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Editor: Katharine Van Tassel
Akron Univ. School of Law

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Sunday, September 23, 2007

Buying Nursing Homes: Profit v. Patient Care

The New York Times reports on private investors purchasing nursing homes.  What has been the result of the change in ownership -- well - according to the Times research - not good.

Regulators say residents at these homes have suffered. At facilities owned by private investment firms, residents on average have fared more poorly than occupants of other homes in common problems like depression, loss of mobility and loss of ability to dress and bathe themselves, according to data collected by the Centers for Medicare and Medicaid Services.

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. By contrast, publicly owned nursing home chains are essentially required to disclose who controls their facilities in securities filings and other regulatory documents.

The Byzantine structures established at homes owned by private investment firms also make it harder for regulators to know if one company is responsible for multiple centers. And the structures help managers bypass rules that require them to report when they, in effect, pay themselves from programs like Medicare and Medicaid. Investors in these homes say such structures are common in other businesses and have helped them revive an industry that was on the brink of widespread bankruptcy. “Lawyers were convincing nursing home residents to sue over almost anything,” said Arnold M. Whitman, a principal with the fund that bought Habana in 2002, Formation Properties I. Homes were closing because of ballooning litigation costs, he said. So investors like Mr. Whitman created corporate structures that insulated them from costly lawsuits, according to his company.  “We should be recognized for supporting this industry when almost everyone else was running away,” Mr. Whitman said in an interview. . . .

The Times’s analysis of records collected by the Centers for Medicare and Medicaid Services reveals that at 60 percent of homes bought by large private equity groups from 2000 to 2006, managers have cut the number of clinical registered nurses, sometimes far below levels required by law. (At 19 percent of those homes, staffing has remained relatively constant, though often below national averages. At 21 percent, staffing rose significantly, though even those homes were typically below national averages.) During that period, staffing at many of the nation’s other homes has fallen much less or grown.

Nurses are often residents’ primary medical providers. In 2002, the Department of Health and Human Services said most nursing home residents needed at least 1.3 hours of care a day from a registered or licensed practical nurse. The average home was close to meeting that standard last year, according to data.  But homes owned by large investment companies typically provided only one hour of care a day, according to The Times’s analysis of records collected by the Centers for Medicare and Medicaid Services.

TalkLeft has a great discussion about this takeover and what it means for individuals considering long-term care for their loved ones.

http://lawprofessors.typepad.com/healthlawprof_blog/2007/09/nursing-homes-g.html

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