Nursing Homes: Profit or Safety?

In 2007, the Carlyle Group, one of the wealthiest private equity firms in the world, purchased ManorCare, the second largest nursing home chain in the country.  A recent investigation by the Washington Post details how the purchase made ManorCare a for-profit business that prioritized financial return for investors at the expense ManorCare’s 25,000 patients.  The results were devastating.  As the Post investigation revealed, in the years following the purchase, health code violations rose by 26 percent.  Serious violations, which can be categorized as issues placing a patient in “immediate jeopardy” increased by 29%.  The nursing homes were chronically understaffed by nurses.  This past March, ManorCare filed for bankruptcy.

Behind each of these violations is a human being with a real story.  The Post investigation details several and each are heartbreaking.  They include stories of patients left unclothed with visible bedsores and infections; limited mobility patients forced to walk unaided due to lack of staff who would fall and suffer fractures or brain hemorrhages; and patients who “were so poorly staffed that some residents regularly soiled themselves while waiting for help to the bathroom.”  We all have loved ones who currently or in the future may require, skilled nursing care.  It is vital for family members to have faith and trust in the care providers.  The unacceptable situation at ManorCare highlights a scary trend where regulations failed, and actual harm resulted. 

How did this happen?  In 2007, the Carlyle Group brought together a collection of roughly 300 investors who purchased ManorCare for $6.1 billion dollars.  To complete the purchase, the investment group borrowed approximately $4.8 billion dollars.  This immediately created two problems.  First, ManorCare was now saddled with billions of dollars of debt at the expense of its new owners who had to pay for their purchase.  The Post investigation revealed that “during the buyout by Carlyle, HCR ManorCare’s long-term financial obligations had risen from less than $1 billion to over $5 billion, according to financial statements.”  On top of this, ManorCare had to address a second problem.  The investors expected a return on their investment and such a return could only come from one place: the profits of a formerly non-profit nursing home chain.

To make these payments, ManorCare needed a new stream of income.  In 2011, Carlyle decided to sell ManorCare’s massive real estate holdings to a real estate investment company that, coincidently, was also owned by Carlyle investors.  Essentially, all of the nursing homes and assisted living facilities went from being owned by ManorCare to being leased by ManorCare, which not only created $472 million dollars of lease payments annually but also included millions of dollars in management and transaction fees.  The profits from the sale, went to Carlyle investors.  The lease payments were paid to Carlyle investors.  The transaction and management fees were paid to Carlyle investors.

Unsurprisingly, all of this debt left little money for actually providing care at ManorCare facilities.  In fact, after 2011, ManorCare never once returned an annual profit.  ManorCare was forced to institute drastic cost cutting measures.  Skilled nursing staff was cut.  Old equipment was not replaced.  Employees complained that there were never enough people to accomplish basic tasks. For example, a former employee noted that two nursing assistants would have to manage more than 30 people which meant that there were not enough staff “to get the residents up, get them out of bed in the morning.”

As a result, patients suffered.  Inspections found an increase in bedsores, falls and infections. Lawsuit settlements increased tenfold. At one facility in Pottsville, Pennsylvania alone, the Post described an array of lawsuits as the following:

One woman had suffered three falls, multiple infections, dehydration and bedsores…; another also had multiple falls, one that caused a broken hip; a liver cancer patient had fallen six times during four months, and at least one of those times it was while reaching for his urine bag; and another broke his hip when aides were moving him to be weighed, but had to wait two hours before he was taken to a hospital.

With debts increasing, and no more money to raid, ManorCare declared bankruptcy in March 2016.  The company has since been bought by a nonprofit group and returned to nonprofit status.  In response to the Post investigation, Chris Ullman, a Carlyle spokesman stated, “Our first priority was to deliver quality care and serve the company’s patients well.  We are disappointed this investment did not meet our financial expectations.”

According to the Illinois Department of Public Health, Illinois has approximately 1200 long-term nursing care facilities that serve more than 10,000 residents.  In Illinois, these facilities are regulated by the Nursing Home Care Act, 210 ILCS 45.  This law governs all facilities within the state and serves to protect residents from abuse and neglect by regulating staff, facilities and treatment standards. A violation of the act can result in heavy fines or even facility license restrictions.  It is more important than ever to make sure nursing facilities are complying with this law.

As a community, we have an obligation to make sure these rules are being enforced so that loved ones are receiving the care that they deserve.  No one deserves to live in conditions alleged to have occurred at ManorCare and it is up to all of us to hold those responsible when the actions and greed of some affect the care and well-being of many.