The Nursing Home Industry Lies, Cheats, and Steals with Government Help:  It’s Time to Stop the Wankery and Demand the Truth!

By:

Dave Kingsley

Wankery:” Definition: (Noun; Vulgar Slang British)  “Pretentious, contemptible, stupid, behavior or material.”  https://www.lexico.com/en/definition/wankery

A Message to Advocates, Activists, Journalists, & Politicians

Over the years, I have observed many legislative hearings regarding nursing home abuse and neglect. In practically every hearing, industry lobbyists claim that Medicaid reimbursement is too low. Therefore, they conclude, the public, patients, and their family members can’t expect better care.  Usually, they pull out their standard narrative of “low net” or “a thin margin.”  In essence, they are claiming that the industry is made up of incompetent businesspeople who have a tendency to invest in losing businesses.

Unfortunately, leading advocates and scholars invited to testify invariably fail to confront the industry’s hardship plea as a lie, which it is.  Basically, Medicaid is fueling a real estate industry undergirded by at least $300 billion worth of revenue producing commercial real estate.  Revenue flowing through thousands of facilities (buildings) is enhanced by a plethora of other businesses billing Medicaid and Medicare for therapies, pharmaceuticals, labor contracting, dietary provisions, management services, and anything else providers can dream up as a cost to taxpayers and as a flow of cash to one of their businesses.

Here is how it works:  the corporate entity (LLC, LP, etc.) with the license to operate a facility, i.e., provide care, also pays for services to other corporate entities owned by the same investors who own the licensed facility.  These are called “related parties.”  The LLC with the license is making a lease payment to the LLC which owns the property.  Often, nurses and nurses’ assistants are provided by a labor contractor – another LLC.  Management of a licensed facility is often provided by a management firm owned by the owners of the licenses, the properties.  This is a form of theft, but it’s legal thievery because the industry has a powerful lobby.

Payments to these related party entities increase operating expenses, lowers net operating revenue, and often result in net operating losses.  Net income therefore is often far lower for each facility because parent corporations are sucking out a huge proportion of revenue through an array of corporations.  So, lobbyists will deceitfully tell legislators that the overall “median” net income percentage (net income divided by total revenue) is a half percent or some such nonsense.

Furthermore, people not well-educated in corporate finance (which, understandably, is most people) won’t know that net income isn’t a valid metric for determining capital flowing from customers – in this case, the government – to shareholders.  A host of accounting gimmicks hide cash flow that certainly does not appear in net income.  However, that is a discussion for a later blog post.  Suffice it to say, low nets and thin margins are the warp and woof of industry propaganda – swallowed, or at least not confronted, by most everyone from advocacy groups to scholars, to journalists.

What Could We Afford if Excess Extraction of Taxers’ Money by the Nursing Home Industry Were Identified & Stopped?

We know that the nursing home business is lucrative for investors, shareholders, and executives.  We know from financial reports submitted to the Securities & Exchange Commission by publicly listed nursing home corporations that executives receive millions per year in compensation and Wall Street investors such as BlackRock and Vanguard are the largest shareholders in publicly traded nursing home stock. 

BlackRock and Vanguard are the leading asset managers on the Planet.  They would not be investing your pension, college endowment, 401K, or other assets in an industry with a track record of paltry returns. 

Some my research colleagues and I have been investing a huge amount of time compiling financial reports (otherwise known as cost reports) to various state agencies.  These reports are pervasively false, misleading, and often fraudulent.  Invariably state agencies fail to audit these documents and legislators seem oblivious to pervasive industry deception. 

Excess cash pouring out of Medicaid and Medicare through licensed skilled nursing/long-term care facilities into investors hidden behind a veil of secrecy could be utilized to keep people out of these God-awful places in the first instance or to make life comfortable for those of us who will be or are now institutionalized under horrible conditions.

The number one duty of advocates is to tell the truth to power and to force the industry to stop lying, cheating, and stealing money that could be directed toward decent, humane, treatment of disabled Americans needing assistance with basic, every day, living.  It is time to get our messaging in order.

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

By:

Dave Kingsley

Rogue Corporations Scamming the System

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

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

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

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

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

This is Not the Democratic Party’s Finest Hour

By:

Dave Kingsley

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

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

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

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

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

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

Executive Compensation for CEO’S of Major Nursing Home Chains did not Decline Significantly During 2020: For Most, it Increased by a Significant Amount

    The nursing home lobby operating in Washington and state capitals is continuing its long running financial hardship campaign.  An article in the latest issue of Provider (the main propaganda organ for the industry) claims that COVID presented such a serious financial blow to providers that enhanced financial assistance from government would be the only way to implement needed substantive reform. The reform needed, according to the article, is due to increasing demand in long term care services (Patrick Connole, “COVID Challenges Bring Opportunity for Systemic Changes,” June 2020, 9-10).

    The article states that “With the majority of nursing homes already operating on razor-thin margins, the cost of making improvement will not be possible without financial assistance.”  Perhaps the razor thin margins to which the author is referring apply to the LLC listed as the owner and not to all the other LLCs such as the property LLC, the management LLC, the rehab LLC, the medical transport LLC, etc.  Certainly, holding companies and REITs have not fared badly at all during 2020 and the height of the COVID pandemic.[i]

    One would think that the entities at the top of the financial food chain would have taken a major hit and pared back their CEO pay considerably if the razor thin margins at some point in the flow of capital diminished shareholder value.  However, as the table below suggests, CEO pay for major nursing home operator/real estate chains listed on a public exchange were either enhanced by a large amount over 2019 and 2018 or remained steady.

    The above table does not display the proportion of total pay that is due to an “incentive bonus.”  Nevertheless, in cases where a major increase year over year appears for an executive, a large amount is for performance, which one must assume is financial performance.  The loss of life throughout the companies overseen by the executives in the table was a historical first for institutionalized U.S. populations.  An estimated 132,000 to 140,000 people in the care of these CEOs unnecessarily lost their lives.

    The government funded companies headed by CEOs at issue in this blog post are increasingly powerful players in taxpayer subsidized long-term and skilled nursing. In blog posts ahead, I will be discussing the growth of their power and influence.  For instance, the ManorCare property sold off by the private equity firm The Carlyle Group is now owned by Welltower and operated through a Welltower-Pro-Medica joint venture.

In the future, I will be blogging about the convoluted ownership structures in the nursing home industry and the complexification of that facet of the business due to the creativity of corporate lawyers and financial experts. Without exposing the financial trickery employed by providers, the public will be victimized by falsehoods of lobbying groups such as the AHCA/NCAL and others.

NOTE: The data in this post were derived from proxy statements filed with the Securities & Exchange Commission. In the future, I will be discussing compensation for board members and other officers/executives of major LTC/SKn corporations.


[i] Kingsley DE, Harrington C. COVID-19 had little financial impact on publicly traded nursing home companies. J Am Geriatr Soc. 2021;1–4. https://doi. org/10.1111/jgs.1728

Mark Parkinson, Former Governor of Kansas, is a High Paid Propagandist for the Nursing Home Industry.

Mr. Parkinson Goes to Washington. His Current Task is to Cover Up Corporate Responsibility for Massive Loss of Life Due to COVID

Mark Parkinson, Former Governor of Kansas & CEO of the American Health Care Association

When Kathleen Sibelius was appointed HHS Secretary by President Obama, her Lieutenant Governor, Mark Parkinson, became governor.  His first major act was to nullify one of his predecessor’s last acts. Governor Sibelius had denied a permit for a dirty, hyper-polluting, fossil fuel, power plant in Southwest Kansas. Parkinson reversed her decision and granted the permit.  That was probably Parkinson’s only significant act as governor.  He finished out what would have been Sibelius’s term and immediately left for a high paying gig in Washington, D.C. – as CEO of the American Health Care Association (AHCA).

The AHCA lobbies on behalf of its nursing home corporation members.  According to the organization’s 2019 IRS 990, it has annual revenues of $40 million – most of which is derived from member dues.  Parkinson’s 2019 compensation was reported on the 990 as $2.5 million. (https://projects.propublica.org/nonprofits/organizations/530260105). 

These days, Parkinson is busy converting AHCA corporate members from negligent providers of care to victims of COVID-19 by pleading hardship on their behalf for what could be 200,000 deaths in the so-called “nursing homes” of America. In the last few days, he was quoted in Skilled Nursing News bemoaning the poor financial outlook for the nursing home industry(Parkinson: Nursing Homes’ Financial, Operational Recovery ‘Completely Tied to Visitation’ – Skilled Nursing News).  As our past and current posts regarding earnings of publicly listed provider corporations have demonstrated and will likely continue to demonstrate, long-term care providers are in fact doing quite well.

The Rights of Nursing Home Patients and their Families are up against AHCA Corporate Members & Their Deep Pockets 

Make no mistake about it, the AHCA, with affiliates in all 50 states, swings far, far, more weight in Washington and state capitols than well-meaning advocacy and activist groups could ever hope for.  Indeed, the power relationship between the industry and advocates is asymmetrical.  That explains why regulation is weak and quality of care remains low.

For instance, according to Section B. of the AHCA IRS 990 (displayed below), $3,197,201 alone was spent on software and public relations/lobbying firms in Washington, D.C.  The software helps link 50 state chapters and coordinate campaign and lobbying activities.  The $2 million plus expenditure for “public affairs,” “audio visual solutions,” “communications,” and so forth in a single year is a component of the industry’s propaganda juggernaut. Much of the rest of the $40 million is spent on Democratic and Republic governor’s associations and other purchases of political influence.

What Does $40 Million Buy the Nursing Home Industry in One Year?

Immense amounts of cash, decades of lobbying expertise, and a high paid staff can guide legislation and regulation in a direction that benefits corporations at the expense of patients, families, and communities.  Stated differently, the AHCA is a well-oiled propaganda machine.

AHCA framing and narratives have been effective in creating a Panglossian viewpoint among the public, media, and even advocates.  Although it is common to hear negative comments about the industry such as it is “greedy,” “puts profits above people,” and other such disparaging remarks, a psychologically complex set of beliefs neutralize this disdain. Industry propaganda has undermined the public’s suspicion that greedy industrialists are pocketing excess amounts of Medicare and Medicaid funds through unjustified cost cutting.

The gargantuan amount of PR money spent by the AHCA and expertise in manipulating public opinion has instilled a subliminal belief among a wide swath of the public.  Their narrative is that the nursing home system is the best there is in the best of all possible worlds.  Stated differently, the industry would have you believe that Medicare and Medicaid reimbursements are too paltry for them provide better care and remain in business.  Their lobbyists and PR mavens brilliantly induce the belief that net earnings are so thin that humane care is financially out of reach.  This is a scurrilous lie.

By Dave Kingsley

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

By

Dave Kingsley

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

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

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

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

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

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

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

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

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

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

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

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

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