Tag Archives: Industry Propaganda

How the Health Insurance Industry is Using Disinformation to Take Over and Defraud Medicare

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Dave Kingsley

Corporate Greed in the Post-Truth Age

    Most Americans have never heard of the Better Medicare Alliance[1] – a Washington, D.C. think tank and front group for big health insurers such as UnitedHealth, Aetna, and Humana.  Also, the 2023 Super Bowl TV audience didn’t know who paid for a commercial at halftime claiming that President Biden had plans to “cut Medicare.” The ad included a message urging viewers to call the White House and “tell President Biden not to cut Medicare,”[2] but they – the TV viewers – didn’t know who was asking them to do it. Football fans had to be perplexed.  Medicare beneficiaries were most likely upset and worried by what they saw and heard.

    The ad, funded by Better Medicare Alliance, was a lie.  The truth is that President Biden had no intention and no plan to cut Medicare.  Contrary to what the ad claimed, he was planning to claw back $4.7 billion from UnitedHealth and other insurers for defrauding the program through false billing practices.  One illegal practice health insurers utilize to add unearned value to their Medicare Advantage (MA) reimbursement is called “upcoding.” Because sicker patients are reimbursed at a higher rate, the trick is to find ways to lie about how sick a patient is – to make them look sicker than they are.[3]

    MA beneficiaries tend to be healthier than Traditional Medicare (TM) beneficiaries.  Nevertheless, research indicates that when individuals move from TM to MA, their costs to the program increase.  The important point is that “total Medicare payments to MA plans in 2024 (including rebates that finance extra benefits) are projected to be $83 billion higher than if MA enrollees were enrolled in FFS Medicare.”  Furthermore, payments to MA plans average an estimated 122 percent of what Medicare would have expected to spend on MA enrollees if they were in FFS Medicare.”[4]

    After the Biden Administration’s proposal to recoup stolen money from MA insurers and prevent further fraud, the health insurance industry threw a conniption fit and went into overdrive.  The Super Bowl ad was only one tactic (costing eight figures, it was super expensive).  In addition, they sent their army of lobbyists crawling all over the Washington, D.C. beltway threatening and bribing legislators.  HHS backed down.  The cheating continues and costs the seniors of America – indeed all wage earners – hundreds of billions from their payroll deductions, premiums, co-pays, and nearly $200 out of every Social Security check.

Pulling Back the Curtain on the Washington D.C. Policy Planning Network:  What is the Better Medicare Alliance & Who is Behind It?

    The insidious thing about think tanks set up inside the Washington, D.C. beltway is that they enlist the aid of seemingly legitimate advocates and scholars.  It is hard to know if the advocates and scholars are merely naïve or whether they are self-serving. Perhaps unwitting would be a kinder word. For instance, the Better Medicare Alliance board consists of Dennis Borel, Executive Director of Texans with Disabilities, Caroline Coats, Humana, Inc., Daniel Dawes, Meharry Medical College, Mary Beth Dawes, Former Congresswoman (President & CEO), Joneigh Kaldhun, CVS Health, Dan Lowenstein, Visiting Nurse Service, NY, Richard Migliori, UnitedHealth, Elena Rios, National Hispanic Medical Association, and Kenneth Thorpe, Emory University.

    The organizational structure of these industry front groups is a form of disinformation itself. On the board are big players in the MA industry – Humana, CVS, and UnitedHealth.  Interspersed with the representatives of these health insurance behemoths are executives and professionals from organizations with an ostensible mission to improve society in some manner.

    By placing their imprimatur on an industry lobbying group, NGOs, nonprofits with a stated humanitarian cause, and universities  are participating in a duplicitous tactic to confuse the public about the real purpose of nefarious industry think tanks like Better Medicare Alliance. Their support for various entities with a mission to preserve and strengthen the medical-industrial complex helps divert funds needed for care into the coffers of executives and shareholders.

Privatizing Medicare was Supposed to Reduce Costs and Give Beneficiaries More Choice:  It Hasn’t Worked Out that Way.

    MA is a creature of the Medicare Modernization Act of 2003. The right-wing of American politics accomplished a coup by setting Medicare on the road to privatization.  Currently over 50% of all beneficiaries have selected it over Traditional Medicare ™.  Federal policy is unfortunately driving Seniors into MA by allowing manipulative practices such as low premiums and a few benefits not available to TA beneficiaries.  Seniors are being led like lemmings into the arms of the insurance industry by disinformation and deceit. Organizations like the AARP in partnership with health insurers like UnitedHealth are the Pied Pipers.  

    MA is one of the most serious threats to the health and well-being of American seniors.  It robs money from care and transfers it into the pockets of investors and executives.  Many beneficiaries are happy with low premiums and add-ons not available under traditional Medicare such as Silver Sneakers plus some dental and vision care.  I can understand why many people who have it are pleased with their coverage.  It works for healthier beneficiaries until it doesn’t.      

    If MA beneficiaries should incur a costly service that is not in network, their assets could be wiped out.  Some retirees have no choice in the matter.  If their company or institution includes health insurance as a retirement benefit, it is most likely MA. Furthermore, I can’t blame anyone who is trying to avoid the premiums for supplemental coverage under traditional Medicare.  Avoiding bankruptcy and depletion of assets through a catastrophic sickness makes perfect sense for TA beneficiaries. But the supplemental insurance is a heavy burden that could be avoided if the Medicare program weren’t diverting so much funding to MA (see discussion below).

Seniors and People with Disabilities Would not be Struggling as Much If Big Health Insurance were not Stealing from Them.

    For seniors and disabled Americans to lose nearly $200 per month of their Social Security and choose between a large payout for supplemental or the risk of bankruptcy, is an injustice when privatized healthcare is stealing hundreds of billions of Americans’ tax dollars, payroll deductions, and hard-earned money through out-of-pocket expenses. The Physicians for a National Health Program (PNHP) has estimated that MA overcharged taxpayers by a minimum of 22% or $88 billion and potentially up to 35% for a total of $131 billion in 2022. If the high end of the estimate were correct, all of Part B premiums ($131 billion in 2022) or Part D premiums ($126 billion in 2022) could be covered by excessive corporate extraction of funds from Medicare.[5]  

    UnitedHealth is noting $25 billion in cash and cash equivalents on its 2023 balance sheet, CVS has noted $12 billion, and Humana is noting $5 billion. They have multiples of these amounts in long-term and short-term investments; they spend hundreds of billions on stock buybacks, dividends, and board and executive compensation. By digging into their assets, the cash rich health insurance business would be able to charge fair prices and stop their criminal behavior without much of a dent in a reasonable return on their investments.

In this Dark Age of Plutocracy, the Superrich & Corporations are Lying and Blaming Government & Ordinary Americans for Poor Healthcare and Excess Expenditures

     Americans earning wages and salaries are being subjected to a corporate network of disinformation and gaslighting.  President Biden is blamed for cutting Medicare when he is in fact attempting to protect the program.  The growing elderly population is blamed for federal debt and deficits when Medicare and Social Security have little impact on the federal budget (SS has none and over half of MC is paid through payroll deductions, premiums, and co-pays).  The nursing home industry blames taxpayers for failing to provide them with enough money to adequately care for the elderly and disabled patients in their beds while they spin a false hardship narrative.

    The Medical-Industrial Complex has established a network of front groups with a duplicitous message of doing good for Americans and has enlisted the aid of do-gooder nonprofits, universities, and individuals. This system and its apparatchiks aren’t all that clever.  Their organizational tactics are rather easy to discern.  The problem is that it is happening stealthily behind the scenes in Washington, D.C. and the 50 state capitals. The media is ignoring it. We intend to expose it and encourage everyone we can to join us in that endeavor.

[1] https://bettermedicarealliance.org/

[2] You can see the ad here: https://www.ispot.tv/ad/2UHG/better-medicare-alliance-cutting-medicare-thats-nuts.

[3] Reed Abelson & Margot Sanger-Katz (2023), “Biden Plan to Cut Billions in Medicaid Fraud Ignites Lobbying Frenzy,” https://w.w.w.nytimes.com/2023/03/22/health/medicare-insurance-fraud.html?searchResultPosition=1.

[4] Medicare Payment Advisory Commission (MDPAC), 2024, p. March 2024 Report to the Congress: Medicare Payment Policy – MedPAC

[5] Physicians for a National Health Program, (2023), Our Payments their Profits: Quantifying Overpayments in the Medicare Advantage Program. MA Overpayment Report (pnhp.org)

WHY DO THE  AMERICAN PEOPLE TOLERATE A POOR PUBLIC HEALTH SYSTEM ALONG WITH BAD HEALTHCARE THAT COSTS SO MUCH?

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Dave Kingsley

Unchecked Bigness is One Factor Threatening our Democracy & Our Health

    Big corporations and big unions can be and indeed are in many cases bad for our health.  For instance, UnitedHealth, Centene, Cigna, CVS, and other healthcare-related corporations in the top 30 of the Fortune 500 have interjected themselves into our publicly funded medical care system as financial intermediaries and major influencers of government policy.[1]  Their motivation is protecting and enhancing shareholder value in the uniquely privatized, taxpayer funded U.S medical delivery structure.  They make money from sickness not wellness.  Prevention does not add to their bottom line, but treatment is quite lucrative – never mind the public interest.

    Big unions, which initially have laudable missions and continue to do much good, sometimes tend to degenerate into self-serving actors without concern for the health and well-being of the public.  This is particularly the case when our federal, state, and local governments attempt to protect our health from the dangers of fossil fuel.  Public efforts to stop irrational projects such as the Keystone pipeline often fail due to the power of the building trade unions in concert with industrial interests.[2]  The United Auto Workers and the big three auto manufacturers have successfully tapped the brakes on the Biden Administration’s planned transition to electric vehicles. Air quality and the threat to humanity from climate system meltdown are secondary to the short-term interests of big unions and gas engine manufacturers.

Indoctrination, Manipulation & Conditioning of the American People

   Why are we, the American people, passive and compliant in the face of an assault by special interests on our dignity and well-being?  The deterioration of service and quality at excessive prices is not only happening in healthcare.  We see it in airline travel, brick and mortar and online retail, technology (computers, software, and apps) – you name it.  Predatory economics have become the name of the game, which is simply this: “How can we lower quality and squeeze more out of customers/patients through lying and deceitful propaganda?”

    Customers and patients are not at fault. The dystopian part of the U.S. economy did not come about as the result of a revolution.  The wealth and political power of investors, owners of vast amount of assets, and corporations have been able to move economic behaviors incrementally and deceitfully from the unthinkable to the normal.  Propaganda and duplicity by forces with the resources to falsely convince the public that they are living in the best there is in the best of all possible worlds have been effective.  People tend to trust officious and authoritative, i.e. powerful organizations and individuals.  So, they hunker down and take it as they get fleeced through small incremental price increases and lower quality of goods and services.

    The primary healthcare industry business model can be compared to the air travel industry.  They incrementally lower quality and add value to revenue for investors at the expense of patients and consumers of medical goods.

    Through dissemination of false advertising and stories promoted by industry PR, the mainstream media – perhaps unwittingly – is helpful to corporate predators. As airlines herd passengers around like cattle and stuff them into increasingly uncomfortable flying tubes at ungodly prices, the media takes up the airlines’ cause by spreading the image of travelers as “unruly.”  The poor airlines are forced to put up with all those bad people.  Should I believe that or my lying eyes? I have traveled on the airlines extensively over the past 60 years.  I used to love it.  Now I hate it.  Furthermore, mostly what I see are cooperative, well-behaved people trying to adapt and endure the indignities, discomfort, and stresses heaped on them by extremely profitable, oligopolistic, and deregulated airlines.   

     Industries have leveraged highly sophisticated techniques of mass psychology for the purpose of pacifying the traveler, nursing home patients and their families, customers of health insurance corporations, users of computer applications, and so forth.  You probably don’t know that A Place for Mom is owned by private equity, that they don’t choose the best place, rather they choose the place that will pay them.  Did you know that the ostensibly pro-retiree-AARP’s deal with UnitedHealth is designed to lead the elderly down a primrose path into the waiting arms of the health insurance industry while the pro-beneficiary-Medicare program is destroyed?

    When you don’t see that the fine print included autorenewal, too bad. That’s your problem.  You have a serious glitch and need help.  That’s been outsourced to the Philippines.  Good luck with that. You didn’t know that the 5-minute life flight from Taos to Albuquerque cost $70,000 and was out of network? Now you’re stuck with the bill and will never find out what a reasonable price would be and why it’s not covered by your Medicare Advantage plan. You hear that those unfortunate, underpaid nursing home corporations are not making enough money to treat us and family members humanely. You could check their finances and verify what they are saying but the government allows them to operate behind a veil of secrecy. 

Big Government is Not Always Bad

    As the bottom ninety percent of Americans in income and wealth make their slow descent into economic serfdom, government agencies that are supposed to protect us have been neutered and checked by the politics of self interest and pseudoscientific economic theory.  Nonsense from major university economic departments, indeed from the overwhelming majority of economists, has been adopted as gospel by politicians and the media. Despite of the obvious failure and detriment from this proto-religious canon, it continues unabated and is as strong as ever.  The EPA, FTC, and other major government regulators have been reduced to going along to get along. This all while the ecosystem is collapsing, public health is deteriorating, and wealth and power is increasingly concentrated in fewer entities and individuals.

    The free-market, trickle down, government-busting theories of faux libertarians such as Hayek and Friedman have proven to be a chimera.  But that has become the underpinnings of U.S. government and economics.  Political power resides in the so-called center right to center left.    The Democratic Party and the Republican Party are both responsible for deregulation of corporations and privatization of government services.  It was President Carter that deregulated air travel, trucking, and banking industries. He kicked off a deregulation craze that has left the American people in an extremely vulnerable position.  President Reagan was a fanatical government hater and adopted the right-wing worship of corporations along with a cynical view of people that our-constitutional government is designed to serve.  The Democrats have made a little noise about the dismantling of government but have for the most part gone along with it and have even participated in it.

What Can the American People Do About Their Economic Plight?

    The first step in changing a corrupt system is exposing it.  The first step in exposure is to stop believing propaganda.  The AARP is not a friend of retirees – they are selling us out with their UnitedHealth partner.  A Place for Mom is not interested in your mom – they are looking to turn a quick buck.  Prevagen is snake oil.  Balance of Nature is a worthless capsule.  The FEC is allowing false advertising and consequently you can be robbed of your hard earned money at CVS and Walgreens. All the available evidence we can amass tells us that the nursing home industry is quite lucrative for investors. But the investors’ narrative of financial hardship is dominating the conversation.  Let’s put a stop to that.

    The second step in systems change is changing the narrative. Government is not bad – it is good.  Regulation is important.  Not long ago, I confronted some state legislators at a hearing about weak oversight of nursing homes and their finances.  That hadn’t been done before in that particular legislative committee.  Advocates need to take a strong stand in exposing fraud. 

The status quo is not OK.  Believe it. Demand change. Pick up the phone. Send emails and get your friends, neighbors and relatives to call and write.  Politicians respond to volume.  So, learn about an issue and organize people to confront  senators, congresspersons, and state legislators.  Get people to pressure the media to stop selling lies.  Learned helplessness is our enemy.  If you think that Medicare Advantage is a good deal, it may be for you, but down the road all Medicare will be controlled by a few insurance conglomerates. They will continue to create financial intermediaries such as pharmacy benefit managers for the purpose of adding value to their revenue at the expense of our care.

    Support those think tanks in Washington that you know are on our side.  The Committee to Preserve Social Security & Medicare is fighting for us.  The Committee for a Responsible Federal Budget and the Concord Coalition are working to reduce Social Security and Medicare benefits. I know these organizations well and have dealt with all of them.  The Committee for a Responsible Federal Budget and the Concord Coalition were organized with the backing of the late multi-billionaire Peter G. Petersen who was on a crusade to privatize Social Security & Medicare.[3]  If you think that his legacy is not a major negative influence in your life, you would be wrong.  Furthermore, politicians and the media are treating the Washington network he left behind with deference and respect it doesn’t deserve.  Believe it! Fight it!

[1] In 2000, none of these companies were in the Fortune 500 top 30.  Now UnitedHealth is the 5th largest corporation in the U.S. and 10th largest in the world.  CVS is the 6th largest U.S. corporation and healthcare related corporations make up one-third of the top 30 U.S. companies in the Fortune 500. 

[2] I spent a career in labor relations on management’s side of the table.  Most of the unions with which I negotiated were building trades unions such as sheet metal workers, operating engineers, laborers, pipe fitters, boiler makers, and electricians in mining, construction, and heavy manufacturing.  I believe that unions are good thing until they aren’t.  The companies I worked for believed in good faith bargaining, but we took strikes and work stoppages that were counterproductive for the union members, companies, and the public. At this stage of our economic system, I don’t think that we can leave the plight of workers to the unlikely event that they will organize and improve their standard of living.  Politicians need to step up. I do not want to overlook the good that labor unions have contributed to the working classes.  They have fought for health & safety, an end to child labor, better pay and benefits so richly deserved by the people without whose labor corporations would not exist.  I think that they still fight hard for social justice.  We have much more good from the labor movement than bad.

[3] Working with the Committee to Preserves Social Security, the Gray Panthers, and other groups I have spent countless hours over the decades in Washington, D.C. fighting the duplicitous cabal of Peter G. Petersen funded think tanks and other Wall Street back entities trying to grab off the $trillions in tax-funded programs for investors.  It’s a tough fight and one that is undermined by organizations that appear to be do-gooders but are really representing the other side.

Philanthropic Foundations, Quasi-governmental Science Organizations, and Universities Often Act as Corporate Shills: How the Industrial Complexes Work.

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Dave Kingsley

President Eisenhower’s Warning

    In his 1961 farewell speech, President Eisenhower recognized danger in the development and growth of a new phenomenon in U.S. economic and political history – a permanent, massively funded, and rapidly growing complex of government agencies, military-related industries, and universities.[1]  His prescient concern was that we would pay for and get more defense than we need; that the military establishment would grow beyond reason and purpose; and that the Pentagon would become a vehicle for special interest power and enrichment – which indeed it has.

    A decade after Eisenhower’s warning about a mushrooming defense network, Barbara and John Ehrenreich suggested that an emerging medical-industrial complex was to healthcare what  the military-industrial complex was to defense.[2] In 1980, the late Arnold Relman, M.D., editor of the New England Journal of Medicine, stated that “The most important development of the day is the recent, relatively unheralded rise of a huge new industry that supplies healthcare services for profit.”[3]

    Industrial complexes like healthcare and defense have proliferated over the past few decades.  We have witnessed the growth of financial services, fossil fuel, agricultural, and a host of other industrial complexes.  These systems are not static.  Rather, they are dynamic, steady state, adaptive, social systems in a constant process of elaboration and complexification.[4]  Consequently, in Washington, D.C., and state capitals these elaborate, special interest networks have become horrifyingly powerful and effective – like nothing seen before. Indeed, this unprecedented facet of U.S. history is a major threat to future generations.  Unfortunately, it is hidden from the public and rarely discussed in the mainstream media.

The Policy Planning Network[5]: A Granular Understanding of “Industrial Complexes.”

    Politicians initiate legislation but not policy.  Rather, they respond to policy proposals from institutions representing special interests.  Agglomerations of these special interests working on policy are always complex systems of interactions between foundations, non-profit entities, e.g. think tanks, for-profit corporations, and powerful individuals.  In general, organizations such as the Brookings Institute, the Cato Institute, the Johan A. Hartman Foundations, the Commonwealth Fund, the National Association of Realtors, the Chamber of Commerce, the Heritage Foundation, the American Enterprise Institute, and the National Bureau of Economic Research are major players in policy percolating through special interest channels at the national level.

    Industries have their own self-serving propaganda organs and armies of lobbyists in the mix of interactions leading to policy proposals.  For instance, the real estate industry is represented by the National Association of Realtors, the pharmaceutical industry by Big Pharma, Hospitals by the American Hospital Association, Wall Street by a hoard of financial-services associations, and so on and so forth – there are too many to count.  When an issue is favorable to conservative causes or private enterprise (not necessarily capitalistic though), the Chamber of Commerce will weigh in with its immense financial resources.

    Some of these powerful entities like the John A. Hartman Foundation and the Commonwealth Fund[6] hold forth as “do gooder” organizations with no other mission than the public good.  With vast amounts of wealth pouring into their foundations, they have piled up huge amounts of capital on their balance sheets.  Since, they are required to dispense only 5% of their revenue to individuals and organizations related to their ostensible missions, they have in fact become status quo maintenance organizations and investment firms looking for optimal returns. Furthermore, they serve the interests of private wealth by ensuring that policy remains from the center to the center right. Major foundations are intent on ensuring that policy is not transformative, will not threaten the status quo, and will not upset the current distribution of wealth and power.

    In reality, these powerful players in Washington policy making are tax shelters for superrich individuals and their families who desire to keep their vast wealth out of the hands of the IRS and to maintain considerable control over public policy.  The most influential foundations typically solicit financiers and corporate executives to sit on their boards.  Representatives of labor, consumers, and the poor are not found on the boards of dominant special interest influencers in Washington, and the policy they induce reflects that fact.   

A Case Study of the Policy Planning Network: Commissions, Think Tanks, and Trade Associations that Help Keep So Many Institutionalized Elderly and Disabled “Nursing Home Patients” in Dire Conditions.

    How does a nation deal with the embarrassment of indecent and inhumane treatment of the elderly and disabled in government funded institutions run by private industry?  Recent and ongoing history tells us that the Nation’s elected representatives and agency heads have passed the problem off to foundations, think tanks, trade associations, and quasi-governmental science entities (i.e., to industrial complexes). 

    For instance, the incredible incompetence and indifference to prevention and infection control in nursing homes before and during COVID was referred to the Mitre Corporation – a shadowy Washington entity with roots in military intelligence and other defense activities. The John A. Hartman Foundation initiated a commission by the National Academies of Science, Engineering & Medicine (NASEM)[7] in 2020.

    Consequently, we’ve had two nursing home commissions in very recent history: the NASEM Commission and the Mitre Corporation Commission, both of which glossed over the nastier side of the industry, which is the dominant side.  Neither commission covered any territory that would result in holding the industry accountable for substandard worker treatment and pay, overall low quality of care, excess extraction of funds for shareholders, unsavory, unethical, far too often criminal owners, and problematic financial reports. 

    To the contrary, the commissions seemed sympathetic to the industry’s false claims of financial hardship and lack of government support.  Indeed, the Mitre Commission concluded that the industry needed more help in the form of personal protection equipment and other government assistance.  The industry’s excuses for the deaths of 200 employees and 2000 patients were never questioned by either commission.

Whitewashing & Window Dressing[8] the Inhumane Treatment of Disabled and Elderly Americans.

   The NASEM Commission has been institutionalized as the Moving Forward Coalition – a think tank funded by the John A. Hartman Foundation. The two nursing home commissions and the subsequent MFC are basically “tweaking-organizations,” which propose changes at the margins without a serious threat to the status quo.  Furthermore, The American Healthcare Association (AHCA) and LeadingAge (LA) – the well-funded and powerful nursing home trade associations –  and other private industry representatives appear to have a dominant position in the organization.  Special interests dominate the steering committee and are represented on all the other MFC committees.[9]

    Advocates and scholars serving on the two major commissions and the MFC tend to be passive and compliant with the industry’s self-serving wankery. The systemic problems of corruption and commoditizing of human beings for the sake of cash flow are ignored while the committee members engage in pretentious noodling over meaningless technical issues and “pie in the sky” ideas that will not be implemented.[10]  

    Like most major philanthropic corporations, the John A. Hartman Foundation is a vehicle for tax avoidance and superrich control over public policy.[11] The Mitre Corporation board is primarily a mix of current and former military intelligence officials and for-profit corporation managers and executives[12] with a displaced mission to grow their organization and enhance their power. 

    Interestingly, it is very easy to find the bios of the Mitre board members, which are on their website, but finding the bios of the John A. Hartman Foundation board takes some work.  Although board members’ names are listed on the JAH website, their bios are not. However, one can safely say that consumer, poverty,  and labor representatives are notably absent from these types of foundation boards.

Summary

    Important policy affecting the rights and welfare of the American people is generally generated in an interrelated system of foundations, special interest think tanks, trade associations, advocacy groups, and former high level government officials.  The money and power behind this policy planning network is controlled by super-rich individuals/families and corporations for the purpose of protecting their wealth and maintaining control over government policy. 

    The power wielded by the American power elite through their lavishly funded network in Washington and state capitals is unrecognized by the media and hidden from public view. This system will not change without exposure initiated by scholars and honesty from those who willingly participate in it. 

    The corruption and deceit in the making of policy – including nursing home and healthcare policy – is pervasive and intensifying.  Extensive system change begins with exposure.  The Tallgrass Economics blog and the nonprofit Center for Health Information and Policy have a mission to expose policymaking on behalf of the rich and powerful at the expense of ordinary Americans.  We will be discussing do gooder foundations, think tanks, trade associations, and advocates who assist them in policy contrary to the best interests of the public.

[1] https://www.archives.gov/milestone-documents/president-dwight-d-eisenhowers-farewell-address

[2] https://www.nybooks.com/articles/1970/12/17/the-medical-industrial-complex/

[3] https://www.nejm.org/doi/full/10.1056/NEJM198010233031703

[4] See Walter Buckley, (1960) Sociology & Modern Systems Theory

[5] Professor G. William Domhoff, an acolyte of C. Wright Mills described the major foundations, think tanks, trade associations, and other entities and individuals initiating policy on behalf of corporations and the wealthy as “the policy planning network.” See, G. William Domhoff (2010), Who Rules America: Challenges to Corporate and Class Dominance, pp. 85-115.

[6] The Commonwealth Fund board includes a representative from UnitedHealth and Margaret Hamburg, former FDA Commissioner in the Obama Administration among a bevy of board members from investment banks, private equity, and other for-profit businesses.  Dr. Hamburg also serves on the board of a pharmaceutical company for which she receives compensation in the amount of $500,000 per year.

[7] Seventy percent of NASEM funding is from government agencies while 30% is from private sources.  The NASEM reputation has been sullied due to funding and influence from industries with a stake in the outcome of its commission studies.  For instance, the Sackler’s donated $19 million to the agency prior to a study on opiates. In 2011, Purdue Pharma and the Sackler’s were rewarded with a study that minimized the danger of opioid pharmaceuticals of the type manufactured and distributed by Purdue Pharma, see e.g.: https://www.nytimes.com/2023/04/23/health/sacklers-opioids-national-academies-science.html  In contacting NASEM for the purpose of determining how individuals were selected for their nursing home commission, I found them to be removed from public purview and operating behind a veil of secrecy.  I could find out absolutely nothing.

[8] “Window Dressing” is used as a verb transitive in this context rather than as a noun – as in “they are window dressing an injustice.”

[9] https://movingforwardcoalition.org/committees/

[10] For instance, the effects of replacing “resource utilization groups” (RUGs) with a “patient driven payment” (PDPM), a major issue  in pervasive over billing practices, has been taken up by the JAH and MFC. This is a technical argument beyond the grasp of legislators, the lay public, and journalists that will do very little to stop the industry rip off and will certainly not improve the lives of patients.

[11] For an in depth analysis of major charitable organizations and the superrich, see:  David Wagner (2000), What’s Love Got to Do with It? A Critical Look at American Charity, pp. 89-115.

[12] https://www.mitre.org/who-we-are/our-people/our-leadership

Kansas City Public Television & the Damaging Consequences of Nursing Home Misinformation

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Dave Kingsley

Cavalier Distribution of Unsupportable Financial Information Causes Physical Harm and Shorter Lives

     Kansas City Public Television (KCPT) is presenting an upcoming program entitled “The State of Aging in Kansas City.”  The program as advertised includes a panel discussion and a documentary film. I was shocked to see false claims by the American Health Care Association –  the industry lobby – included in the promotional material for the program.  For instance, the promo repeats AHCA falsehoods that “nearly 60% of nursing homes are operating at a financial loss” and that “Nearly three of every four facilities are concerned about closure due to staffing shortages.” 

    This is blatantly false information and serves to shield the industry from responsibility for widespread neglectful care of patients while investors are earning robust returns. It is obvious that KCPT has given the for-profit nursing home industry a major amount of influence in the development of their promotional material without fact checking the industry’s financial claims or consulting with credible scholars and advocates engaged in nursing home research. 

    Any widespread distribution of nursing home financial misinformation is a devastating blow to efforts at significant reform of the Medicaid and Medicare funded skilled nursing business. Therefore, patients in poorly run nursing homes continue to experience unnecessary pain, discomfort, and shortened lives because of lobbyists’ propaganda.

    The industry’s bogus hardship claim is a primary barrier to changing the despicable way elderly and disabled patients are treated in so many long-term care facilities.  The AHCA has immense resources to spread a false narrative –– with $128 million in 2021 revenue (https://www.aha.org/system/files/media/file/2022/11/2021-aha-form-990.pdf) and affiliates in all 50 states.  Hence, the “we can’t afford to do better” defense serves to undermine serious demands by advocates for stricter regulation and an increase in the quality of care.

    Public television has unwittingly placed its imprimatur on industry propaganda.  There is scant evidence that the nursing home industry is experiencing widespread loss.  Conversely, an abundance of available evidence suggests that historically and during COVID, the nursing home business has been and remains highly lucrative.

Responsible Journalism and Integrity Requires a Correction by KCPT

    Apparently, “The State of Aging in Kansas City” will kick off with a town hall & panel discussion on September 5th.  The town hall and a documentary will be shown on KCPT on September 14th.  Although I was consulted by the independent filmmaker about a year ago who asked that I meet with him to discuss nursing home finance.  I did that on a couple of occasions, but I did not know exactly what his project was about.  He did say that he was working on a documentary for public television.  I didn’t think much about it until I saw the promo and his name attached to the documentary.

       The filmmaker told me he had nothing to do with the promotional material and directed me to the person who was responsible for it.  I sent that person – who will also MC the townhall meeting –  a lengthy email explaining the problems with the information in his promo to which I attached couple of articles that I had authored with my colleague Charlene Harrington, Professor Emeritus at the University of California, San Francisco.  His response was, in my view, terse and dismissive.

    I have not seen the documentary and cannot speak to its contents.  Hopefully, it will help the public with an understanding of the issues facing patients, families, advocates, scholars, and legislators in understanding how we can arrive at a fair return to investors for an acceptable level of care.  At this time, we cannot do that because of the raw, rank, political power of the nursing home, hospital, real estate, and finance industries (i.e., medical industrial complex) inside the Washington, D.C. beltway and the 50 state capitols.

    For those of us who spend a good proportion of our waking hours in an attempt to counter industry propaganda and provide objective, scientific information, public television misinformation, dispensed to its widespread viewing audience, is like a kick in the solar plexus. It is very difficult to overcome corporate falsehoods in this post-truth era, but it is psychologically devastating when the hard work in attempting to do that is undermined by local public television.

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

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By:

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 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.

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

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    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.

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

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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.

Nursing Home History as Pablum:  Creating a Comfortable Reality for the Powerful

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By:

Dave Kingsley

A commission to study the nursing home system, conducted under the auspices of the National Academies, of Science, Engineering, & Medicine (NASEM), recently released its report entitled The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff.[1] The report included a very brief history of the nursing home system – a 400-year history reduced to a couple of pages.  Furthermore, it is a history that will not upset officials, proprietors, investors, executives, politicians, and others who are benefitting from the status quo. 

Basically, the commission is feeding the public historical pablum.  Left out of the multi-century account are such salient features as ongoing and intensifying financialization, and pivot points such as the 1950s-60s’ development and codification of “the medically indigent,” the role of states’ rights, and the influence of racist, segregationists.  Also excised were many significant changes of 1980s-90s such the transformation of macroeconomic and corporate philosophy from managerial capitalism into what is known as “agency theory,” – basically meaning that shareholder value is not just the highest ethic of capitalist management but the only ethic.

Between the late 1990s and early 2000s, capital markets and tax codes were conducive for the entry of real estate investment trusts (REITs), private equity (PE), and other corporate legal structures (e.g., limited liability companies or LLCs) into the senior housing market.  Large pools of capital had been accumulating through pension, college endowment, sovereign wealth, and insurance funds that needed to flow into businesses that would provide desired yields and return on investment.  These funds are managed by institutional investors such as Vanguard and BlackRock.  The number and size of publicly listed companies have grown considerably over the past two decades as REITs have expanded their power and financial dominance in the senior housing market.  To ignore these players in the industry is to ignore the proverbial 800-pound gorilla in the room.

These changes have been accompanied by massive investments of cash into political campaigns and politicians’ coffers by PACs, Corporations, and lobbying firms representing the medical-industrial complex, Wall Street, and real estate.  What worthwhile history would tiptoe around the corruption wrought by money in politics?

It is easy to become known as a radical and marginalized. Taking a hardnosed stand regarding the truth is an annoyance.  History is written from a “point of view” of the powerful and their version of events. They choose the people, places, and things to include and exclude.  Challenging those points of view will typically evoke hostility.  This is currently noticeable in the backlash to “critical race theory.”  African Americans would benefit greatly from a factually accurate history of race in America, which would facilitate an honest look at institutional racism still pervasive in the United States – including in the nursing home system. It would also be helpful to the elderly to have a movement that could be called critical elder theory – perhaps CET would be an appropriate acronym.

Unfortunately, humans are beset with psychological defense mechanisms that serve the avoidance of truth and lend support to the creation of a comfortable reality.  There are many defense mechanisms recognized by psychoanalysts.  However, four main defenses in history: denial, rationalization, repression, and fantasy are essential for understanding how official bodies such as commissions paper over reality and prevent real change. 

Fantasy is seeing the world not as it is but as the way we would like it to be.  No American wants to think that the elderly, as humans, are only worth what the treatment in a typical nursing home would suggest.  We believe we are better than that.  Our creed does not permit widespread shortening of life and suffering because of financial considerations.  Somehow the incongruence between our creeds and our deeds must be reconciled.  So, we retreat into a fantasy world in which medically fragile and frail elderly and disabled persons are living in as system with a few tweaks can be fully staffed and made into a “home-like culture” (a vague term if ever there was one).

Fantasies can only be maintained through denial of reality (out of sight-out of mind), repression (just don’t think about it), and rationalization (Medicaid reimbursement is too low).  Human nature being what it is, these defenses operate mostly at a subconscious level. 

Window dressing called “home culture” as it has been conceived and implemented thus far will not substantively change the structure and function of the nursing home system as it has evolved.  However, it will assuage our consciences.

[1] National Academies of Sciences, Engineering, and Medicine 2022. The National

Imperative to Improve Nursing Home Quality: Honoring Our Commitment to

Residents, Families, and Staff. Washington, DC: The National Academies Press.

https://doi.org/10.17226/26526

DEMOCRACY, CORPORATE FINANCE, & MEDICAL ETHICS

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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.