Is it time to think about ending the private operation of nursing homes?

The tragedies we have been watching unfold over the past two months are very hard to bear. It has been especially difficult to see how heavily the pain of the COVID-19 illness and deaths has played out in nursing homes here in Western New York, throughout New York State and the nation.

As this post is being published on May 12th, there have been more than 150 confirmed or suspected COVID-19 deaths in Erie County nursing facilities, 30 in Niagara County, 5,200 in New York State and more than 25,600 nationally.  The national numbers are undercounted to some degree because the governors of certain states have chosen to hide public health information from their constituents and many statistically unexpected deaths were not tested.

Decisions about having family members transferred to nursing facilities are among the most difficult that spouses, sons and daughters will ever make, and come generally after the family has concluded that they are no longer able to properly care for someone. While costs are certainly a significant factor, families generally will agonize even more about how their loved one will be cared for during the pandemic.

While the federal government rates facilities on a variety of factors including nursing staff levels, medical issues arising from care, and other matters, the ratings, ranging from 1 to 5 with 5 being the best, are of little help in family decision-making. Oftentimes after family finances are evaluated the options of available locations are limited to a small handful of facilities on the lower end of the ratings scale.

Seventy percent of the nursing homes in the United States are privately owned. Hedge funds have frequently purchased the physical location, the business or both.  Hedge funds are not a charity.  The brochures and the TV ads always present wonderful images of the facilities and their levels of care.  Reality doesn’t really sell well.  The actual level of care can demonstrate a stark example of where management’s priorities are.

The Buffalo News in 2018 reported on poor state oversight of nursing facilities.

New York State gave licenses to operate at least 10 Buffalo area nursing homes in the last decade to new owners who had been fined for providing poor care to residents at other nursing homes.

Advocates for nursing home residents say the state must do more to prevent nursing home owners providing low-quality care from buying more long-term care facilities…

Sixteen of the 47 nursing homes in Erie and Niagara counties have been bought since 2007 by for-profit, out-of-town owners. Many of those homes are among the region’s worst rated.

The state allowed some of the out-of-town investors to buy more nursing homes, despite poor ratings and state and federal fines totaling at least $325,000 at ones they already operated…

The Health Department, which reviews applications to operate nursing homes, now more thoroughly evaluates applicants’ track records running other long-term care facilities, a deputy health commissioner said in September [2018].

Applications to buy nursing homes are approved or rejected by the Health Department’s Public Health and Health Planning Council, 25 volunteers appointed by the governor

 The Health Department staff about a year ago began providing council members with the federal government’s ratings of other nursing homes owned by prospective buyers, said Deputy Health Commissioner Daniel Sheppard.

He said that sends a message to applicants that quality matter.

The 2018 Buffalo News report continued by citing examples of local nursing homes that have been purchased by out-of-town interests; interests who owned and operated facilities in other areas that have been cited for by state health investigators for violations in previous years that resulted in in substantial fines.  Some investors in local facilities had been fined in recent years for putting residents in “immediate jeopardy.”

The New York Times last week reported on the manner in which many nursing facilities are purchased and managed.

When the pandemic struck, the majority of the nation’s nursing homes were losing money, some were falling into disrepair, and others were struggling to attract new occupants, leaving many of them ill equipped to protect workers and residents as the coronavirus raged through their properties.

Their troubled state was years in the making. Decades of ownership by private equity and other private investment firms left many nursing homes with staggering bills and razor-thin margins, while competition from home care attendants and assisted-living facilities further gutted their business. Even so, many of their owners still found creative ways to wring profits out of them, according to an analysis of federal and state data by The New York Times.

In many cases, investors created new companies to hold the real estate assets because the buildings were more valuable than the businesses themselves, especially with fewer nursing homes being built. Sometimes, investors would buy a nursing home from an operator only to lease back the building and charge the operator hefty management and consulting fees. Investors also pushed nursing homes to buy ambulance transports, drugs, ventilators and other products or services at above-market rates from other companies they owned.

These strategies paid off handsomely for investors, but they forced nursing homes to skimp on quality. For instance, for-profit nursing homes — roughly 70 percent of the country’s 15,400 nursing homes and often owned by private investors — disproportionately lag behind their nonprofit counterparts across a broad array of measures for quality, The Times found. Also, they are cited for violations at a higher rate than nonprofit facilities.

The toll of putting profits first started to show when the outbreak began. No nursing home could be completely prepared for a pandemic as devastating as Covid-19, but some for-profit homes were particularly ill equipped and understaffed, which undercut their ability to contain the spread of the coronavirus…

Controlling the real estate gives investors, including real estate investment trusts, leverage to raise rents. Separating the real estate from the operating business can also help limit liability in wrongful-death lawsuits, because the latter typically has little cash and few assets…

A recent report on private equity buyouts of nursing homes, which studied 119 transactions from 2000 to 2017, said private equity owners tended to put “high-powered profit maximizing incentives” first. The researchers found that after private equity stepped in, nursing staff hours per patient fell 2.4 percent, and staff quality as measured by federal regulators fell 3.6 percent…

The nursing home industry is pushing for broad immunity in the wake of the pandemic. So far, 16 states, including New York, New Jersey, Michigan, Georgia and Illinois, have already approved measures granting immunity from lawsuits — a development that worries longtime critics of the industry…

On Thursday this post will continue with information about care issues that nursing homes are dealing with during the pandemic along with some questions about future management.

4 thoughts on “Is it time to think about ending the private operation of nursing homes?

  1. It was once said that the moral test of government is how it treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.
    Hubert H. Humphrey

    Who can this nation turn its lonely eyes to?

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  2. The nursing home industry in WNY was sabotaged by the NYS Health Department, Govenor Spitzer, and the NYS Legislature. Not for profit religious sponsors managed nursing homes quite well until the state decided not to reimburse the NFPs at a reasonable rate. The NFPs asked the state in 2007 to raise their rates that had not been changed since 1986! Yes, you read that right. Rates could be raised ONLY if the religious sponsors sold to a FOR PROFIT. The LI and NYC operators came here and saw rates raise by 40%. Staffing levels dropped, quality of care vanished. Massive profits were and are being made.That is the real story.

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