing News (Skilled Nursing Continues to Outpace Senior Living in Near-Term Investment Outlook, January 21, 2020), Alex Spanko wrote the following:

With a combination of strong federal relief and a seemingly safe place in the wider health care continuum, skilled nursing facilities have repeatedly emerged as bright spots in an otherwise hazy financial outlook for players in the senior housing and care sector.

Fitch Ratings on Tuesday added to that trend in awarding a BBB- rating and stable outlook to unsecured notes issued by National Health Investors (NYSE: NHI), a major publicly traded landlord in the space (https://skillednursingnews.com/2021/01/skilled-nursing-continues-to-outpace-senior-living-in-near-term-investment-outlook/).

Publicly listed corporations in the long-term care business will be reporting their 4th quarter and 2020 annual reports in the next few weeks. We will be compiling essential information for all them and posting it on this blog. Combined, these companies own a significant share of the long-term care industry. If their financial statements don’t support the “hardship pleas” of their lobbyists, then advocates need to ask for evidence of their claims.

The Financial Performance of “Nursing Home” Corporations during the COVID Pandemic, Part I: The Ensign Group

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Dave Kingsley

Introduction

The long-term care industry is paid by federal and state governments to care for medically fragile patients. That is an awesome responsibility. Historically, the industry has failed to provide the level of quality expected in a wealthy, humane, democratic society.  But the irresponsibility and negligence of so-called “nursing home” corporations in the face of a deadly pandemic has resulted in a human tragedy of incomprehensible proportions. Let’s call what happened what it is: gross negligence.

The public needs to know about the providers who have failed the patients in their care.  Hence, with this post, I will commence a series of highlights of companies in the business.  These posts are designed to illustrate the variety of corporations structured as publicly listed corporations, family trusts, private equity firms, family offices, sole proprietorships, and real estate investment trusts (REITs). One purpose of this series is to demonstrate the wide variety of ownership structures.

Throughout the COVID pandemic, I have been interviewed by various journalists about facilities with egregious amounts of COVID infections and deaths.  One task that I assisted members of the press with was tracking down ownership, which is often opaque and somewhat difficult to determine.  Initially, I’m highlighting two of those facilities and their owners: (1) Riverbend in Kansas City, Kansas, owned by The Ensign Group (ENSG) and Avocado Acute Care in San Diego, California, owned by the Jacob Graff Family Trust. This first post pertains solely to The Ensign Group.

The Ensign Group & the Riverbend Post-Acute & Rehabilitation Center

Riverbend Post-Acute & Rehabilitation Center came to the attention of the Kansas City media early in the sweep of the COVID pandemic through long-term care facilities.  According to the Kansas City Star, thirty patients had died from COVID in the facility as early as April.  I was contacted by Fox4 television reporters working on a story about a notorious loss of life in the facility early in the pandemic.

I was interviewed on air about the industry in general, but at the time I was not that knowledgeable about Riverbend ownership.  However, it did not take long to pin down The Ensign Group (ENSG) as the ultimate owner, which is a “holding company” and one of a handful of publicly listed owners in the business.

With over 200 facilities, The ENSG is one of the major players in the long-term care industry.  Given that it wasn’t formed until 1999, it is a rather young company.  Nevertheless, its revenue recently surpassed $2 billion.  Furthermore, a review of its annual 10-K and quarterly 10-Q reports filed with the SEC suggests that it has had robust earnings per share, has accumulated several hundred million dollars in cash and equivalents, and has very little debt (debt to equity ratio is at .15 versus 1.45 for the industry) – a very good position to be in these days.

How is it doing in this pandemic?  According to its third quarter 2020 10-Q filing, revenue was $599,255,000 compared to same quarter of 2019, which was $512,109,000.  It is doing stunningly well.  The ENSG reported 3rd quarter long-term debt of $113,322,000 compared to $325,217,000 as of December 31, 2019.

…earnings per share for the quarter was $0.77, representing an increase of 97.4% over the prior year quarter and adjusted diluted earnings per share for the quarter was $0.78, an increase of 95.0% over the prior year quarter.


https://investor.ensigngroup.net/news-releases/news-release-details/ensign-group-reports-third-quarter-results

At last check today I noticed that ENSG stock today was listed at $74.37 per share – near an all-time high. Here is what the Forex website had to say about the stock:

We wrote about the Ensign Group (ENSG) back in September and stated that gains may be only starting. The premise for our bullishness was the fact that earnings were increasing significantly and the technicals were following suit. Well, this momentum continued in the third quarter as the company reported adjusted net income of $44 million on sales of just under $600 million. In fact, record earnings over the past few quarters have resulted in management increasing its 2020 guidance significantly. Updated guidance for this year comes in at $3.12 per share on sales of approximately $2.435 billion. The maintaining of the top-line numbers illustrates that margins continue to increase. Management expects to do $3.50 in earnings per share in 2021 which would be a 12% increase over this year if met.


https://www.forexabuzz.com/2020/12/ensign-group-market-continues-to-love-this-stock-nasdaqensg/

The annual 10-K reports and 10-Q filings are hundreds of pages of financial and other information. Suffice it to say that the ENSG has been an excellent investment. It is difficult to understand the lack of preparation by management for a pandemic they knew was coming. The 2020 proxy report indicates the CEO’s 2019 compensation was $6 million. Lobbyists for the industry will claim that providers are operating on a low margin, which is a lie and needs to be debunked by advocates. I suggest that advocates never buy the excuse that low quality and grossly neglectful care is caused by a provider’s financial hardship.

 I will conclude with this:  providers have received an immense injection of federal funds through the CARES act and other supplemental payments from the Center for Medicare & Medicaid Services.  No doubt the ENSG has taken advantage of the lending facility provided by the Federal Reserve and Treasury Department and has probably received some outright grants worth $millions.  It is not feasible at this time to sort out just how these programs have enhanced cash flow, but I will be working on this issue in the months ahead.