Tag Archives: Industry Propaganda

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.

What are the Causes of Outrageously Expensive U.S. Medical Care? Institutional Racism, Propaganda, & Privatization are Some Primary Causes.

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Dave Kingsley

Why Do Americans Put Up With Their Inferior, Costly, Medical Care System?

My colleague Kent Comfort’s post today is a story to which most Americans can relate – astounding and inexplicable charges for an emergency room visit or a seemingly simple procedure in a hospital or clinic.  Why do the American people put up with the most costly, inefficient, and corrupt medical system among countries with developed economies?

The simple answer is that we have been indoctrinated to believe that we have the best medical care system possible in the best of all possible worlds.  We are even told that we have the best medical care in the world.  The alternative, according to propagandists, is the dreaded socialism – never mind that the British National Health Service is government owned and operated, exceedingly fair to the population, and costs much less than U.S. medical care. Also, over the past few decades, London and the British Iles in general have become engines of global finance and capitalism.  While Margaret Thatcher was on her privatization tear, she made it very clear that she would not touch the NHS.

Propaganda and conditioning of people in nation states are ordinary across the globe.  Governments in advanced industrial nations are sophisticated and effective in selling policies and programs that are not in the public’s best interests. Although the British National Health Service is among the best in the world at a cost of $4,653 per capita compared to the U.S., paying $11,072 and struggling with a wasteful system failing a large part of the population, the ole “socialism is bad” propaganda rears its ugly head at the mention of a national, single payer system. What we are told (and far too many people believe) is that we can’t afford to do better. Apparently, we can only afford to pay more to do worse.

The real historical circumstances leading to the embarrassingly bad U.S. medical care system have nothing to do with “socialism.”

I will make the case that the current industrial medical system in the United States has its roots and initial conditions in Jim Crow, Southern Democrat opposition to health care equality for African Americans that would most certainly occur in a federally administered, single-payer, universal medical care system.  Furthermore, the American Medical Association, Northern Republicans, and Southern Democrats waged a rabid and successful war against President Truman’s single payer plan through a well-financed propaganda campaign.

The AMA would not even recognize the right of African American physicians to practice medicine and excluded them from its all-white, politically reactionary organization.  Furthermore, the AMA was a powerful force in state politics and could exercise considerable control over education and licensure, which are determinate of physician income.  Hence, a white supremacist and powerful group of physicians joined forces with other racist and reactionary forces to stymie Harry Truman’s national health care plan.

Had the Southern Democrats supported President Truman in his quest for a single-payer, universal health care system, it would have made it through congress and be as much a part of the U.S. government and economy as the National Health Service is an integral part of British society.  The Senators and Congressmen from the South were white populists and supportive of New Deal programs for whites such as Social Security (agricultural & domestic workers were excluded), the Hill Burton hospital construction program (hospitals funded under Hill-Burton were allowed to remain segregated well into the 1960s), and other programs that benefitted whites.

Poverty medicine, Medicaid, Exclusion, and Lower Tier Care

Under the leadership of Arkansas Congressman Wilbur Mills, one of the most powerful congressmen in U.S. history, the single payer Medicare system for the elderly was accompanied into law by the means-tested, poverty Medicaid system.  Mills was a bigot and signatory to the Southern Manifesto (signed by all Southern Democrats in congress), which was a protest against Brown v. Board of Education.

As Chairman of the House Ways & Means Committee, Mills maneuvered Medicaid into existence to prevent expansion of Medicare to younger age groups.  Furthermore, the states’ role in Medicaid would allow for harassment, stigmatization, and lower tier medicine, all of which would help keep African Americans in an inferior status in Southern states.

Privatization and the Monetization of Poverty

Poverty is paying off for some of the largest corporations in the United States. Medicaid is a cash cow for providers running for profit hospitals, nursing homes, and medical supply companies.  For instance, the Centene Corporation is in the business of managing Medicaid programs for states.  Centene executives were paid a combined $64 million in 2020.  The company’s CEO was one of the highest paid executives among the Fortune 500 executives.

In the weeks ahead, we will be further making the case that Americans have been conditioned to believe that the health care system they have is the best they can afford and deserve.  That’s false.  We will expose the corporations making excess earnings, paying high dividends, and providing poor care.

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