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American Gulag
Nursing Home Profiteers

Worse than a coffin

There’s a fate worse than death, and many of us are condemned to it before death’s rescue: being sentenced to a nursing home, an assisted living facility or a “rehab” center. In the United States that’s the true gulag, the places where 1.5 million people perish long before dying, where neglect and abuse pose as “care” and corporations line up to gorge on some of the $75 billion in government money, and billions more in private payments, that keep the industry flush. I speak from experience. For the last four years I’ve had two parents navigating six assisted living facilities and rehab centers between them. One day I’ll begin to detail their miserable odyssey. Meanwhile, I was glad to see the Times devote a considerable amount of what little remains of its Sunday news pages to an investigation of the corporate-orchestrated crime that passes for nursing care in this country.

If you have time, I recommend all 3,200 words. If you don’t, here’s the Reader’s Digest version, minus the kind of Reader’s Digest ideology that cheers on exactly that sort of crime in the name of private enterprise.

In short, “prominent private equity firms like Warburg Pincus and the Carlyle Group, better known for buying companies like Dunkin’ Donuts,” have discovered that there’s money to be made on the back of old folks. They go in. They buy nursing-home chains (by nursing homes I mean also assisted-living facilities and the rehab centers that often attach to those facilities as extra profit centers), cut costs and cut staff, cut nurses especially, cut what goes for “activities” for those poor old folks, then disperse actual ownership among a series of sub-companies, which prevents lawyers from suing or getting much of anything should they sue. Then the equity firms resell at huge profits. It’s worked like a charm:

The typical nursing home acquired by a large investment company before 2006 scored worse than national rates in 12 of 14 indicators that regulators use to track ailments of long-term residents. Those ailments include bedsores and easily preventable infections, as well as the need to be restrained. Before they were acquired by private investors, many of those homes scored at or above national averages in similar measurements. In the past, residents’ families often responded to such declines in care by suing, and regulators levied heavy fines against nursing home chains where understaffing led to lapses in care. But private investment companies have made it very difficult for plaintiffs to succeed in court and for regulators to levy chainwide fines by creating complex corporate structures that obscure who controls their nursing homes.

The companies excuse? Oh, well, the nursing-home industry was flat on its back. Homes were being sued so much that they were going out of business in droves. The equity firms saved the industry. The corporate structures raised up to confound lawyers and disperse accountability to the point of oblivion, insulating companies from lawsuits, saved the industry. “We should be recognized for supporting this industry when almost everyone else was running away,” Arnold M. Whitman, a principal with the fund that bought one of those nursing home chains in 2002, is quoted as saying.

It’s the old principle of destroying a village in order to save it. America’s Vietnam (or Iraq, if you prefer) has moved to take up residence (or pestilence, if you prefer) under its very nose—in our backyards, without parents and grandparents. The corporate types like Whitman speak unapologetically about their heist: “‘There’s essentially unlimited consumer demand as the baby boomers age,’ said Ronald E. Silva, president and chief executive of Fillmore Capital Partners, which paid $1.8 billion last year to buy one of the nation’s largest nursing home chains. ‘I’ve never seen a surer bet.’”

A surer bet. At least Pete Rose only bet on baseball. These crooks, these palmed-avenue abusers and profiteers, are doing it on the back of old people and laughing about their bedsores all the way to the bank: “The typical large chain owned by an investment company in 2005 earned $1,700 a resident, according to reports filed by the facilities. Those homes, on average, were 41 percent more profitable than the average facility.” And here’s how:

The first thing owners do is lay off nurses and other staff that are essential to keeping patients safe,” said Charlene Harrington, a professor at the University of California in San Francisco who studies nursing homes. In her opinion, she added, “chains have made a lot of money by cutting nurses, but it’s at the cost of human lives.

The Times gives the numbers to back up the claim. The number of clinical registered nurses has been cut at 60 percent of the homes acquired by the investor firms. Federal regulation calls for nursing care to be at 1.3 hours per day per resident of a nursing home. At least. The time spent caring for patients in investor-owned homes? 30 percent less, while the ratio of clinical registered nurse to resident was 35 percent below the national average. “Federal and state regulators also said in interviews that such cuts help explain why serious quality-of-care deficiencies — like moldy food and the restraining of residents for long periods or the administration of wrong medications — rose at every large nursing home chain after it was acquired by a private investment group from 2000 to 2006, even as citations declined at many other homes and chains.”

The crime here, of course, isn’t entirely the investor chains’. It’s diminished to indifferent regulation. It’s laws like those passed in Florida that make it much more difficult to sue nursing homes, and permissive regulations that allow nursing home chains literally to cloak themselves in a haze of accountability that becomes a blessed (for them) absence of accountability.

The result is a form of neglect, abuse and, in inevitable cases, a form of murder by apathy whose reward is, for those companies, the proverbially obscene profits. Last year, Formation properties I, the investing firm that includes the scabrous Arnold M. Whitman, sold 186 nursing home facilities to General Electric for $1.4 billion. The profit on the sale? $500 million in four years.

Big numbers, because life, to those people, has never been cheaper.

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