It’s no shock that nursing homes fall victim to coronavirus when profits come first

The COVID-19 pandemic has been an unimaginable tragedy for nursing home patients and workers — but health care educators, researchers and advocates are not surprised. For years, those of us who work in these disciplines have been alarmed by the business model of the nursing home industry. Furthermore, regulators’ weak enforcement of providers’ responsibility to protect the health and safety of patients and workers has been quite concerning to us.

During the past several decades, the long-term care industry has increasingly become what I call “financialized.” Shareholders over stakeholders has become the dominant management philosophy. Rather than managing nursing home facilities with the goal of making a reasonable profit while at the same time placing appropriate emphasis on the interests of patients, workers and communities, chains have all too often oriented themselves toward extraction and exploitation — extracting resources without investing in quality of care.

Nothing better illustrates the practice of placing cash flow and return on investment over the needs of patients than the lack of preparation for the onset of highly infectious diseases in long-term care facilities. Developing protocols for a pandemic and stockpiling necessary personal protective equipment would no doubt divert some revenue from the stream of capital flowing to investors. Consequently, return on investment has been maximized at the expense of patient safety and health.

The practice of extracting cash from government-funded nursing homes while at the same time reducing staff and underpaying caregivers has been driven by debt-fueled takeovers of large and medium-size chains. In the past decade, the second- and third-largest U.S. nursing home chains were bought out by private equity firms Formation Capital and The Carlyle Group. Within a few years, both chains filed for bankruptcy. The buyout firms recouped their equity and extracted a princely sum for investors.

States are often left with responsibility for putting insolvent facilities left by these bankruptcies back in operation. Eighteen of the top 20 nursing home chains are now owned by private equity firms.

While the industry has become increasingly financialized, regulation has remained too weak for adequate protection of patients. Providers have a well-funded and well-organized lobby — the American Health Care Association — led by Mark Parkinson, the former governor of Kansas. The AHCA has phenomenal influence in all 50 states and at the federal level. Attempts by advocates to influence legislation designed to elevate the quality of care are invariably rebuffed by industry lobbyists, who claim that increasing regulation would create a hardship for operators. And yet no financial transparency is required from the industry by legislators and regulators to substantiate their hardship pleas.

During the Obama administration, operators’ accountability for neglect and abuse was enhanced through increased financial fines. A couple of years ago, the industry was successful in convincing legislators to substantially roll back those fines. Indeed, substandard care does not usually result in serious consequences such as loss of licenses or takeover by states.

The question now facing legislators is this: Will the current tragedy besetting the nursing home system be a wake-up call and lead to requirements for protection of our loved ones in long-term care settings, or will we return to business as usual? If it is business as usual, the conditions in places where we care for the disabled and frail elderly will remain out of sight and out of mind until the next novel disease sweeps through our country.

This story was originally published May 6, 2020 at 5:00 AM with the headline "It’s no shock that nursing homes fall victim to coronavirus when profits come first."