The Nursing Home Industry’s Accounting Firm is Providing Propaganda for Low Staffing Standards


Dave Kingsley

    What’s in a Number?

    The major accounting firm of Clifton, Larson, & Allen (CLA) has concluded that CMS proposed nursing home staffing standards will cost the industry $6.8 billion in additional labor costs.[1]  Without the proper context, a big number like $6.8 billion has a big impact on legislators, the media, and the public in general. In the proper context, this is not a big number.  It is in fact a de minimus increase in overall costs to the industry – mere noise in the data.

    By the time the standards are implemented, total spending on Medicaid will have reached $1 trillion.  Approximately 20% or $200 billion of total Medicaid dollars will be allocated to long-term care. Medicare will expend an additional $100 billion for skilled nursing care.[2] These are conservative estimates, but even low-ball statistics reduce the impact of $6.8 billion to insignificance.   Based on CLA’s estimate, nursing home operating expenses will increase by around 2% of revenue derived from taxpayers.  Given waste from overpayment, widespread mismanagement, and weak government oversight in the taxpayer funded nursing home system, there will be little to no impact on providers’ bottom line because of CMS weak standards.

    Furthermore, overall industry revenue from reimbursement for direct care is enhanced by a host of tax subsidies for depreciation, interest, and other write downs on taxable income.  Money owed and not paid to the government is cash flow – it is money that can be used to make more money or to pass along to investors and executives. 

Guns for Hire:  How A Major Accounting Firm Serves as a Propaganda Arm of the Nursing Home Industry

   One would expect  ethical, competent accountants to provide an objective report on returns to nursing home investors. But that is not what CLA is doing for the nursing home industry. Typically, they base their claims about industry hardships on facility cost reports – specifically on net operating income.  This is laughable for several reasons. 

    The practice of separating facility specific net income from parent corporation financial reports, i.e., income statements, cash flow statements, and balance sheets, suggests that CLA is intentionally distorting the financial picture of the industry. Expenses at the facility level include related parties and home office allocations.  I suggested to a legislative committee a couple of weeks ago that they look at transfer pricing rather than the usually low or negative net operating income reported by facilities, which lease their property from another subsidiary of their parent corporation.  Triple net leases are standard in the industry.  Hence, facilities pay maintenance, taxes, and insurance on property they don’t own.  This makes the net operating income for the property subsidiary quite robust.

    As corporate finance has evolved with tax policy, net income is not a measure of “profitability” or return on investment.  This is especially the case in asset intensive industries.  The nursing home industry is not merely a healthcare industry.  Rather it is primarily a real estate and finance business.  With large amounts of write downs for, among other things, depreciation and interest, direct care revenue is greatly enhanced by tax subsidies.

    Real estate alone results in huge federal and state tax expenditures. For instance, in 2014, Amazon’s net profit was -$241 million –note: that is negative $241 million.  It would appear to nonfinanciers that Amazon was losing a lot of money.  Harvard finance professor Mihir Desai pointed out that “Amazon’s EBIT, however, was $178 million, and the difference of $419 million represents taxes, interest, and currency adjustments.”  Professor Desai asked, “What about EBITDA?”  Amazon had $4.746 billion in depreciation and amortization.  Consequently, their EBITDA of $4.924 billion was “a far cry from the net loss of $278 million. So Amazon generated lots of cash, as measured by EBITDA, but had losses according to profitability measures.”[3]

    Of course, Amazon is not in the nursing home business.  But the same principles apply.  Perhaps Amazon is more asset intensive than we find in the LTC/SKN industry, but real property is a major factor in providers’ cash flow. 

    With the entry a couple of decades ago of limited liability corporations (LLC), real estate investment trusts (REITs) and private equity firms (PE) the ground shifted under the feet of regulators and advocates.  The industry has become financialized through ancillary subsidiaries providing labor, insurance, therapy, and other goods and services, which has resulted in increasing extraction of cash without a correlative increase in quality of care.  None of this enters the CLA picture of the industry.  There appears to be no focus on what facilities are paying related parties for goods and services.  Nor do we know how to evaluate the quality of care based on pricing.  This is astounding but is nevertheless overlooked by legislatures, government agencies, and many of the largest advocacy organizations such as the AARP, NCOA, NIH, the so-called Moving Forward Coalition. 

    It is time that advocates step up and demand that we get a thorough, objective, financial analysis of the industry rather than a continued reliance on the AHCA/NCAL and their paid accounting firm. The nursing home lobby has no compunction about putting out ridiculous financial information because they know they can get away with it. That is a shameful, disgraceful situation.  It will do us no good to argue about the minutia of reimbursement (think RUGs versus PDPM) and ignore the bigger issue of nonfeasance, misfeasance on the part of CMS, state agencies, and legislatures.

CLA Propaganda Serves as a Barrier to Quality of Care

    CLA is paid to support the nursing industry’s hardship claims and to help further a very effective narrative of low net income, financially struggling owners/investors, and stifling over regulation. Legislative hearings attended by industry lobbyists, government representatives, and advocates often seem like a gathering for singing kumbaya and exuding effusive niceness.  Legislators and most other speakers and attendees are willing to sit through hours of mind-numbing rate setting minutia, e.g., complex incentives paid to facilities willing to provide a minimal amount of care.  Hours pass without anyone addressing highly questionable financial practices and faulty cost report data.

    Furthermore, legislators don’t understand that the nursing home industry has been transformed in a mere two decades.  The mom-and-pop nursing home is far gone.  A few nonprofit facilities that are not part of a chain still exist, but we are uncovering serious grifting in even some of those places.  In the for-profit sector, sophisticated financiers are leveraging a variety of legal and financial innovations such as the limited liability corporation (LLC) Umbrella Partnership Real Estate Investment Trust (UPREIT), private equity, and other legal, financial structures  to extract optimal cash flow with minimal expenses for care.

    The nursing home system is about money.  It has become fully financialized.  Real estate and finance override healthcare.  The only way that the industry can maintain such a disgusting and pathetic system is to hide the truth from “we the people,” and create a propagandistic narrative for protecting the interests of financiers and realtors.  The AHCA is very good at deception.  But one of their most effective tactics is to hire a large accounting firm to do their dirty work for them.

[1] CLA (2023) “CMS Proposed Staffing Mandate:  In-Depth Analysis on Minimum Nurse Staffing Standards.


[3] Mihir A. Desai (2019) How Finance Works: The HBR Guide to Thinking Smart about the Numbers.

Why Are We Putting Up With Medical-Industrial Grifters And Politicians Who Collaborate With Them?


Dave Kingsley

Who Pays for Medicare, Medicaid, and the Affordable Care Act?

The answer to this subtitle, “Who Pays for Medicare, Medicaid, and the Affordable Care Act?” is “You and I do. We all do.” We pay through our income taxes, payroll taxes, sales taxes, property taxes, premiums, deductibles, and co-pays. We pay more than enough to provide all of us with first class medical care from the prenatal stage of life to the end of life. I can provide an overwhelming amount of evidence to support a claim that I will make in this and subsequent posts: we are getting far less for our money than we deserve because of greed supported by government/corporate corruption and propaganda.

Furthermore, corporations paid with taxes to underwrite our healthcare are allowed by federal and state governments to display their disdain for us with bizarre and insulting ad blitzes featuring carnival barkers like Joe Namath, Jimmie J. J. Walker, William Shatner, George Foreman, and other clownish characters with no self respect and the same amount of respect for us. You are paying for this incredible insult to your intelligence. If you are wondering why Medicare Advantage (MA) costs the Medicare program more than traditional Medicare, this is one reason.

Medicare has evolved into an incomprehensible Rube Goldberg morass of traditional and MA components incomprehensible to ordinary people. Enrolling in the program involves a lot of good luck or expert help for avoiding traps that could haunt you down the road if your health status changes. Even worse, hardly anyone knows that the MA program is an ongoing effort (facilitated by both political parties) to end traditional Medicare and rig the system in the favor of big insurance over beneficiaries. It’s succeeding with a swiftness beyond the wildest dreams of the corporate sponsors of the cleverly named Medicare Modernization Act of 2003.

How Much Are You Paying For Government-Funded Healthcare?

In considering what you pay for federal/state collaboration with corporate America for medical care – which is practically all medical care in the U.S. – let’s consider the macro level numbers first and then discuss what it costs you – the resident/citizen/beneficiary. Annual expenditures for Medicare were approaching $1 trillion per year in 2020 and will no doubt reach that milestone this year. Medicaid expended $655 billion in 2020 and premium subsidies for the Affordable Care Act totaled $55 billion, medical care for post 9/11 veterans is estimated to cost $60 billion per year, tax deductions (expenditures) for employer sponsored health insurance is the largest tax expenditure at $227 billion, household out of pocket spending reached over $406 billion. With these expenditures and hospital, drug, physician/clinical services, the U.S. expended approximately $4 trillion for medical care in 2020 (

We can only estimate total expenditures but $4 trillion is an acceptable official estimate, which would be approximately $11,700 per capita and 18% of GDP. This is double the expenditures of U.S. peer countries in Europe and Asia, which have universal, single payer systems rather the U.S. privatized model that blocks millions of our fellow citizens and residents from medical care.(

I believe however that when tax expenditures are considered, $4 trillion, or $11,700 per capita and 18% of GDP significantly underestimates the total expenditure for medical care in the U.S. corporatized, for profit system. Corporations receive significant streams of revenue through the tax codes, which burdens ordinary wage and salary earning Americans by increasing their tax burden while reducing the capital gains taxes of corporations and high net worth individuals. There has been no attempt to enumerate the total amount of benefits accorded to medical care corporations for real estate depreciation, interest on debt, executive compensation, and other forms of federal and state tax expenditures. I’ve already noted the $227 billion for employer provided health insurance and included that in the $4+ trillion total.

One Egregious Example Of Corporate Greed Among Many

It is past time that the American people were told about the excessive executive compensation, unnecessary increases in shareholder value through stock buybacks, stock splits, and other manipulation of stock prices. Taxpayers need to be clearly enlightened about how much of their money is going to medical care versus going to shareholders, executives, advertisers, and other wasteful expenditures that we can expect in a privatized public-funded medical care – technically known as the medical-loss ratio. The Centene Corporation is one of many examples of greed and corruption unquestioned by the people sent to congress to oversee our rights as taxpayers and citizens.

Centene, which derives its revenue from Medicaid – poverty medicine – paid its CEO Michael Neidorff $24 million in 2020. The total compensation for Centene executives and board members (which includes former congressman and HHS Secretary Tommy Thompson and former congressman Richard Gephardt) was slightly more than $64 million. Much of this compensation is paid in stock options and stock awards. The first $500,000 of executive compensation is tax deductible, hence tax maneuvers (tax arbitrage) through stock awards/option are beneficial to corporate earnings.

It is not uncommon these days for high paid corporate executives to have their stock awards diverted into individual and family trusts or some entity set up for tax avoidance. Having analyzed the proxy statements of several health care corporations, I’ve come to realize how fabulously wealthy many families and individuals have become in corporations earning most of their revenue from government funded medical programs.

What Should Excessive Government-Funded Medical Expenditures Mean to You?

It may escape peoples’ attention that the budget in their state is strapped because of the cost of Medicaid due to massive numbers of residents unable to obtain access to care through some form of insurance. State revenue is primarily derived from income, property, and sales taxes. In most states, consumers pay at least 4 or 5 percent sales taxes on everything they buy – including food and clothing. Some states like Texas and Florida have no income taxes and therefore have high sales taxes. The burden of sales and property taxes is inversely proportional to income and wealth. Higher income people have a lighter burden. Although poor people who have the greatest burden for taxes are funding poor peoples’ medicine while wealthy individuals benefit financially from Medicaid have a lighter tax burden. Furthermore, program beneficiaries are treated as second class citizens in the health care system. Indeed, millions of poor people can’t even qualify for Medicaid or the Affordable Care Act and are essentially uninsured.

What does it mean to anyone in a society in which some of their fellow human beings are forced to pay taxes but denied medical care or accorded only low tier medicine for no other reason than they are poor? The public’s acquiescence in and acceptance of this injustice is mind boggling and disturbing.

In addition to state and federal income taxes paid by wage and salary earners, most every worker pays nearly 3% of every paycheck for Medicare (1.45% deducted from wages/salary and 1.45% submitted by the employer). These payroll taxes fund the Medicare hospital trust fund (Part A). At age 65, citizens qualify automatically for hospital benefits but are charged a premium for physician services (Part B), which will be $170.10 per month in 2022 (deducted from Social Security). Coverage for drug benefits (Part D) will cost around $37.00 per month. In spite of these costs, a major medical catastrophe can bankrupt you.

Hundreds of billions of tax expenditures for depreciation, employer provided health insurance, and generous tax avoidance provisions too numerous to mention flow from income taxes deducted from wage and salary earners’ paychecks – labor is taxed heavier so that capital can avoid taxes.

Budget Deficit & Inflation Propaganda

The monied elites are undeservedly rewarded through privatized, government-funded (with your taxes), medical care. Consequently, these programs do add significantly to U.S. debt and deficits. However, debts and deficits don’t bother me as much as the blame heaped on programs that benefit the American people for “running up the deficit.” The power elite owns the media and controls legislators through obscene amounts of political expenditures and can perpetuate big lies for the purpose of cutting benefits and increasing their share of program expenditures.

Here is some truth: Of the total expenditures on Medicare in 2020, 57% was paid by beneficiaries through their payroll taxes, premiums, co-pays, and deductibles (See page 10, 2020 Medicare Trustees’ Report). I submit to readers that the corruption of privatization and politics accounts for the other 43%. For instance, the Medicare Modernization Act of 2003, which legislated the drug benefit into existence, prohibits negotiation of drug prices. Very little serious discussion occurs regarding excessive payouts to shareholders and executives and lack of price controls in all phases of medical care.

That budget deficits and debts – often blamed on Social Security and Medicare – are running up inflation is one of the big lies foisted on the American people through clever, highly paid, public relations firms. Not one cent of Social Security is paid out of the U.S. Treasury. All of it – 100% – is paid for by beneficiaries through taxes they pay while earning a wage or salary. As I explained above, less than half of the funds for Medicare is transferred from the U.S. Treasury. That would not be necessary if corporations, i.e. shareholders and executives, weren’t lining their pockets with your taxes.

Why Are the American People Putting Up With The Medical Industrial Complex & The Politicians Supporting Its Greed & Corruption?

We could write books about the incessant propaganda and conditioning heaped on the American public. Suffice it say at this point that “we the people” are victims of clever framing, narratives, and political strategies. The Medical-Industrial juggernaut has unlimited amounts of money to spend on lobbying, paying off legislators (both Democrats and Republicans), and grooming the media. Taxpaying citizens and residents are sitting ducks. Therefore, they have been conditioned to believe that they don’t deserve anything better and should thank their lucky stars for the kindness and beneficence of the elites for any healthcare they do have. And if they are paying taxes and have no healthcare paid for with their taxes, too bad. That’s life.

There is an answer to the sorry state of affairs in the U.S. medical care system. Citizens must become informed, organized, and force their legislators to answer for the money they are receiving from Big Pharma, the American Hospital Association, and every other big money, medical-industrial group, roaming the halls of legislatures and paying for political campaigns and other goodies for legislators.

Paid professionals as advocates need a narrative and political strategy that might be risky. Speaking truth to power necessitates exposure of powerful people such as Congressman Richard Neal, current chairman of the powerful House Ways & Means Committee and a poster child for medical-industrial graft. He holds hearings on the disgraceful nursing home situation in this country without any intention of seriously reforming the system. If you don’t believe me, just Google him.

The Tallgrass Economics Blog will be focusing on propaganda, framing, narratives, political strategies, and how citizens can fight the corruption in a government-funded medical care system they pay for. We believe that the Democratic Party, liberals, and progressives could step up their political communication skills. We also believe that the great people in nonprofits advocating for reform of tax funded medicine need to come together and call out the politicians who are helping corporations fleece the hard working, patriotic, people of America.