Much to my surprise

An actually good piece in American Prospect:

The biggest nursing home chain in America quietly changed hands earlier this month, in a little-noticed deal that underscores just about everything that is rotten about America’s elder care system.

Genesis HealthCare and its 350 facilities are now in the hands of a documented serial liar with a history of conning his way into nursing home takeovers, then evicting the patients and flipping the real estate to luxury condo developers. His name is Joel Landau, and he pulled off exactly this feat with a nursing home on the Lower East Side of Manhattan in 2016, walking away with a $72 million profit after orchestrating an improbably elaborate campaign to convince a battalion of city and state officials that lifting a deed restriction that required the property to house a public health care facility was the only way to preserve the building as a public health care facility.

It’s possible to read it as all being the fault of The Joos. But in this particular instance, if it’s anything at all like the similar scandal 50 years ago in New York, that would be fair comment. Not Them, so much as some who happen to be.

It’s also far too against private equity and doesn’t delve enough into the appalling state government operation of the bits it can and should control. This is very much more about private operators taking advantage of a river of state cash than anything else.

And yet – it is true that something stinks here. And this piece is at least part of that story about what does.

9 thoughts on “Much to my surprise”

  1. I don’t understand the economics of nursing homes. I keep seeing that such-and-such a group is near bankruptcy and then I read of another group that is building them apace.

    I read about their difficulties caused by the low rates at which local authorities pay them and wonder why the homes don’t just tell the local authorities to piss off while concentrating on customers who fund themselves.

    So: is it a thriving sector with good prospects, and just a few badly run businesses in trouble, or is the status quo something different?

  2. Like a lot of businesses theirs tiers from stripped down basics to luxury. While training as a nurse my wife worked as an agency care home assistant to make some money and there were some care homes she would work once and refuse to go back to as the standards were so shoddy.
    She reckoned at the that’s there’s a trade-off that’s acceptable regarding care and cost, comfortable and treated with respect even if basic, but the regulatory burden and costs distort the system making it hard to achieve. That was over 20 years ago and I don’t see much improvement as said

  3. @dearieme
    https://www.sciencedirect.com/science/article/pii/S0277953617301351?casa_token=YTayxEqDugYAAAAA:M9yBeMqRuy-McrbJgfZ52y7AaViy0I88WNyt0HX4QmZ6z4E6kzJo–aTLAl1YmklK1IMaLMJ4tc

    Local authority provision has fallen from 65% in 1975 to 8% in 2015, mainly replaced by for profit. For profits have lower quality care, but there’s not much difference. Lots of demand. Most operators remain small. Quality is difficult to tell and thus it may be difficult to fill beds with fee payers (hence the need for local authority payers). Low barriers to entry and thus a lot of competition and low returns.

    In general, shocks to the industry caused by shifts in standards/regulations may push marginal players out, but it’s seen as an area that can be entered. The PE firms have been doing some consolidation – which may reduce central costs, but may also be associated with asset stripping or bad business practices. Taking on too much debt:

    https://www.ft.com/content/952317a6-36c1-11ea-a6d3-9a26f8c3cba4

  4. walking away with a $72 million profit after orchestrating an improbably elaborate campaign to convince a battalion of city and state officials

    Assuming there that the ‘campaign’ didn’t eat into that $72m

  5. A nursing home is Hotel California. Once you’ve captured your client, it’s too tempting to lower standards to make money.

  6. @ dearieme
    There are differences between the US and UK systems, so you query is interesting but does not relate directly to Tim’s post.
    @ ken
    Local Authority provision in the 1960s and 1970s was largely one step up in the amount of care provided from the charity-provided Almshouses and significantly more expensive on a like-for-like basis than the emerging for-profit alternatives: the quality of care/comfort *had* to be higher in the for-profit sector or they would have had no clients.
    How does one square this? Two ways: lower capital cost in the for-profit sector who adapted large old houses whereas the Local Authority did expensive new-builds and higher wages/lower performance in the public sector. Gradually budget restraints led to the balance between public sector building new homes and hiring rooms from private sector operators moving in favour of the latter.
    You *say* that quality is lower in the private sector – that may be true in a few instances, but I have no reason to believe that it is generally, or even on average, the case. Economic logic would suggest the contrary as does the data I have seen/heard. There are a lot of for-profit homes around here that charge high prices (sometimes *very* high prices) to self-funding residents, while those that choose to accept local-authority-funded residents have to cross-subsidise those by overcharging self-funding residents – just how does any public-sector residential home afford equal, let alone higher, standards of care without the cross-subsidy? [Even a higher payment than the LA would make to a private-sector home would not suffice unless it was so much higher that the District Auditor would report it to the Council].
    Anecdata: when I was young enough to go home for Christmas I came home from Church to be informed by my big sister, who preferred to attend the midnight, that my mother, as Chairman (“Madam Chairman”) of the County Borough’s Social Services Committee had gone to sort out a crisis because the cook at one of the LA homes had burnt the Turkey for the residents’ christmas dinner: she came home after she and colleagues had found/got hold of a replacement turkey. Dinner was a bit late [only a bit because everyone in the family could cook but Dad and big sister didn’t start the vegetables until mother got home]

  7. @john77

    The paper I linked to finds that quality is lower in the for profit sector – it looks sound to me, but not my area of expertise. They use the CQC inspections. Feel free to provide alternative data.

    “This study asks whether there are differences in the quality of care provided by public, non-profit or for-profit facilities in England. We use data on care quality for over 15,000 homes that are provided by the industry regulator in England: the Care Quality Commission (CQC). These data are the results of inspections carried out between April 2011 and October 2015. Controlling for a range of facility characteristics such as age and size, proportional odds logistic regression showed that for-profit facilities have lower CQC quality ratings than public and non-profit providers over a range of measures, including safety, effectiveness, respect, meeting needs and leadership. We discuss the implications of these results for the ongoing debates about the role of for-profit providers of health and social care.”

  8. CQC inspections (much like Ofsted for schools) are an exercise in box ticking. As long as all your (voluminous) paperwork is filled in and correctly filed, you’ll get a good report – the quality of care has little, if anything, to do with it.

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