From brain hemorrhages, opioid overdoses and hip fractures to bedsores, bruises and infections – inadequate staffing at nursing homes can have traumatic and even deadly consequences for frail and elderly patients whose lives depend on quality round-the-clock care. There’s no question that putting nursing home profits over patients is dangerous.
Ownership matters when it comes to nursing homes – that’s the tragic takeaway from “Overdoses, bedsores, broken bones: What happened when a private-equity firm sought to care for society’s most vulnerable.” The November Washington Post investigation paints a deeply-troubling picture of what happened to Manor Care Nursing Home’s approximately 25,000 residents when the nation’s second-largest nursing home chain was owned by the Carlyle Group, “one of the richest private equity firms in the world.”
Purchased by Carlyle in December 2007, the Manor Care chain declared bankruptcy in March and has since been purchased by the nonprofit Promedica Health.
Private equity firms operate in the aggressive and shadowy world of what some call “vulture capitalism.” Unlike the stock market, which is public, these firms privately gather pools of capital from ultra-wealthy individuals and institutional funds, such as pension funds. Monies are used to purchase struggling companies, which are then typically re-sold within four to seven years. While the end game is a high rate of return on investment, these risky transactions often end in bankruptcy and can involve drastic cost-cutting measures along the way, such as staff reductions at Manor Care.
In April 2011 Carlyle enriched its investors and imperiled Manor Care’s financial stability in what’s known as a “sale-leaseback,” a common strategy used by private equity firms. Carlyle sold nearly all of the chain’s hundreds of nursing home and assisted living facilities as well as the land underneath to real estate investment company HCP, to which Manor Care then needed to pay rent. According to the Post, after the sale-leaseback, the nursing home profits were no longer enough to pay the bills. Carlyle further extracted funds for its investors from Manor Care in the form of various fees, such as “transaction” and “advisory” fees.
By 2012, Manor Care needed to implement a cost-reduction program.
According to the Post, health code violations at 230 of HCR ManorCare’s homes rose 26 percent each year from 2013-17, with the number of annual infractions rising from 1,584 to almost 2,000 during the same time. Violations that increased in number included failure to prevent and treat bedsores, failure to assist residents with eating and bathing, medication mistakes and failure to deliver adequate care to those who need special services such as assistance with prosthetics and colostomy bags.
Manor Care representatives defended the company by pointing out that health code violations increased at other nursing homes during the same time frame due to changes in inspection methods. They also blamed the chain’s fiscal problems on October 2011 reductions in Medicare reimbursements.
However, the Washington Post analysis indicates that violations at Manor Care facilities rose three times faster than at other nursing homes nationwide, both in terms of the average number of violations per home and total number of violations overall.