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David G. Stevenson and David C. Grabowski Private Equity Investment And Nursing Home Care: Is It A Big Deal? Health Affairs, September/October 2008; 27(5): 1399-1408. [Abstract] [Full Text] [PDF] [Reprints & Permissions]

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Nursing Home Crisis

Gregory D. Pawelski   ( 19 November 2008 )

Nursing Home Crisis 19 November 2008
Gregory D. Pawelski, Retired Send comment to journal: Re: Nursing Home Crisis gdpawel{at}comcast.net Gregory D. Pawelski	Congress is turning up the heat on nursing homes, or so it seems. The House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing that focused on problems with regulation and full disclosure of ownership. Surprisingly, this subcommittee had not held an oversight hearing about nursing home care since 1977. This indicates a rather lackadaisical attitude on the part of Congress in regards to our senior population. The last significant change in nursing home regulations was the Nursing Home Reform Act of 1987. Now it seems that Congress maybe serious enough in examining whether standards continue to provide an appropriate level of care and protection for residents of nursing homes. The subcommittee released a report commissioned by the Centers for Medicare and Medicaid Services (CMS) that suggested that the regulatory enforcement system for nursing homes has a lot of problems. All 46 ManorCare nursing homes in Pennsylvania staff below a standard recommended in a CMS study as putting residents at risk. The CMS contracts out the oversight of each nursing home to each state's health department. Not only is the each state's health department the problem, the CMS may be part of the problem, too! The CMS uses stealth moves like putting out the word that surveyors shouldn't cite anything they don't absolutely have to, cutting or underfunding oversight budgets, and looking at self-reported and unaudited data (data reported by the facilities themselves and no oversight agency verifies audits to ensure that they are even true). Nursing home inspections depend on the paperwork to verify that the residents are getting good care. ManorCare pays nurses to make sure that the paperwork is perfect, thereby ensuring a good inspection. In the past few years, a wave of new owners and investors has begun purchasing nursing home chains. These private equity firms are unregulated and new to the nursing home market. Many worry that the top priority for these new owners will be profits, rather than providing the staffing and resources necessary to ensure top-quality care for our loved ones. Frequently, they use complex corporate structures, separating the nursing home real estate from the operating companies and putting multiple layers of limited liability partnerships between themselves and the day-to-day operations of the nursing home. The Carlyle Group already planned to restructure its takeover of ManorCare, which will comprise about 300 corporate entities that could obscure ownership and make it more difficult to regulate care. It split the company's real estate holdings from the rest of the business so the properties could be used as collateral to raise funds in credit markets. Ownership structures with multiple stakeholders have been used by other private equity firms to minimize liabilities and shield them from regulator inquiries, like when cutting staff is made to improve profit margins. They use these kinds of structures to avoid taking responsibility when taking control of nursing homes. Private equity is buying up this industry and then hiding the assets, and when residents are dying from lack of proper care, there is little the courts or regulators can do, while they skim off the profits to line the pockets of investors or plow the money into separate ventures that have nothing to do with nursing home care. The CMS and the states lack the tools to keep up with the rapid changes in the industry, to know who actually owns the country's nursing homes and who should be held accountable for the residents in their care. There is a crisis in our nation's nursing homes. The residents there need help! Further Reading: http://www.gao.gov/new.items/d08517.pdf http://cancerfocus.net/cancer_patients_in_nursing_homes/41776