Ernest Tosh is on a mission. For the better part of the last decade, Ernest has worked around the country to educate lawmakers, lawyers, nursing home advocacy groups and ombudsman programs about the lack of transparency in the nursing home industry- and what to do about it.
Ernest has recently met with lawmakers in California, New Jersey, Pennsylvania and Maryland; he’s spoken to advocacy groups in Virginia, Texas, New Jersey, and at the 2021 Consumer Voice Annual Conference; and he presented at the annual California Advocates for Nursing Home Reform conference. The main topics of his discussions have been private equity’s role in the nursing home industry and the impact it has on patient care.
Private Equity’s Effects on Nursing Care
The impact of private equity in the nursing home sector is alarming and undeniable. Studies have consistently shown increases in private equity investment in nursing homes result in lower quality of overall care, including more bedsores, and malnutrition and dehydration diagnoses. Additionally, at nursing homes under private equity ownership:
- Short-term mortality of Medicare residents increases by 10%.
- Average staffing levels decrease.
- Patient mobility declines and pain intensity increases.
- Probability of taking antipsychotic medications increases by 50%.
- Management fees increase by 7.7%, lease payments by 75%, and interest payments increase by about 325%. Cash on hand decreases by close to 38%, which means less money for resident care.
Source: Atul Gupta, Sabrina T. Howell, Constantine Yannelis, Abhinav Gupta. “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes,” NBER, February 13, 2021. https://bfi.uchicago.edu/working-paper/does-private-equity-investment-in-healthcare-benefit-patients-evidence-from-nursing-homes/
The private equity sector is in the business to make money, and their interest in the nursing home sector is growing. In 2019, thirty-three (33) private equity-driven nursing home acquisitions were valued at $483 million. In 2020, forty-three (43) private equity-driven nursing home acquisitions were valued at $1.5 billion.
The increase in value and volume proves what many who operate in this field already know- that nursing homes are profitable or private equity firms would not be investing in them. Notwithstanding, the nursing homes continue to demand higher and higher federal and state reimbursement rates because they claim to be losing money.
As a result, private equity investors and nursing home operators go to great lengths to hide their identities and profits, thereby creating a difficult web to unweave when attempting to understand how much money nursing homes make, and what’s considered profit. Unweaving that web is made even more difficult because in almost every state, ownership and financial transparency is not a requirement to owning or operating a nursing home.
That is quickly changing.
COVID-19 highlighted many of the pre-existing issues plaguing nursing homes across the country- poorly trained and underpaid staff, and a clear lack of nursing home standards and regulations that protected residents’ health and safety. Tragically, as of March 20, 2022, a total of 151,726 nursing home residents across the U.S. had died with COVID-19.
Countless others have suffered neglect and poor care due to COVID staffing issues, with complications such as bedsores, depression, and significant weight loss reaching unprecedented levels. COVID-19’s effects on nursing homes have shocked many lawmakers around the country, leading to a renewed effort to address the problem.
On March 13, 2020, the Centers for Medicare & Medicaid Services (CMS) announced a package of new measures designed to protect nursing home residents from COVID-19. In addition, nursing home lockdowns likely helped contain the pandemic and averted a larger catastrophe. However, they also took a heavy toll on both staff and residents. This exacerbated pre-existing issues, prompting many to call for sector-wide reforms.
In 2021, Ernest testified about private equity in nursing home care to the U.S. House of Representatives Ways and Means Committee. Ernest presented to lawmakers some staggering facts:
- In 2019, private equity firms invested over $190 billion across 1,227 healthcare investment deals, representing 14% of all private equity value in the country. That same year, private equity firms had $2.9 billion in capital waiting to be deployed in the healthcare acquisition sector.
Private equity firms cycle through their nursing home investments in 4-7 years. During that time, the firms employ every effort to maximize profits and cut costs at the facilities, thereby dramatically increasing cash flow, all at the expense of the infirm residents they promise (and are compensated with taxpayer funds) to protect and care for. This is designed to increase the value of the facility (or chain of facilities) to prospective buyers when the firm’s investment cycle closes.
Ernest’s testimony provided lawmakers with an understanding of how they can draft legislation requiring more transparency in the nursing home industry. Consumers are entitled to know who they are entrusting their loved one’s care with, which thanks in part to Ernest’s efforts in California, will soon be a reality.
In California, Ernest helped lawmakers and advocacy groups craft SB 650, The Corporate Transparency in Elder Care Act of 2021, that was signed into law by Governor Newsom on October 4, 2021. The bill requires skilled nursing facilities to provide consolidated financial reports and documentation of the corporate structure to the public and state regulators with the Office of Statewide Health Planning and Development (OSHPD) starting in 2023. The bill further mandates (in part):
- an organization that operates, conducts, owns, manages, or maintains a skilled nursing facility must prepare and file with the OSHPD an annual consolidated financial report that includes data from all operating entities, license holders, and related parties in which the organization has an ownership or control interest of 5% or more and that provides any service, facility, or supply to the nursing facilities;
- such an organization must also provide documents outlining a visual representation of the organization’s structure as attachments to the consolidated financial report;
- a duly authorized official of the organization must certify the report; and
- OSHPD must develop policies and procedures to outline the format of information to be submitted, determine if the annual consolidated financial report is complete, and post those reports and related documents to its internet website
Thanks in large part to Ernest’s efforts, California law will soon require a licensed skilled nursing facility owner and operator to make public all owner/operator information, including data from all related parties in which the skilled nursing facility owner/operator has an ownership or control interest of 5% or more and that provides any service, facility, or supply to the skilled nursing facility.
This law matters. It provides consumers with the ability to understand whether the money a nursing facility receives goes to resident care, or the owners’ pockets. It prevents nursing homes from hiding their profits, cutting staffing and resident care in the process. It further provides the ability to discern a nursing facilities ownership and management structure to hold the proper parties accountable for any harm caused by the facility and its operators.
Similar to his efforts in California, Ernest is meeting with lawmakers in Pennsylvania to help protect consumers by changing that state’s nursing home transparency laws.
A multitude of proposed bills (in draft form) will require nursing homes to provide consumers and the public:
- the nursing facility’s financial statements including, but not limited to, a balance sheet, a statement of income and expenses, a statement of retained earnings (or fund balance), a statement of cash flows, a description of any dividends paid in whole or part to any person or entity with a direct or indirect ownership interest of 5% or more in the nursing facility; the same documents will be required for all related entities as well.
- complete contact information for all persons or organizations who own more than 5% of a nursing facility or any of its related entities.
- details surrounding any proceedings that resulted in the suspension, denial or revocation of the license or renewal license of that facility; and
- proceedings that resulted in the denial or revocation of the Medicare or Medicaid certification of the facility; and
- the felony convictions of any crime involving physical, sexual, mental, or verbal abuse or neglect; any crime involving the misappropriation of property or financial abuse; and
- descriptions of any instance of permitted, assisted or encouraged illegal act or acts against a resident of a long-term care nursing facility; and
- descriptions of any federal, state, or local law enforcement action in any jurisdiction concerning the conditions in any health care facility for which the applicant or administrator was licensed, if that court proceeding resulted in an order or judgment against the applicant, granted damages against the applicant, or any form of equitable relief, including an injunction or declaratory judgement;
- details of any reduction or elimination of services at licensed facilities;
- details of any bankruptcy proceedings involving licensed facilities owned or operated by the applicant, any related entity, or defunct related entity.
Another proposal includes requiring at least 75% of a long-term care nursing facility’s aggregate revenue appropriated through the Commonwealth of Pennsylvania in a fiscal year to be expended on the direct care of residents; while another proposal addresses when the state’s Department of Health can deny licensure to a nursing home operator.
These renewed legislative efforts are creating a ripple effect that will result in improving nursing care around the country.
Ernest was asked to provide similar consultation and advice to New Jersey’s house and senate chambers, in their efforts to craft legislation requiring more transparency in nursing home ownership and operations within the garden state.
This bill will require nursing home chains to file consolidated cost reports to show how much money the entire organization is bringing in across all facilities, among other reporting requirements that will in part, mirror California’s Corporate Transparency in Elder Care Act of 2021.
Ombudsman Programs in New Jersey, Pennsylvania, Maryland and California
Ernest is also working with ombudsmen programs across the country to educate them on the current state of tracking ownership and financial operations of individual facilities and/or chains throughout their states.
National Consumer Voice
Ernest is working with the National Consumer Voice, a nonprofit advocacy group for consumers, to assist them with proposing and promoting regulations requiring more nursing home transparency at the federal level.
We need all hands on deck. It is imperative that we continue to educate consumers, lawmakers and the public about the tricks nursing homes use to hide their profits, as well as the hurdles they place in front of consumers, lawmakers and regulators who seek a clearer understanding of how these places operate and how their money is made and spent.
If we want to tackle and eliminate the myriad problems with nursing home care, especially as it relates to dehydration, malnourishment, and bedsores (also known as pressure sores or decubitus ulcers), it is necessary to know where and how taxpayer and consumer dollars are spent by nursing homes across the country. This is the only way to hold nursing homes accountable.
At Bedsore.Law, we are dedicated to doing just that. We understand that to ultimately achieve change on the broadest spectrum, we need a broad approach that can improve care in every facility, in every county, in every state. Ownership and financial transparency are a great start.