REVIEW REFERENCES
CORPORATE NURSING HOME CHAINS
PAGE I (1996-99)

There are a large number of lengthy reviews describing what has been happening in the "Nursing Home Industry"-- its enormous financial success, its fraud, its meteoric plunge into bankruptcy and most important of all the neglect and misuse of the frail aged in order to fuel corporate profits. I have several thousand and these references are representative. The articles listed on these two page are lengthy and laden with examples describing the financial misjudgement, the fraud, and the poor care given to individuals or by individual facilities.

I have selected broad reviews for this page and have taken extracts which illustrate the broad thrust of the dramatic events and the arguments used. I have not selected extracts describing individual corporations. Separate pages on this site give a description of the major corporate chains and references to individual chains can be found there.

Because of the volume of the material I have divided it into two web pages.

This page covers the years 1996 to 1999.
Page II continues the story and covers the years 2000 and 2001.
Click Here for PAGE II.

This page is designed to give depth to the site, the reviews, and the interpretations. It can be skimmed by those wishing to confirm or challenge the views I have expressed - or learn more. It is chronological rather than subject based and therefore illustrates an unfolding saga. For the serious scholar it provides a selection of references and an indication of the contents. He or she can then decide which articles to access elsewhere.

It is easy to get too involved in the actual conflicts, the political processes, the business decisions and the solutions proposed in the USA. We can start thinking like an American! By doing so we may not see the wood for the trees.

We are studying one of the oldest and most tested examples of corporate health and aged care in the world. It has had years to sort itself out? What lessons can we learn? Do we want an aged care market in Australia.

Please stop and think about the consequences of this market system for the grandmothers and grandfathers of the USA - the people who fought two world wars for freedom and democracy. Vast numbers of elderly have developed unneccessary complications, suffered pain, lacked mental stimulation, and died prematurely while their life was still worth living. The market has actively pursued practices which greatly increased the misery of growing old and dying.

I suggest that you stand back and ask yourself whether this is the sort of system which we should be promoting to care for our elderly in Australia? Is this a system which can be corrected by regulation or by tweeking the economic strings which make the corporate puppets move? Is the thinking and fundamental principles of the market (competition for money} primarily responsible for what has happened?

Is it possible to effectively regulate and control a system when the pressures in the system drive it to circumvent every effort at control? Is the USA simply patching a rusting bucket when it should be having a radical rethink? I suggest that it is.

Is it socially acceptable to use the frailty of the elderly as a source of profit, or should their care be a community service in which we involve ourselves as a community? If resources are limited is it legitimate to ration care for the profit of shareholders and the bloated salaries of executives? Would Australian's countenance the government's aged care policy if it was put to them in these terms.

Is the sort of system described in these articles the sort of sytem we want in Australia? Our government has made every effort to turn our aged care system into an aged care market. Are we going to allow this?

The first two articles describe corporate and marketplace thinking in the early 1990's. They set the stage for what happened later. This is followed by an article describing the response of a large not for profit corporation which is bending before the forces of the marketplace. Not for profits were once the dominant providers of aged care. They set the ethos of the system, an ethos which the market has replaced.

There is a 1998 article analysing the market in detail, This was shortly after government had changed Medicaid funding and the consequences of the changes were not yet apparent. This is followed by a series of 1998 articles from the Tampa Tribune describing the impact on care of the publicly traded corporations and marketplace competition. Remember that the care descibed was at a time when the chains were making vast sums of money. Consider this when you read their subsequent explanations.

The articles then follow in chronological order. The unfolding saga is revealed in all its macabre detail.

Further information and further extracts are attached to the pages dealing with individual corporations. They fill out the details and provide large numbers of examples.

COMMENT:- The next article describes patterns of thinking in the corporate marketplace. It is an interview with Andrew Turner, founder and chairman of Sun Healthcare. It gives such a profound insight into corporate thinking and marketplace practices that I have put the complete article on a separate web page. This article provides a key to understanding what happened to aged care in the 1990's

Andy Turner wants the government out of health care, Period,
New -Mexico Business Journal. April. 1996 April. 1996 Vol 20; No 4: pg 10
Albuquerque: NM US: Mountain

CLICK HERE to read this article. (HINT:- open in separate window)

COMMENT:- The next article is a review of the history of the two companies Sun Healthcare and Horizon. It gives a graphic insight into the thinking of the marketplace at the time. Much of this thinking persists despite subsequent events. If we understand the enthusiasm and the frenzy with which the market pursued profit from the frail aged, we can begin to understand what happened subsequently. This article is so revealing that I have reproduced it in full and given it a separate page.

Watch them grow, And grow.
New 'Mexico Business Journal, April. 1996 April, 1996 Vol 20; No 4; pg 15
Arlene Odenwald - - - - - Albuquerque; NM

CLICK HERE to read this article. (HINT:- open in separate window)

COMMENT:- Humanitarian not for profit, community, and Mom and Pop nursing homes were the backbone of aged care in the USA until the government turned aged care into a competitive marketplace with Medicaid and Medicare (about 1965) funding. It was this money which attracted the entrepreneurs. Groups providing nursing home care primarily for profit have steadily increased their hold on aged care, expanding very rapidly in the last 20 years. They now set the tone and the prevailing practices in the sector.

The next article describes the aged care system and also how a large not for profit group is adopting a market based approach to care. Note the difference in its approach and that its business policies are still tempered and restrained by its primary mission of care.

As is well illustrated in this case not for profit labour relations, acquisition activities and standards of care have remained more benign. As a consequence it has bent to the pressures of the market but ethics and care have remained important. In general services by not for profits have bent before market forces but the adverse consequences have been more restrained than in for profit facilities.

Understaffing, poor care and financial excesses have been less severe. Not for profits have not got themselves into debt. The large market listed corporations crumbled when Medicare funding changed. In contrast most not for profits have not been burdened by debt, community anger and a disenchanted work force. They survived.

GOOD WORKS, GOOD BUSINESS: NOT-FOR-PROFIT NURSING HOME GIANT PREPARES FOR HARD TIMES
Modern Healthcare Nov. 10, 1997 Page 42 News
Charlotte Snow

The nation's largest chain of not-for-profit nursing homes says the old cliche "no margin, no mission" best describes its approach to the business of good works.

If that's true, the Good Samaritan Society is ready for one heck of a mission.

In an industry dominated by proprietary companies, the society stands out as a not-for-profit with more financial savvy than many of its for-profit competitors.

"We've found that you need to be as nimble as you can in the finance area no matter what your mission," said Charles Balcer, interim president and chief executive officer of the Sioux Falls, S.D.-based society.

The society has recorded profit margins averaging 4.7% over the past decade. Its total current debt is $309.7 million, and its estimated net worth is $404.3 million.

Even as business pressures increased, it managed to sock away $29 million on revenues of $629 million for a 5% profit margin in 1996. By comparison, Fort Smith, Ark.-based Beverly Enterprises, the nation's largest for-profit nursing home operator, posted a 2% profit margin in 1996.
--------------------------------
Like most nursing home operators, the society is particularly vulnerable to reductions in Medicare and Medicaid reimbursement, which represent more than two-thirds of all payments to long-term-care companies.

State Medicaid programs accounted for 46.8% of the society's revenues in 1996. Some 33.5% of its revenue dollars came from private-pay sources; 8.7% from Medicare payments; 4.6% from ancillary services; 2.1% from interest income; 0.5% from unrestricted contributions; and 3.8% from other sources.

For now, analysts say the society's size, wide geographic spread and service diversity are helping it weather cutbacks in state and federal reimbursement programs.
-------------------------------
The society was founded Sept. 29, 1922, in Arthur, N.D., by August Hoeger, a Lutheran minister. The society since has grown from one six-room home for the disabled to a national company operating 238 facilities in 26 states. Of these, 214 provide skilled-nursing care, 24 offer assisted-living apartments and 74 offer independent-living apartments. The bulk of the society's facilities are located in rural areas in Iowa, Kansas, Minnesota, Nebraska, North Dakota and South Dakota.
--------------------------------------
According to the 1997 MODERN HEALTHCARE Multi-unit Providers Survey, the society is the nation's eighth-largest nursing home chain based on its total number of U.S. beds. It's almost 10 times the size of its nearest not-for-profit competitor,- - - - - .

For the most part, the society has avoided large, high-profile acquisitions and built its holdings by acquiring stand-alone nursing homes or adding complementary services to existing operations.
-----------------------------------
"Every decision we make we ask, `How does this fit into our mission of taking care of the frail elderly?' " Balcer said. "We are a unique, mission-oriented society. We don't want to go into areas that are already being served and where the community doesn't want us."

The society's nonaggressive acquisition approach has helped it maintain a rather low profile. Its employees are not unionized, so it has avoided the orchestrated worker uprisings that have plagued other industry leaders, such as Beverly, for years.

The society's reputation for patient care has varied from facility to facility, as is the case with most large long-term-care chains.
-----------------------------------
"If they had had any health or safety violations, then we would have taken action against them and that's not their history," said Joann Erickson, a supervisor of the state's healthcare facilities surveying team.

Fred Gladden, chief of the health resources section of the North Dakota Health Department, said the society traditionally has been viewed as a national company whose 13 facilities in the state have strong ties to the communities they serve. But, he says, that perception soon may change.

"They are making the transition from a mom-and-pop operator to a very sophisticated big business," Gladden said. "I think they are recognizing their position. They are emphasizing more direction from the corporate office and the standardization of admission and patient-care policies."
---------------------------
Faced with increasing pressure to control costs, the new leader likely will have to make some tough calls. Balcer said the not-for-profit is questioning how big it wants to get. In some cases, the benefits of expansion no longer appear to outweigh the costs of additional staffing, he said.

Although the society has embarked on some new construction, including an $11 million research and information center at its headquarters, it is budgeting conservatively for the next year in light of reimbursement changes, Balcer said.

COMMENT:- Market theory decreed that "bigger was better". There were economies of size and financial advantages in market dominance. There were profits in owning all of the services provided and in having an integrated system. This ensured referrals within the chain and citizens could be passed from one service to another to maximise profits.

A large number of extracts of the following copyright article have been included because it so extensively reviews the marketplace and the thinking which determined the way in which care was and still is provided to a large sector of the US population.

Stop and think for a moment. What they are talking about is the care of the frail and vulnerable elderly - people who can no longer look after themselves and who are no longer capable of controlling their own lives. It is clear that the market is totally blind to everything except its own dynamic structure and its own priorities. What chance do these vulnerable citizens have?

How can the care and needs of individual citizens be met by an impersonal giant in a distant board room dictating policy based on the marketplace dynamics described below? This is June 1998. Time will show that "bigger was better" should have been "the bigger the more vulnerable" and "the bigger the worse for residents".

Banking: financing trends in an acquisitive health care market - focus on long-term care.
Journal of Health Care Finance June 22, 1998
Gordon, Lawrence J.; Bressler, Andrew

Introduction

The merger and acquisition (M&A) frenzy sweeping the health care industry has been particularly intense in the long-term care sector. As a result, the financial community - both lenders and investors - now views this sector differently and the approach to long-term care financing has changed. based on our experience, we focus on six factors driving consolidation in the sector and - through the use of four transactions as a platform - discuss the key credit issues and risks faced by long-term care companies today.

Industry background

Long-term care refers to a broad range of medical, social, personal care, and supportive services. - - - - - The incidence of these chronic conditions increases with age; elderly individuals represent the majority of users of long-term care services.

Long-term care spending (nursing home expenditures plus home care expenditures) represents approximately 11 percent of total national health expenditures. In 1996 this amounted to approximately $ 120 billion - - - with nursing homes accounting for $ 84 billion of the total. It is believed that the number of elderly persons requiring long-term care services will grow from approximately 7 million (1.7 million reside in nursing homes) to over 9 million by 2005.(1) By 2020, this figure is likely to increase to between 12 and 13 million.(2)
----------------------------------
Dramatic change

Consolidation and integration have driven the dramatic change in the long-term care industry in the 1990s. Table 1 shows the top 10 chains at year end 1997 (by 1996 bed count). Rehabilitation hospitals and facilities, skilled nursing homes, assisted living facilities, intermediate care facilities, home health services, and other specialty care services have all grown significantly in size and number in the last 10 years. - - - - - These services are expected to grow as the demographics shift toward the aging population continues.

The role of government

Medicaid and Medicare account for 52 percent and 12 percent, respectively, of all nursing home spending. Medicare now represents 12 percent of the total federal budget, - - - - and this percentage is expected to grow to 18 percent by the year 2007.(3) Total Medicaid spending is expected to grow by 7.5 percent annually from $ 159 billion in 1996 to $ 350 billion in the year 2007. Already Medicaid consumes almost 20 percent of total state budgets, and this percentage is growing.

With such a high percent of long-term care revenue funded from government sources, it is important to note that the margins earned from providing government-financed long-term care services are well below the margins obtained from private pay and managed care business. In fact, Medicaid margins average only 2-4 percent, compared with 10 percent for Medicare and up to 30 percent for managed care contracts and private pay.

Recent long-term care M&A activity

M&A activity in the long-term care sector has affected many companies in the industry. In addition to "horizontal" mergers, many long-term care companies seek to develop full post-acute care networks (exemplified by Integrated Health Services' movement into the home health service segment). However, as shown in Table 3, most of the transactions are the result of horizontal combinations. According to Irving Levin and Associates, there were 121 M&A transactions among long-term care companies in 1996, almost double the level in 1995. Indeed, the acquisition boom accelerated toward the end of 1996 and all through 1997 as long-term care stock prices were depressed due to a combination of concerns about Medicare and Medicaid reforms and an overall slump in health care stocks in mid- to late 1996.
-----------------------------
Drivers of Long-Term Care Consolidation

Legislative reforms

Following several years of starts and stops, Medicare reforms are finally a reality - -

Effect of PPS

Larger, low-cost nursing home chains should prosper under PPS. Under PPS, nursing homes will be reimbursed on a flat fee per day for Medicare patients. High cost nursing homes and facilities that provided excess ancillary services to Medicare patients will likely record losses. Conversely, larger, more efficient nursing home chains that effectively manage costs below the average Medicare PPS per diem rate could see a meaningful improvement in profitability.
---------------------------------
As a new era of prospective payment commences, some smaller, less-efficient companies may decide to either sell their assets or - - - discontinue service to Medicare patients, providing growth opportunities for larger participants in this sector.

Introduction of financial buyers as a source of equity capital

Investment by financial buyers in the consolidating long-term care industry represents a needed source of additional equity to complete larger transactions. Financial buyers likely will continue to play an important role in the consolidation of various fragmented health care industry sectors, including long-term care.

Strong reimbursement environment

Most states enjoy strong economies with slow growth in welfare and Medicaid enrollment. This environment, coupled with many state budget surpluses, has led to a healthy reimbursement climate for most nursing homes.

Increasing role of managed care in long-term care services

As managed care penetration continues to grow (especially among Medicare recipients), long-term care companies are beginning to develop contracting relationships with health maintenance organizations, point of service plans, and preferred provider organizations. In order to contract effectively with managed care companies, successful long-term care providers will develop greater regional scale and market share as well as additional "one-stop-shop" services. All of these managed care issues are likely to generate additional acquisition activity among long-term care providers.

Long-term care companies and post-acute care services

Long-term care companies are expected to continue to develop and acquire a continuum of post-acute care services. These services are effected through the acquisition of home health care, assisted living, rehabilitation, and therapy services. In particular, Integrated Health Services has been a leader in this strategy,- - -

Select Transactions

Four of the larger transactions completed during 1997 in the long-term care sector provide a good road map for evaluating key credit issues in this changing health care market.

(The following groups used as examples here are examined on their own web pages)

Genesis Health Ventures' acquisition of Multicare for $ 1.4 billion
--------------------
Extendicare's acquisition of Arbor Health Care
----------------------
Sun Healthcare's acquisition of Regency Health for $ 589 million
-------------------------
GranCare's acquisition (supported by Apollo Advisors) of LCA
-----------------------
The increased M&A activity in the health care sector during 1997 profoundly affected health care-related lending, particularly in long-term care. The considerable increase in total leverage necessitated the extension of final maturity dates to enable companies to amortize significant amounts of principal during the later years.

As senior debt multiples associated with these leveraged loans continued to rise, the financial buyers and lead lenders more frequently structured transactions with higher levels of "back-end" amortizing, institutional debt tranches. The "B" and "C" term loan tranches are senior obligations that bear interest rate premiums to traditional revolving credit and "A" term loans, and carry longer final maturities.

These B and C tranches became commonplace in long-term care transactions in the second half of 1997. The robust growth of these various sources of institutional funding (for example mutual funds and collateralized loan obligation vehicles) has represented an important component of the successful structuring of these and other leveraged financings.
------------------------
Synthetic leases

Another financial product appearing more frequently in long-term care credit facilities is a synthetic lease. A synthetic lease allows a company to purchase or build a facility (for example, a nursing home) to meet its needs, lease it from a third party trust for a finite period of time, and have the right (but not the obligation) to purchase the facility later. The lease is secured by the underlying property and is usually guaranteed by the borrower along with other collateral. The lease is classified as "off-balance sheet financing" and provides the company with certain tax advantages - in particular, public companies can classify the financing as a lease for generally accepted accounting principles reporting purposes and as a loan for tax purposes - by increasing book income and lowering taxable income.

As stated earlier, strategic co-investments involving both financial and strategic buyers are increasingly commonplace.
----------------------------
Credit Analysis

Corporate lenders structure covenant packages for each transaction compatible with the financial and operational practices of the individual companies.
--------------------
With regard to senior leverage, Sun was the most levered transaction at the time of closing at 4.4:1.0, while Extendicare was the least levered at 3.0:1.0. However, Sun leases most of its facilities; in contrast, Extendicare owns the majority of its facilities. In addition, different financing structures play an integral part in these varying strategies - - - -
-------------------------
The introduction of straight and synthetic leases allows long-term care companies with different financial strategies to use each (and frequently both types of leases) to achieve their operational goals. Leverage ratios, albeit an important component of the credit analysis, should be viewed within the context of a company's operating and financial strategy.

Transaction Risks

Although statistics and ratios provide a barometer of a company's current financial position, they are not a full measure of credit worthiness.
------------------------------------
Reimbursement

Reimbursement risk can affect entire business lines of long-term care companies, such as the skilled nursing segment's shift from a cost-based system to a PPS.
-------------------------------.
Payer mix

Payment concentration risk can expose the company to influences from state and federal legislation or rising costs in a capitated environment. While several long-term care companies may have comparable proportions of private pay, Medicaid, and Medicare payer sources, they may not necessarily share the same risk profile.
------------------------------
Product/service mix

The long-term care sector has been marked by a trend among companies to diversify revenue sources and to seek higher margins by offering more services on the continuum of care as well as other ancillary services. Thus, a company's fundamental strategy and its service mix should be evaluated. Strategically, some long-term care companies, such as Sun, target an acute level of patient care, which yields higher per diem rates at the expense of occupancy. Others, such as Extendicare, manage their businesses based upon occupancy by targeting a lower acuity level with a longer-term nursing profile, enabling the company to integrate more ancillary services.
------------------------------
To reduce reliance on low margin Medicaid business, long-term care companies are targeting Medicare and the even more profitable private pay and managed care business. The high managed care margins reflect the large cost savings realized by payers that utilize sub-acute care services in long-term care facilities, compared with significantly higher rates in an acute care hospital setting. In addition, as managed care companies increase control over larger volumes of patients, their bargaining power increases when contracting for services, enabling them to focus on lower-cost alternatives. To counter the consolidated purchasing power of the managed care organizations, an increased need exists for larger, more integrated networks that cover greater territorial area.

Expanding the breadth and depth of ancillary services provided by a long-term care company clearly presents greater profit opportunities; however, greater exposure to integration and regulatory risks (such as salary equivalency) must also be managed.
----------------------------------
Compliance issues

Recently there has been a great deal of public discussion of the fraud and abuse investigations of health care companies conducted by the Office of the Inspector General of the Department of Health and Human Services, with significant fines and settlements handed to companies found guilty of fraud and abuse. The potential risk to a company's credit quality has made it imperative that every company in the health care industry receiving reimbursements from government programs have an effective compliance program in place.
-------------------------------
Integration

As long-term care companies undertake increasingly large acquisitions, more significant execution and integration risks must now be considered. Among the structural and corporate issues to be addressed are the transition of upper level management and the potential need for downsizing, the merging of different corporate cultures, and potentially different billing procedures and reporting processes.
-------------------------------
The internal and external influences on the long-term care sector have caused rapid change during the past two years, and likely will continue for several years. A thorough understanding of a client's strengths and vulnerabilities has become increasingly important. The stakes have never been higher.

Appendix

NationsBank's Credentials in the Health Care Sector.

NationsBank Corporation, the third-largest U.S. bank with $ 290 billion of assets, is a leader in health care finance. The bank has a dedicated Healthcare Finance Group staffed by a 23-person team with over $ 10 billion in commitments bankwide to the health care industry, of which 15 percent is committed to the long-term care sector. NationsBank has been the leading financial institution in terms of agenting syndicated bank credits for the health care industry for the past three years(1) with $ 5.7 billion, $ 9.1 billion, and $ 12.3 billion in 1995, 1996, and 1997, respectively. It is one of the only banks to have a dedicated industry research analyst supporting the client management team.

COMMENT:- In November the Tampa Tribune published a series of articles under the tittle of "Money or mercy". These were based on their own research. These are an excellent exposure of what was happening in nursing homes in Florida. The full articles can probably still be accessed on the www.

We should not doubt that the corporate executives believe the image which they market to potential nursing home residents and their families. This is how the market saw the industry. They became angry when it was challenged. These reports relate to what happened before the 1997 changes to Medicare and changes in the labour market. Chains subsequently blamed both for poor care in their homes. Corporations never acknowledge this earlier poor care

Money or mercy?
The Tampa Tribune November 15, 1998

In the glossy pages of corporate literature from Florida's largest for-profit nursing home chains there is a repeated image: a frail person gazing with trust and gratitude at a health care worker holding their hand.

The brochures promise compassionate care and healthy profits for the people who invest in their companies. But the reality of life in some of those nursing homes is another thing - quality care and big profits do not always go hand in hand.

A six-month Tampa Tribune investigation has found that residents of for-profit homes had higher than average rates of reported neglect and abuse. Homes owned by four large chains - Beverly Enterprises Inc., Integrated Health Services Inc., Vencor Inc. and Mariner Health Group Inc. - were more likely to fall below state standards than other homes.

Meanwhile, the system for protecting nursing home residents is so heavily weighted in favor of the nursing home industry that bad homes are given repeated chances to stay in business. Shortcomings at the state agency that regulates nursing homes have further exacerbated the situation, records show.

COMMENT:- The next two articles reveal the consequences of providing care in the manner described in the previous article. I have deleted large sections but the extracts show what is happening. They give a much more realistic view. It is clear that there are two aged care worlds and only one of them is a real world. This is 1998. The care reported on was largely provided in 1997. This was a time when corporate profits were booming and the new Medicare funding had not yet impacted on profits.

Profits can come at high costs
The Tampa Tribune November 15, 1998
LINDSAY PETERSON and DOUG STANLEY

Corporate chains increasingly run the nursing home industry, and research shows they have a large share of problems in Florida.

Mary Johann died alone.

She lay on a plastic sheet that covered her bed at a nursing home, her neck pinned between the mattress and bed rail. The same thing had happened 10 days earlier, but a worker had found her before she strangled.
-----------------------------
More than 10 years ago, Congress heralded its passage of new laws to ensure humane treatment of people in nursing homes. Another institution, however, has quietly imposed its own standards:

Wall Street.

The nursing home industry, once a collection of individual operations, is dominated increasingly by companies that thrive only when they take care of shareholders. Their stocks have soared in the 1990s as Americans have poured money into the market.

The six largest nursing home companies in Florida are traded on Wall Street. They control the lives of roughly 20,000 people, about one-third of the state's nursing home population.

More than three-fourths of the people in Florida nursing homes can't button a blouse or put on a pair of pants alone. Half need help to eat. Many are in their last days.

Caring for them requires attention and tenderness. And many nursing homes are filled with people who chose the hard work because they love and revere older people.

But many of their bosses have other priorities, such as satisfying investors who expect steadily rising profits.

State and federal records show business profits can come at a high human cost.

About one-quarter of Florida's nursing homes fell below state standards during annual inspections between January 1997 and March 1998. Among four of the state's six major chains - Beverly Enterprises Inc., Integrated Health Services Inc., Vencor Inc. and Mariner Health Group Inc. - the substandard rate was 32 percent to 40 percent.

Federal data show these chains had higher-than-average rates of reported neglect and abuse, as did many smaller companies with publicly traded stock.

Only one had substantially lower rates: Health Care & Retirement Corp. , which recently merged with Manor Care.

There also are problems among nursing homes not tied to shareholders. But government data show the care overall is better at those operations.

"All you have to do is look at the nonprofits to see what's happening," said Jean Venturino, a visiting nurse who sees patients in several area nursing homes.

"Maria Manor, Menorah Manor, in St. Pete, they're nonprofit. They have an ethic of caring," Venturino said.
----------------------------------
"Investors look at the short term. Investors look at returns and dividends. They're not looking at quality of care," Bell said.
----------------------------------
When the company (Vencor) took over PersonaCare of St. Petersburg in mid-1997, nurse Rhonda Poinelli saw the number of nurses and nurses aides drop.

Working in the evenings, Poinelli said, she found supply cabinets locked, and she searched from floor to floor for bandages and catheter bags. Often she couldn't find them, which meant patients did without.

Frequently alone with as many as 40 people, Poinelli would find some wet or hungry, pleading for help, she said. But she couldn't detour to help them or her patients wouldn't get their medications on time.

The nursing director's job had become a revolving door, she added. "It seems like I had a new boss every day. ... I started having nightmares."
-------------------------------
Some of these problems - shrinking government payments, mostly - have depressed nursing home stocks and piqued the concerns of the analysts. They want signs the companies will adjust to the new payment system to keep profits growing.

Those expectations can be powerful.

In 1995, Beverly Enterprises came under scrutiny after some high-priced purchases.

"We have been concerned for some time about the prices (the company) paid for the recent pharmacy acquisitions and the company's ability to cut costs quickly enough to achieve a reasonable and timely return on these investments," wrote two stock analysts in a 1995 news release.

Ten months later, Beverly boasted to business reporters it would bring in its highest nursing home profits in years, crediting an increase in high-cost treatments and "tight internal cost controls."

From 1995 to 1996, the number of Beverly homes cited for harming or endangering patients in Florida doubled from 13 to 27.

In early June 1996, the one where Mary Johann died, Wellington Specialty Care, landed on the state's substandard list. State inspectors had found a string of problems in March; the home was dirty and understaffed.
----------------------------
State inspectors descended on the home Feb. 5, then again Feb. 13. They found six residents at risk of getting caught in their bed rails. Others suffered from dehydration and advancing bed sores. Again, the inspectors found too few workers. The Wellington administrator was replaced in June 1997. But when inspectors returned in December, they found the home still understaffed.

Under almost daily scrutiny from regulators in 1998, the home passed inspection in May. But by September, it had problems again.

Wellington is one of five Beverly homes on a list released by the state in September of 18 Florida homes with repeated, serious problems.
--------------------------------
Health care regulators aren't the only ones challenging Beverly. In July, the U.S. Justice and Health and Human Services departments said they were investigating the company for possibly illegal billing of Medicare from 1990 to 1997.
---------------------------------
But O'Brien said the problem is not only that people die unnecessarily; it's the lack of warmth when a home is understaffed or has rapid employee turnover.

After a corporation took over one of the homes where O'Brien worked recently, the new administrator immediately cut staff.

One of the first moves was to reduce kitchen workers' weekly hours from 40 to 36, O'Brien said. Many quit. Some had worked there for years, knew the residents and often made special foods to encourage them to eat.

A stable crew of aides and nurses is vital, O'Brien said. They know who likes to sleep until 9 a.m., who prefers a bath in the morning and tea in the evening.

It takes strong, caring managers to build a strong, loyal staff, she said. But many corporations treat administrators like interchangeable parts. In many nursing homes around Tampa Bay, management stays for less than two years.

"I'd like to see these companies slow down on the constant changing of administrators and DON's (directors of nursing). It's really hard on the residents and the staff," said Ron Milliner, administrator of Tampa's Lakeshore Villas, a family-run home that has had superior ratings.

But it seems the only constant in today's nursing home environment is change. There have been dozens of corporate mergers and takeovers in the last two years.
-----------------------------------
Analysts predict even more consolidations as companies struggle with the cuts in Medicare. That's what happened 15 years ago when Medicare cut its payments to hospitals.

"There was an upheaval. That's when our big layoffs began," said Cheryl Harrell, a social worker formerly with University Community Hospital who helped place patients in nursing homes.
------------------------------
A Tampa Tribune analysis of the latest inspections, up to April 1998, showed five of the six largest nursing home companies in Florida had a higher than average number of deficiencies when compared with all nursing homes in the state.
--------------------------------
Homes owned by five of the six largest companies, which are all publicly traded, had a higher than average number of deficiencies that caused "actual harm" to residents.

COMMENT:- This is a long article which documents the failure of both the state and federal regulatory systems. It describes a large number of instances. Information from other states indicates that the regulatory system has failed citizens across the USA.

Regulation often fails residents
The Tampa Tribune November 15, 1998
VICKIE CHACHERE; ; of The Tampa Tribune;

Florida's nursing home regulation system is mired in weakness, much of which appears self-inflicted. The agency in charge pledges reform.

Florida's Agency for Health Care Administration, which bills itself as the toughest nursing home regulator in the country, has failed repeatedly to protect residents from dangerous conditions - including some that have turned deadly.

Even when a long pattern of neglect exists, the system to protect nursing home residents protects the industry instead, a review of scores of agency records has found. Often, nothing happens until there's a crisis.

Often, someone has to die.

Then, in a flurry of tough talk and news releases, regulators impose punishments that often are watered down in subsequent months as a home's owner files appeals or brings the business to minimum standards.

As a result, Florida's 71,000 nursing home residents lack the safety net they have been promised against abuse or neglect.

COMMENT:- There are two important business activities which the chains devote much time and expend large sums on. Controlling politicians and the laws they pass can have a vast impact on profits. Getting regulators to compromise their mission by identifying with the legitimacy of the business priorities of the marketplace. The regulatory response to Vencor's conduct illustrates this well -- see later

Some fear government remains too "cozy' with industry;
The Tampa Tribune November 15, 1998
VICKIE CHACHERE

Politics and connections play roles in the nursing home regulation system.

State Rep. Carl Littlefield dubs it the "unholy alliance" - the relationship between Florida's largest nursing home trade association and the agency that regulates the industry.

Littlefield, a Dade City Republican, recalls sensing something amiss when he asked regulators a question and got the answer an hour later in a call from nursing home executives.

"I just know there is so much interplay between the agency and the association that I'm not sure it's healthy," said Littlefield, chairman of the House Government Services Council, which oversees nursing home regulation.
-------------------------
In Tallahassee, the power of wealthy nursing home companies to influence government is no secret. Some legislators say the industry controls regulators, while some of the bureaucrats say it controls the politicians.

Each side has a point.

Top employees have jumped between the regulating Agency for Health Care Administration and the industry's Florida Health Care Association. Both acknowledge a close working relationship.

Some of the largest nursing home chains, with deep pockets and powerful lobbyists, also claim legislative attention.

AHCA officials have complained that efforts to close troubled nursing homes can be met with end-runs by the businesses to legislators, warning of lost jobs in their districts.
------------------------------
But the industry's influence doesn't end there. Its lobbyists have the collective power to open almost any door in Tallahassee.

J.M. "Mac" Stipanovich, who managed Gov.-elect Jeb Bush's 1994 campaign and was chief of staff to Gov. Bob Martinez, represents the Florida Health Care Association.

Jim Krog, former chief of staff for Gov. Lawton Chiles, lobbies for Extendicare.

Prominent lobbyist and prolific campaign contributor Jack Cory represents Manor Care, which recently merged with Health Care & Retirement Corp.

Cathie Herndon, former House budget director, lobbies for Beverly Enterprises Inc.

Former state Sen. Curt Kiser has been retained by Genesis Eldercare Network, and former state Sen. Ken Plante represents Vencor Inc. Democratic fundraiser Tom Panza is a lobbyist for Integrated Health Services Inc.

COMMENT:- Once again the points are illustrated by a large number of examples. Aged care is simply another example of regulatory failure. What is at issue is whether regulation and penalties is the correct way to address the problems of poor care? Surely it would be better to look at why poor care is provided and address that. The reasons are obvious.

Fines don't bite businesses hard;
The Tampa Tribune November 15, 1998
VICKIE CHACHERE

Financial pain is applied rarely to problem nursing homes. Government fines often are little, reduced or unimposed.

Resident No. 6 was little more than skin and bones by the time state regulators came to Windsor Woods Convalescent Center in the early days of 1996.
------------------------------
While she wasted away, however, state regulators waited 10 months to fine the business $ 700. Its corporate parent, national nursing home chain Vencor Inc., appealed and dragged the process out for another five months.

Finally, in April 1997, the $ 3.2 billion corporation relented. But it didn't pay the fine until September, when the state sent a letter threatening a civil lawsuit.

It was far from swift and sure punishment, but that's the routine at Florida's Agency for Health Care Administration, records show.

A review of scores of cases from the last three years found inspectors often identify deficiencies in nursing homes and then wait, sometimes more than a year, to reinspect and issue fines.
-------------------------
Instead, AHCA surveyors in Hillsborough and Pinellas counties took an average of five months to make reinspections. And it took about 16 months from the time a problem was identified to the time nursing homes paid the fine.
----------------------------
But that system, too, is fraught with lengthy delays that lead to diminishing fines, records show.

The HCFA similarly allows months for homes to clean up problems, and even slight improvements can bring sharp discounts in fines.

Since 1995, the state has recommended the federal government impose $ 5 million in civil penalties against nursing homes, but less than $ 300,000 has been collected, records show.
----------------------------------
Still, nursing home fines often don't cost the companies anything.

Imagine how drivers would like this system: A state trooper pulls you over for speeding down the highway. He notes your car was traveling too fast, but since you have stopped, it technically isn't speeding anymore. He tells you if he catches you speeding again, you'll get a ticket.

It wouldn't be much of a deterrent, but that's how the state goes about fining nursing homes.

With few exceptions, homes simply can promise to fix problems to satisfy the state for a while. As long as they keep the promises, they won't get fined - no matter the violation.

Businesses react to cuts in Medicare
The Tampa Tribune November 15, 1998
LINDSAY PETERSON

Nursing homes seemed like such a good bet.

It was the early 1980s, and Medicare was cutting payments to hospitals, forcing them to discharge patients sooner.

Because it was cheaper to care for patients in nursing homes, many nursing home executives jumped at the opportunity. They planned to build new facilities, take in discharged hospital patients and boost revenues with Medicare payments for special treatments and therapies.

But to create their empires, they needed investors. And the business dynamic changed.

"Investors put in $1, they expect to get $ 1.20 back," said Scott Bell, who worked for nursing home chain Beverly Enterprises Inc. before forming his own company two years ago.

Running a big business means big expenses, though. And it's not just the cost of care; there's the army of accountants, lawyers and lobbyists doing the figuring, acquiring and arguing.

One thing they argue is that nursing homes are struggling.
------------------------------
But he and others say little about the money they get from residents paying privately and from Medicare, which provides 10 percent to 25 percent of most nursing home revenue.
-----------------------------
Under new rules, they'll get one fixed payment per resident, determined by a government standard assessing more than 100 physical and mental indicators.

Payments per resident will vary between $100 and $500 a day.

Some industry leaders say the changes will slash revenues. Others warn patient care will suffer as they fight to contain costs.

"They're going to figure a way to make a profit," Bodo said. "They're going to do it because that's what they have to do for their shareholders."

COMMENT:- During the last 20 years there has been an ongoing outcry about poor care by citizens. These have now been confirmed by the findings of a federal hearing in Washington. The US response is to regulate. Increased regulation and oversight certainly makes it more difficult for corporations to cut costs at the expense of patients but it fails to address the problem. It increases the total costs of care. The US mind will not grasp the nettle by asking why this is happening and then addressing the causes. The answer challenges fundamental beliefs in the American way of life.

GOOD NURSING HOME CARE INCLUDES GOOD REGULATION
The Palm Beach Post November 25, 1998

With more and more Floridians facing decisions about putting themselves or relatives into nursing homes, more and more nursing homes are becoming part of large chains. As the trend continues, the state will have to spend more and more time on regulation.

The nursing home industry was once a collection of individual operators. After recent mergers and acquisitions, however, 10 publicly traded companies control 20 percent of the nation's 1.8 million nursing-home beds. Florida's six largest nursing-home companies are traded on Wall Street. This creates the same kind of potential conflicts between the state's 676 homes and for their 71,000 residents as exist between managed-care companies and their patients. How will the need for profit affect care?
----------------------------------
How does ownership affect care? About 25 percent of Florida's homes fell below state standards during annual inspections between January 1997 and March 1998, the Tampa Tribune reported last week. Among four major chains - Beverly, Integrated, Vencor and Mariner Health Group Inc. - the failure rate was higher.

When Medicare began paying homes a fixed amount rather than for each service, a Vencor home in Tampa tried to cut its losses by dumping patients on Medicaid, the plan for poor people. Medicaid pays less than $ 100 a day, lower than average daily costs. Families sued, the agency imposed fines, and the home backtracked. But it's not the only company accused of cost-cutting measures that threaten patient care.

The Tribune series raised other issues: Do the Agency for Health Care Administration and the industry lobbying group, the Florida Health Care Association, have too close a relationship?
---------------------------------
Nursing homes, like hospitals, are complex, 24-hour-a-day operations that aren't easy to run or regulate. When they fail to run well, however, Floridians will have to hope the state has some tough regulators.

COMMENT:- Another major factor putting pressure on market listed companies is the way in which citizens are using the courts to assert their right to damages and punitive penalties when their relatives are misused.

Getting Sued by Seniors: Verdicts growing in suits citing poor nursing home care
ABA Journal December, 1998

Joyce Lang didn't know a lot about nursing homes when she had to choose one for her 83-year-old mother in 1994. She picked Cedars Health Care Center in Lakewood, Colo., hoping its new Alzheimer's ward would provide the right care.

Lang got a quick education, and she didn't enjoy the lessons. She claims the home was thinly staffed and ill-maintained. Puddles of urine stayed on the floor for days. Her mother fell frequently, didn't eat regular meals and was not taken to the bathroom regularly.
--------------------------
Lang's mother -- Lydia Dill, now 88 -- is one of four plaintiffs who hope to represent 600 or more past and present Cedars residents in the first class action lawsuit against a nursing home. Salas v. GranCare Inc., No. 96-CV-4449.
------------------------
Dill's innovative lawsuit is just one skirmish in an escalating battle between seniors and nursing homes. Experts say an aging American population is spurring more suits against the homes and, recently, bigger verdicts.

In February, a Florida jury awarded $ 6.3 million to the family of a man who wandered from the grounds of a nursing home and drowned in a pond. In March, a jury awarded a California woman $ 95 million -- later reduced to $ 3 million -- for a fall in which she broke her hip and shoulder.
----------------------------
Baby boomers moving their parents into homes are either more assertive or more litigious than previous generations. "They come out of the Ralph Nader era, the consumer-led causes of the '60s and '70s," Bennett says. "They're saying, 'We're not going to accept bad care.'"
--------------------------------
Not so in 1998. Juries are putting a higher price on the pain and suffering of the elderly, says Steven Levin of Chicago, co-chair of the nursing home litigation group of the Association of Trial Lawyers of America. "As our population ages, people more easily say, 'There but for the grace of God go I.'"

When deciding whether to accept cases, plaintiffs lawyers look for trends in the way residents become sick or injured. Is there an unusually large number of falls? Or of dehydration cases? They compare a nursing home's performance with promises made in its brochures, and in contracts with Medicare and Medicaid.

Federal government lawyers have also gotten involved, filing lawsuits under the False Claims Act against nursing homes that bill the government for care that Medicaid and Medicare recipients never received. A winning suit can bring $ 10,000 per false claim, plus treble damages. And a whistleblower who tips off the government can get a piece of the recovery.
------------------------------
Even so, nursing homes seem to oblige the plaintiffs bar with a steady flow of mishap and scandal.

The U.S. General Accounting Office reported in July, for example, that almost one-third of California's nursing homes had been cited for serious care problems. Because oversight is weak, many more problems may go undetected, the report said.
-------------------------------
Calls for Reform

The federal government has taken a strong interest in nursing homes this year.

In July, President Clinton called for regulators to crack down on nursing homes that break the law. In October, the U.S. Health Care Financing Administration unveiled a Web site (http://www.medicare.gov/NHCompare/home.asp) with information comparing homes. And the Senate Select Committee on Aging has been looking at ways to promote criminal background checks of nursing home employees.

The ABA also is looking at the issue. The Commission on Legal Problems of the Elderly recently published a book on ways to mediate nursing home conflicts. And the Young Lawyers Division plans to debate proposals encouraging states to adopt patients' bills of rights, to guarantee pain-and-suffering claims for nursing home residents, and to put cases involving elderly litigants on a fast track.

COMMENT:- The next article beautifully picks out the consequence of a conflict of two worlds on those who must live in both. Nursing home administrators are forced to confront the consequences of the actions, which a dominant culture expects them to take. They experience acute dissonance when confronted by the world inside the homes. Some are unable to compromise and walk away. Those who are able to compartmentalise their concerns or explain them away (I have called them "closed minded") meet corporate expectations and are successful. They are rewarded with status and financial incentives. The system selects for the most unsuitable people.

Nursing home solutions start at the top
The Tampa Tribune December 22, 1998

This past spring, however, a different dimension of the profit question arose as we learned about the plans by a company called Vencor to evict its Medicaid residents from a home in Tampa.
------------------------------
Vencor is a $ 3.2 billion company that sells public stock. At the time of the evictions, stockholders were upset because of reports that government health care spending cuts would cut company profits.

This brought up a new question about the effect of stockholder demands on nursing homes.

We took six months to study nursing homes statewide. We found that homes run by large, publicly traded companies had more problems, on average, than nonprofits and homes run by for-profit companies that didn't sell stock.

So, what was it about having stockholders that changed a company's behavior?

The quest for profits seems to be the obvious answer, but it's more complicated than that.

It's not so much that money is siphoned away from patient care. In many cases it is, but there's another factor. The daily life of a publicly traded company is so intense, as stocks rise and fall minute by minute, the questions of how to nurture workers and care for residents fall by the wayside.

This is particularly true when residents aren't seen as "customers." And for the most part, they're not customers. They're not in a position to get up and walk out if they get bad care.

Middle managers suffocate in this kind of corporate culture.
--------------------------------
Overall, 40 percent of the administrators in the study, which focused on Indiana and Michigan, changed jobs at least once a year. The problem was worse in homes run by corporate chains than in independently owned homes and nonprofits.

This can be devastating to a nursing home. Several studies have linked unstable management and poor care.

The administrators were driven away by a variety of things, the Andrews researchers said, but most dealt with not having the freedom to make their own decisions, the demands of their supervisors and differences between their ethics and values and those of the corporation.
-------------------------
As my colleagues and I studied the nursing homes in Florida with the worst problems, we would see the parade of administrators. In some cases, they stayed less than six months.

We saw that the problems in nursing homes go way beyond money, to the core of how corporations operate.

We saw that corporations bring on many of their own troubles.

COMMENT:- This article is about Vencor but extracts are included here because it is so representative of corporate thinking. The chasm between the world of the executives who make decisions and the real world of human beings in the nursing homes is well illustrated by Vencor's conduct.

Bed News: The Business Potential Of Nursing Homes Is Elusive, Vencor Finds: Bid for High-Paying Patients Brings Firm Headaches, And It Has to Regroup: Medicaid Is Welcome Now
The Wall Street Journal 12/24/98
By Chris Adams and Michael Moss

SAVANNAH, Ga. -- Laura Morgan's marching orders were simple. As a social worker at a nursing home owned by Vencor Inc., she was to ensure that as many beds as possible were filled with residents covered by generous private insurance or by Medicare. Patients whose high-paying benefits expired, and who thus ended up on lower-paying Medicaid, were to be moved out as soon as possible.

One of her tasks was smoothing the way with relatives. "I had to sit across from family members and lie to them, manipulate them, tell half-truths," says Ms. Morgan, who resigned in June after alerting state authorities to the practices.
--------------------------------------
When Vencor, an operator of specialized hospitals, announced the acquisition of a big chain of nursing homes three years ago, it billed the move as a master stroke: The company would have an integrated health-care network, providing a broad range of care to America's growing population of elderly people.

Instead, Vencor over the past year has found itself grappling with management turmoil, sinking profits and investigations of its admissions policies and its care. So poorly has its high-payer admissions strategy panned out that the company now finds itself caring for fewer private and Medicare-insured residents than when it was just entering the business. Meanwhile, Medicaid now supplies 47% of its nursing-home revenue, the most ever.

A critical component of Vencor's strategy was offering high-quality care, to attract patients who could afford to go anywhere they wanted. But its record on care is slipping, too. A Wall Street Journal analysis of government inspection records shows that the number of times Vencor homes have been cited for staff shortages, medication errors or other care problems has grown in the past year.
---------------------------------------
Vencor officials talked about their plans openly, deriding rivals' strategy of filling their beds with the plentiful Medicaid patients. In most nursing homes, patients who use up their private insurance or Medicare coverage stay put, and, if they have exhausted their assets, simply flip over to Medicaid coverage. But Vencor wanted to discharge such patients, so it could fill the beds with others who had high-paying insurance coverage.

Administrators of individual nursing homes were taught to rethink the entire admissions process with this in mind. A strategy memo passed on to Georgia homes urged administrators to plant the seed in the minds of prospective patients and their families that a stay would be short-term. "Begin concept upon admission," the memo specified, and while giving families tours of the home.

Mr. Barr, as chief operating officer, bore down on this in a memo to regional officials in the summer of 1997. "We determined months ago that we did not want to admit low-paying Medicaid only patients," he wrote. "Please let your administrators know that it's time to get on board or leave."

At Savannah Specialty Care Center, admissions director Hope St. Lawrence had to prepare a fresh patient census every morning, to be faxed to headquarters by 9:30. Then she rushed off to seek out new admittees from hospitals, clinics and elsewhere. She screened out as many as two out of three prospects. Just having insurance wasn't enough, she says. The insurance had to cover extensive therapy, and people already on Medicaid were excluded outright, says Ms. St. Lawrence, who resigned this summer.
------------------------------------
But a few miles away at Savannah Rehabilitation & Nursing Center, the eviction strategy went into full swing starting in April 1997, says Ms. Morgan, who was the facility's resident social worker. At weekly meetings, she says, she would be asked to explain what she was doing to move out the patients the home no longer wanted. "They would say, 'So and so has 10 more days left on Medicare, and she can't stay here. What do you plan to do?' "

When residents threatened to call a lawyer, they were allowed to remain, she says. But for the most part, she adds, they weren't aware that the state's Medicaid rules, while allowing homes to be selective about whom they admit, don't permit discharging people just because they have gone over to Medicaid coverage.

Sitting at her kitchen table on a recent evening, Ms. Morgan explains why she eventually alerted state officials to the evictions. Leafing through her records, she spots the receipt for a $100 bonus she says she received for discharging a couple she says were evicted improperly. From another pile she pulls out a note in which the couple's children thanked her for her helpfulness during the transfer. "They don't know what really happened," she says.

To make it appear the home was complying with state rules, Ms. Morgan says, she would falsely indicate on certain records that families had requested a discharge.

COMMENT:- If market solutions are not working then clearly we need more market solutions. When companies are in trouble because of acquisitions and mergers, then we need more of them. Isn't the logic clear?

Industry Buzz (Beverly and Genesis)
Forbes January 11, 1999
John Ransom, Raymond James & Associates

* Earnings uncertainties will plague the longterm-care sector as it continues to adapt to lump-sum Medicare reimbursement. Expect more mergers in this sector. Beverly Enterprises and Genesis Health Ventures are possible takeover candidates.
-------------------------
"All health care sectors are fighting payor pressure, tight labor and a more adversarial government environment. The best companies have operated through these issues. There's been a tropical storm, and the beachfront condos took a hit."

COMMENT:- While the article below refers to hospitals it is clear from other reports that it also describes what is happening in nursing homes.

Cost-Containment Measures Reduce Quality of Care Reports RN(R) Magazine's Survey of Hospital Nurses
PR Newswire January 19, 1999, Tuesday

Quality of care in hospitals deteriorated last year because of cost-containment decisions, say nearly three out of four hospital-based registered nurses responding to a survey by RN magazine.

Staff cuts were the most common cost-containment measure reported. Of the nurses surveyed, 77% said that staff at their facility had been cut in the preceding 12 months to contain costs -- up from 65% in 1988, when the magazine conducted its last ethics survey. Respondents report that the cutbacks have led to such measures as mandatory overtime for nurses, closing units that aren't full and sending the nurses home and patients to other staffed units, and the increased use of ancillary and float staff.

"The large increase in nurses' patient loads is potentially very dangerous," said Marianne Dekker Mattera, editor of RN magazine. "When nurses are stretched to the limit, not only do the amenities like backrubs disappear, but medications aren't delivered on time, lab reports don't get acted on promptly, and changes in a patient's condition aren't picked up as quickly as they should be."

The second-most common cost-containment strategy reported by survey respondents is early discharge: 63% say patients are discharged from the hospital too soon, often resulting in readmission a few days later. According to a private hospital-based nurse in Ohio, "It's an ongoing struggle dealing with the decreased length of stay and increased rate of recidivism."

On the plus side, 79% of respondents say that they did not see patients' admissions delayed as a cost-containment measure, up from 73% in 1988. And, although 46% of respondents say that supplies or equipment at their hospitals are lacking, and 30% say outdated equipment isn't replaced, that's little change from a decade ago.

Fruits of nursing home reform are yet to be seen
SERIES; THE TARNISHED YEARS: WHO WILL PROTECT OUR SENIORS?; 5 & LAST
THE INDIANAPOLIS STAR January 28, 1999

Troubled by evidence of bad care and lax enforcement, state and federal officials are striving to address chronic problems in nursing homes.

Nationwide, federal officials are requiring tougher penalties for poor-performing nursing homes and more frequent inspections - changes announced by President Clinton in July.

Indiana officials announced their own reforms that same month, in response to an investigative series published in June by The Indianapolis Star and The Indianapolis News. More reform efforts, in the form of legislation, have been proposed in the General Assembly.
------------------------------------
Nancy-Ann DeParle, administrator of the federal Health Care Financing Administration, said an aggressive yet fair regulatory scheme should help reduce health and safety violations over time.

Tougher enforcement will provide incentives for nursing home officials to "do what is needed at the outset for quality," she said.
------------------------------------
Lawsuits "could have a very powerful deterrent effect and send a chilling message to the industry," DeParle said.

Nursing home officials in Indiana question the need for tougher enforcement measures.

"I think the current fine structure is sufficient to achieve whatever punishment or deterrent level you need," said Art Logsdon, president of the Indiana Health Care Association, which represents for-profit nursing homes.

A massive HCFA study, however, found a need for stricter government oversight.

The study, released last summer when the federal reforms were announced, called regulation "the primary bulwark for quality assurance" and advocated more vigorous enforcement.

States play a key role in those efforts, Wiener said.
----------------------------------
Consumer advocates doubt that the Indiana State Department of Health, the state's principal regulator of nursing homes, adequately fulfills those duties.

"We haven't seen any serious effort to address their basic responsibility to enforce minimum standards that will make a difference in the quality of care in this state," said Paul Severance, executive director of United Senior Action.
----------------------------------
Gov. Frank O'Bannon and Indiana lawmakers already are pressing for additional reforms.

The governor wants to double state fines that can be imposed on nursing homes and allow some penalties to be imposed more readily.

State legislators have proposed other changes, including enhanced staffing requirements and much steeper fines.

Support for tougher sanctions was fueled by the newspapers' June series, as well as more recent Star/News findings that conditions in area nursing homes have deteriorated.
------------------------------------
As the newspapers reported earlier this month, rules used by the department water down penalties stipulated in state statute.

And the department has made limited use of one of the greatest tools at its disposal: its authority to grant or revoke licenses.

While several facilities have closed in recent years after serious problems were documented by the department, the agency has not revoked a license in at least five years. It rarely denies a license application or renewal.
------------------------------------
Feldman acknowledged that the agency has not fulfilled its announced plans to hire more attorneys who could help the agency pursue the licenses of poor nursing homes and take other enforcement action.
-------------------------------
That system calls for formidable penalties, including fines up to $ 10,000 a day, denial of government payments for new nursing home admissions, or even termination from those payment programs.

But in its June series, The Star and The News reported that few central Indiana nursing homes felt the brunt of those penalties because facilities often had weeks or months to make corrections.

As a result, they had little incentive to provide consistently good care.

Recent federal reforms call for greater penalties and oversight.

In announcing the reforms last summer, federal officials released a 900-page report indicating that nursing home inspections were too predictably timed - allowing facilities to prepare for them - and probably under-reported malnutrition and other serious problems. The Star and The News also found that the timing of state inspections was fairly predictable.
----------------------------------
In an effort to improve the enforcement system, federal officials announced a variety of initiatives.
-----------------------------------
The U.S. attorney in Philadelphia already has used lawsuits to force major concessions from problem nursing homes.

A suit filed in February 1996 against a subsidiary of Geriatric and Medical Companies Inc. alleged that several residents of a nursing home paid primarily by Medicaid had received improper nutrition and developed bedsores because they received inadequate care.

In a settlement the same month, the company, known as Geri-Med, agreed to pay $ 575,000 and to abide by wound care and nutrition guidelines for all 18 nursing homes it operated in Pennsylvania and New Jersey, said David Hoffman, an assistant U.S. attorney who brought the suit.
-------------------------------
In Indianapolis, Assistant U.S. Attorney Tim Morrison said federal officials are pursuing civil cases against troubled Indiana nursing homes. As yet, no lawsuits have been filed.

The Indiana attorney general's office, which has similar authority, also intends to pursue lawsuits against nursing homes that deliver poor care.
-------------------------------------------
Even nursing homes that face fines can file an appeal, she (National Senior Citizens Law Center) said, and the backlog of those cases is so great that facilities can avoid paying for years.

The backlog could grow as the federal government imposes tougher penalties, Edelman said.

Neil Kaufman, chief administrative officer of the Departmental Appeals Board, the federal agency that hears nursing home appeals, acknowledged that more than 600 cases await a hearing or are the subject of settlement talks that could eliminate the need for a hearing.
------------------------------------
Consumer advocates have praised the system used in Washington, which imposes penalties soon after problems are discovered, not after facilities have had an opportunity to fix them.

Indiana also can take prompt action under its enforcement system. But state rules limit the penalties outlined in the law.
-----------------------------
Days after publication of the newspapers' June 1998 series, the department also pledged to consider recommending an increase in state fines and to implement a variety of other reforms.
----------------------------------------------
While consumer advocates applaud those changes and the department's support of doubling state fines, they much prefer sweeping reform legislation proposed this year by Rep. John Day, D-Indianapolis.

Day's legislation would impose mandatory fines of up to $ 10,000 a day and a ban on admitting new residents until serious problems are corrected. Facilities also would face lump-sum fines of up to $ 20,000.

The legislation also calls for more specific staffing requirements for nurses; implementation of staffing ratios for nurse aides, and more training for those workers; quicker response by the Department of Health to consumer complaints; and a requirement that facilities post notice of violations on outer doors.

COMMENT:- Vencor illustrates corporate thinking. Vencor was more blatant, more arrogant and more open about its policies than its competitors. That it could be so open is a reflection of the way thinking like this was found to be acceptable in the aged care marketplace. Note how even the regulators accepted the legitimacy of Vencor's thinking.

PREPARED STATEMENT OF ROBYN GRANT ON BEHALF OF THE NATIONAL CITIZENS' COALITION FOR NURSING HOME REFORM BEFORE THE HOUSE COMMITTEE ON COMMERCE SUBCOMMITTEE ON HEALTH AND ENVIRONMENT
Copyright 1999 Federal Information Systems Corporation
Federal News ServiceFEBRUARY 11, 1999, THURSDAY
Hearing on H.R. 540 - The Nursing Home Resident Protection Amendments, 1999

Summary

My name is Robyn Grant and I represent the National Citizens' Coalition for Nursing Home Reform (NCCNHR). NCCNHR is a non-profit consumer organization that seeks to define and achieve quality for residents in long term care facilities. For 8 years I served as the Indiana State Long-Term care Ombudsman. During my tenure as state ombudsman, the Vencor corporation evicted flail elderly residents from Wildwood Health Care Center simply because their care was paid for by the Medicaid program. I am here to share with you the devastating effect of the corporate decision to withdraw from the Medicaid program on residents, and their families.

NCCNHR strongly supports H.R. 540 which would prohibit nursing homes that accept Medicaid reimbursement from transferring or discharging residents solely because they are Medicaid beneficiaries. The proposed legislation is urgently needed to ensure that residents on Medicaid are not arbitrarily evicted by providers who wish to accept only residents who pay privately for their care or whose care is paid for by the Medicare program - both providing higher reimbursement than Medicaid. The Nursing Home Resident Protection Amendment would ensure that Medicaid eligible nursing home residents do not have to live their lives in fear of being evicted due to their payment status and would guarantee that nursing home residents do not become disposable pawns in corporate games to maximize profits.
------------------------------
Nursing homes often attract potential residents precisely because they participate in the Medicaid program. In fact, many facilities assure private pay individuals that they can remain even after they have become Medicaid eligible.
------------------------
The Devastation Experienced By Residents Evicted From Their Homes
------------------------------
Beginning in January 1997 residents on Medicaid at Wildwood Healthcare, a Vencor facility in Indianapolis, Indiana, were singled out and told that they were being transferred to other nursing homes solely because they were Medicaid recipients.
-----------------------
The residents I talked with said that everywhere they looked, they saw other residents crying inconsolably at the news. The people, many of whom had lived there for several years, explained to me that this facility had become their home. As we all do in our homes, they had put down roots. They had established important friendships with other residents in the facility and strong relationships with staff. They told me that the nursing home was like a family. Indeed, for some, it was their only family. Being forced to move destroyed their family.
----------------------------------
Complaints to the state survey agency were of no help. In fact, that agency stated that deciding not to keep residents on Medicaid was a business decision, which the facility had every right to make. It was only as a result of outspoken residents and family members, the work of United Senior Action, a citizens' advocacy organization in Indiana which is a NCCNHR member group, and attention from the media that Vencor reversed its policy and agreed to stop the Medicaid evictions.
---------------------------
On a poignant note, they (past residents in Vencor home) told me they missed the gazebo that they had worked so hard to pay for in the other facility. As active members of the resident council they had themselves raised the money to build an outdoor gazebo at Wildwood. The gazebo that they had so loved and of which they were so proud served as a sad and lonely reminder of all that they had had to leave behind and could never recapture.

The effects of forced eviction of residents on Medicaid also are far- reaching and insidious. I recently spoke with a daughter whose mother is in a different Vencor nursing home in Indiana. The daughter told me that she is afraid to raise any concerns about her mother's care because her mother is on Medicaid and she is fearful that complaining in any way could lead to eviction.

Public Outrage Stopped the Spread of Corporate Insensitivity While the efforts of residents, families, and a strong citizens advocacy group, combined with media coverage, ended in a consumer victory that time round, it was certainly too late for many Wildwood residents.
-------------------------------
Unfortunately, being involuntarily transferred from their home is just one of numerous discriminatory practices that Medicaid eligible residents face. Often it is difficult for a resident on Medicaid to gain admission to a nursing home or to remain in a home because the facility has chosen to limit the number of Medicaid beds available. In other instances, facilities assess the finances of potential residents and will only admit them if they have enough money to pay privately for a certain period of time.

COMMENT:- As indicated in the article below corporate chains have enormous political influence. They believe that they are entitled to large profits - this is why they provide the services.

This article is the beginning of an intense lobbying battle in Florida over two issues. Citizens and regulators want laws requiring minimum staffing levels, more oversight and more penalties. Corporations oppose this increase in staffing costs and oversight bitterly. Instead they want legislation to limit the drain on their profits occasioned by the costly law suits. Citizens bitterly oppose this intrusion into their rights. This battle will ultimately spread across the USA. The article describes the corporate response to a law, which would require improved staffing levels.

The article gives some insight into the power and influence of the corporate lobby in the USA. Citizen's groups believe that this is the prime reason why regulation is so ineffective. Regulator's appointments are made by politicians who receive large donations from corporate chains. If they make themselves unpopular they may lose their jobs.

The same things happen in Australia. Members of a widely admired committee controlling the sale and price of drugs in Australia were recently replaced by a representative of the pharmaceutical industry with whom the health minister had close relations.

Crist feels heat over nursing home bill;
The Tampa Tribune February 1, 1999

TAMPA - Rep. Victor Crist says he's been told he's committing political suicide with his tough nursing home bill.

State lawmakers don't begin their annual session for a month, but a fight already has begun over legislation to reform Florida's nursing homes.

Industry representatives have blasted the most far-reaching of the proposals, written by state Rep. Victor Crist, as a hostile effort to punish a business struggling with overzealous regulators and greedy lawyers.

"It is so, so unacceptable," said Ed Towey, for the Florida Health Care Association.

The proposal Crist outlined in December deals with the most contentious of the nursing home issues: staffing and inspections. Towey said the bill would cost the industry at least $ 457 million a year. Crist, a Republican from Temple Terrace, said the actual price tag is less than half that, and he's proposing the money come from the tobacco settlement.

"If they're so hot under the collar because of the staffing increases, then work with me to get the money," Crist said.

Opposition began to form the day Crist announced his bill in December. Towey said it was outrageous that Crist didn't consult the industry.

"The industry had zero input," Towey said.

In addition to increasing staffing requirements, the bill would raise state fines and require regulators to develop an "early warning system" to alert them to nursing homes on the decline. It also would give residents the right to choose their own pharmacy.

Crist said lobbyists have said he'll be buried politically if he continues to push his proposals.
-----------------------------
Ten nursing home corporations gave at least $ 269,000 in campaign contributions in Florida last year. About $ 139,000 went to the Republican Party; about $ 86,000 went to the Democratic Party. The remaining $ 44,000 went directly to candidates.

The Florida Health Care Association, a Tallahassee-based lobbying group, spread at least $ 33,000 among 50 candidates.

To hear the industry objections, Crist called an early January meeting of industry and consumer representatives. Prominent lobbyist Jack Cory was there, representing Manor Care, which recently merged with Health Care & Retirement Corp. So was former state Sen. Curt Kiser, representing Genesis Eldercare Networks.

One of Cory's first complaints was about the staffing requirement. Another lobbyist complained about the beginning of the proposed bill. The first eight pages are essentially a litany of nursing home ills in Florida.

"WHEREAS, the Attorney General's Medicaid Fraud Control Unit has investigated over 1,300 cases of alleged Medicaid fraud in the past five years, and ... WHEREAS the Long-term Care Ombudsman councils received approximately 5,000 complaints in the past fiscal year concerning conditions at nursing homes," the bill begins.

"They didn't like this at all, but it's all true," said Betty Camblor, long-term care ombudsman coordinator in Pinellas County, who was at the meeting. "They hated the staffing requirement, but that's the most important thing in the bill. That's the worst problem we see."

The atmosphere in the room was tense as Crist went through the measure's provisions. Suddenly, Cory stood up, shut his briefcase and announced he and Crist had nothing more to discuss.

Crist said it was the most unprofessional behavior he has seen in his seven years as a state lawmaker. But Towey defended Cory, saying Crist was refusing to compromise. "When there is no room for common ground, it becomes a pointless discussion."
-------------------------------
The increased staffing requirements are expensive, "but we need to do something," Argenziano said. "I want to try to get (nursing homes) more money and I want to make sure it goes to staffing.

"The nursing homes talk about how much this will cost. I'm concerned with the profits being made. They don't seem to realize that these nursing homes are where people live."

COMMENT:- Sun Healthcare is a good example of what is happening. Notice that the corporations all blame the new funding system. No mention is made of Sun's large debt. Independent analyses will show this to be the prime problem.

Note the extent to which Medicare was used/misused. Note also the marketplace claim that without profit no one will build new homes. What about need and the response of the community to the needs of its members.

One of the things that is missing from all of the articles is any assessment of how much Medicare paid therapy is actually "needed". The sole factor determining whether therapy is given seems to be the amount of money Medicare pays and the profit which it provides.

Facing Tough '99, Sun Healthcare Cuts Jobs, Costs
Albuquerque Journal February 07, 1999, Sunday
Elizabeth Keest Sedrel Assistant Business Editor

Albuquerque-based Sun Healthcare Group was flying high a year ago. With a record $2 billion in revenue, it had a $65 million headquarters expansion under way and was looking for new acquisitions.

Now, the third-largest nursing home operator in the country is scrambling to slash costs as its revenues drop and its stock price plummets.

Sun's stock slid from $20 a share last February to less than $2 on Friday. The company has eliminated 7,500 jobs and imposed a companywide wage freeze.

And Sun expects $200 million less in revenue this year because of a new federal formula that is rocking the nursing home industry by cutting reimbursement for Medicare patients.
-------------------------------
Shrinking profits

"What's happening in our industry is our profits are clearly shrinking," Wimer said. "We don't think the rates are adequate for the service we're providing. And from what we're hearing anecdotally from our competitors, they're in the same boat."

While all long-term care operations say they are taking a big financial hit because of the payment formula, analysts say some will suffer less than others because they moved more quickly to reduce costs.

"Everybody is being hit. The relative degree of (financial) pain is tied to a number of factors," said analyst John Ransom with Raymond James & Associates in St. Petersburg, Fla. One factor is how many occupational, speech and physical therapists the company has. "And they (Sun) have a ton."

The second factor is what the company spends on Medicare patients. Some companies saw the reimbursement drop coming and reduced their costs to about $270 per patient per day. Those companies are doing all right, he said.

But companies with per-day costs of about $380, like Sun, are in trouble, Ransom said.

The average daily reimbursement for a Medicare patient at Sun has dropped from $500 to $325.

"That's about a 10 percent reduction in our revenue, which is extreme by anyone's definition," Wimer said.

The third factor is whether a company has a lot of its revenue tied to Medicare patients (Medicare revenues make up almost 30 percent of Sun's inpatient revenues), and the fourth issue is how much is spent on maintenance and rent for nursing homes.

Rent payments alone for Sun are about $225 million a year, and most of those rents are locked in at lease rates the company expected to cover at the old, higher Medicare reimbursement levels, Ransom said.

"I would say Sun along with Integrated Health Services, Mariner (Post-Acute Network Inc.), Vencor Inc., they are all victims of one or more of those factors. And Sun has all of them."
-------------------------------------
Rates, cost and people

The long-term care industry's troubles began with the Balanced Budget Act of 1997, which called for a new payment system for Medicare patients. Under the old system, nursing homes were reimbursed according to actual costs. Under the new system, nursing homes get a set amount of money per patient. Those amounts are based largely on costs in 1995.

Laura Fenwick, a spokeswoman for the American Health Care Association, said the new rates "are not at all representative of the (cost of) care patients are getting."

At the same time, Wimer said, the level and cost of care Sun patients need have risen over the past decade or so. Hospitals switched from a cost-based Medicare reimbursement formula in the mid-1980s and, to save money, began shortening hospital stays. That bolstered the need for the "post-acute" services -- care and therapy for patients who have just been released from hospitals -- which Sun provides.

Sun officials could not be specific about the company's average daily cost to provide long-term care, because individual cases differ greatly. But they say the new rates are simply too low.
------------------------------
"We have to reduce the cost of taking care of (Medicare) patients," Wimer said. "We're going to actually decrease the amount of service that we provide to Medicare patients." Compounding the effect of the cut in Medicare reimbursements is the fact that Medicaid reimbursements have not kept pace with increasing health costs.
-----------------------------
Profit margins in the nursing home business are small to begin with, Ransom said. "So, all Sun can do to cut costs is to cut personnel. And there is a limit (to) what you can do there. You have to provide a minimum level of care," he said.
------------------------------
But if the Medicare payment system isn't changed, Wimer said, no one will want to invest in nursing homes, and no new ones will be built.

"Then who will meet that need?" he asked. "This is an industry problem. In fact, I think it's a society problem."

COMMENT:- This article describes what is happening. There is a great deal of rationalisation in order to tie it all in with previous practices and market behaviour. Note that no one is asking whether the market in health and aged care is different. That would mean asking whether market principles are relevant and functional for health care. Once the question was asked the answer would be obvious and difficult to refute. This would be very challenging.

MADNESS COMES A MONTH EARLY: FEBRUARY WAS CHOCK FULL OF CORPORATE RETRENCHMENTS, BROKEN DEALS AND RED INK
Modern Healthcare March 01, 1999
Ann Saphir

Get back to basics.

That's the lesson some healthcare companies are drawing from the month of February, when a slew of retrenchments, split-ups and sliding profits announced by some of healthcare's biggest players signaled a change in game plan.

Last month wasn't the first time that overextended companies have turned to a back-to-basics strategy, but the magnitude and impact of February's activity were startling.

''(February was) a confluence of a lot of bad things, but nothing that hasn't been building for several months,'' said Rob Mains, an analyst for Advest, a Hartford, Conn.-based investment firm.

Among the adverse events cutting across the healthcare industry last month, long-term-care giant Integrated Health Services announced continuing divestitures, several hospital systems backed out of mergers, and physician practice management company MedPartners and HMO giant Kaiser Permanente reported huge losses.
--------------------------
Retrenchment across the board. The month saw a particularly stunning number of pullbacks, and the pace may only be picking up.
--------------------------------
Mains blames many of those negative events on the implementation of a Medicare prospective payment system for skilled-nursing facilities, which threw a wrench into growth plans for many long-term-care companies.

''Some of the expansion that companies may be regretting was done before anyone realized how bad the PPS was going to be,'' Mains said.

Several other major long-term-care companies that have grown fast and furiously in the past year announced trims and losses in February:
---------------------------
Back to job one. Healthcare companies in all lines of business are honing in on their core competencies. Last month, HealthSouth Corp., Birmingham, Ala., announced a back-to-basics plan, along with a $1 billion stock buyback designed to telegraph confidence to financial markets.
---------------------------------
''The urgency of coming together and staying together just isn't there as it was five years ago,'' said Steve Hatch, a consultant with Northbrook, Ill.-based Arista Associates.

Reimbursement pressures may have led hospital systems to overlook cultural differences in the past, Hatch said, but under what he called a benign managed-care reimbursement environment, those pressures have let up.

An anticipated trend toward capitated payments never materialized, the University of Minnesota's Johnson said, so mergers that were ''bolted together'' under pressure may no longer see the need to stay together.

Cherilyn Murer, a healthcare consultant in Joliet, Ill., said the changes are simply part of the maturation of the healthcare business.

''We've had five years of merger mania, and now it's a natural course to refocus on the organizational costs of mergers and their strategic goals.''

COMMENT:- In the market one person's misfortune can be another's opportunity. A cluster of associated businesses will be affected by the misfortune of nursing home chains. Financiers who are owed money and the owners of REITS which lease facilities to the chains are particularly anxious. Others are looking for bargains.

Buyout Firms Impacted By Medicare Changes
BuyOuts March 08, 1999

While the government's new Medicare reimbursement plan already has created opportunities for buyout firms targeting the health-care industry, it could prove a bitter pill to swallow for those groups that already own long-term care providers.
---------------------------
New Policy Opens Up Fertile Ground

As a result, long-term care providers are looking to cut costs as their revenue from reimbursement will decline. Foster City, Calif.-based Fox Paine & Co., LLC and other firms believe these centers will be forced to outsource some services and are looking to capitalize on that trend by buying third-party health-care providers.
-----------------------------------
Stiff Bill for Firms in Health Care

Meanwhile, buyout firms that have been part of the trend of acquiring long-term care providers over the last several years may need to work harder on their portfolio companies.
-------------------------
Long-term providers hope an increase in the number of long-term patients as the U.S. population gets older will help offset the impact of PPS.

LONG-TERM CARE HIT WITH DOWNGRADES
Modern Healthcare March 08, 1999

The nursing home industry continued to nosedive last week, as rating agency Standard & Poor's downgraded debt held by several companies. One of them, Sun Healthcare Group, said its assets were overvalued.

Standard & Poor's lowered ratings on $8 billion of debt held by four nursing home companies, citing the impact of Medicare's prospective payment system for skilled-nursing facilities. The rating agency had placed most of those companies on CreditWatch with negative implications last November.

Skilled Nursing Facilities Show Signs of PPS Strain.
Medicine & Health March 8, 1999
COPYRIGHT 1999 Faulkner & Gray, Inc. Subscription: $ 525 per year as of 1/97. Published 50 times/year. Contact Faulkner & Gray, Inc., Healthcare Information Center, 1133 Fifteenth St., NW, Suite 450, Washington DC 20005. Phone (202) 828-4148.

EXTRACT ONLY
It added that "since November, earnings reports, company announcements, and reviews with corporate management have confirmed Standard & Poor's position that developing operating conditions will severely test the financial strength of industry participants." The Dallas-based consulting firm Campbell Wilson recently estimated the average SNF will see a 23 percent to 63 percent drop in Medicare payment once the full impact of PPS is felt in four years.

COMMENT:- Note how readily loans were given to corporate chains. There was no secrecy about the new PPS system. What would happen should have been clear but nothing is as blinding as success. No one making lots of money looked.

Long-Term Care Providers Ail Healthcare Sector
Bank Loan Report March 15, 1999

After driving more than half of all leveraged loan issuance in 1997, health care credits-specifically in the long-term or post-acute care sector-are making investors more than a little queasy. The reason? A new restrictive Medicare payment method known as the prospective payment system, or PPS, has dramatically increased the asset volatility in the sector, sending market yields on new healthcare loans smashing through the roof and their trading values crashing through the floor.
----------------------------
"Healthcare companies may start to see a drop-off in revenue of 20, 25 or 30 percent," said John Sico, an analyst at S&P. "This is a transition period. It's a difficult period."

Difficult, indeed. Such "transition" has certainly been seen in the secondary market, where as of last week, according to Credit Suisse First Boston, the likes of Sun Healthcare was being bid for a paltry 60, while Genesis Health wasn't faring much better at 70.
-----------------------
"Borrowers had difficulty in accurately projecting the harshness of its (the PPS) impact," he said.

Lucine Kirchhoff, a health care specialist in the lending group at BankAmerica, said that a year and a half ago, when many of these deals were made, borrowers and lenders alike had no reason to suspect problems like PPS.

"Originally when a lot of these deals were done people thought that for a lot of good performers, they would be break-even or of positive impact," she said. "People felt very good about the stability of the cashflows-it's a very necessary to have care for elderly family members. So banks believed them based on growth and cash flow and asset coverage."

But according to Michael Rushmore, head of floating-rate capital markets at NationsBanc Montgomery Securities, with leverage in the long-term sector currently as high as eight times earnings when normally highly leveraged transactions are less than five times, such levels could swamp the entire sector.

COMMENT:- Another factor impacting on profits is the increased militancy of the nursing unions. Nurses are disenchanted by corporate excesses and their cost cutting. They are uniting to resist the onslaught on their profession. They have flocked to join the unions. Bitter battles ensued as the unions sought to expose deficiencies in care and improve the lot of their members.

The approach of the corporations to nursing care was well set out by Andrew Turner (Sun healthcare) in a 1996 interview. The predictable consequence of Turner's policy of cutting the fat and the way it was done was a flight from nursing and a deeply alienated residual work force. Others followed this lead. Little wonder there is now an acute shortage of nurses.

CLICK HERE to read Turner's interview.

Labor's next recruits
St. Petersburg Times March 15, 1999

Health care workers, from $ 7.35 an hour aides such as Atkins to the upper tier of doctors earning six-figure salaries, need the potential clout that unions offer as they battle corporate owners intent on slicing costs, organizers figure.

"This is a real David and Goliath situation," said Monica Russo, executive director of Unite for Dignity, a joint nursing home organizing effort between the Union of Needletrades, Industrial & Textile Employees and the Service Employees International Union. "It's about power for nursing home workers."

There are early signs of success. Unite for Dignity has signed up 25 nursing homes in South Florida. The service employees union won one of labor's biggest victories in decades with a landslide vote last month to represent 74,000 health care workers in Los Angeles County.
-----------------------------
But nursing home operators aren't about to sit still as unions come to town. Many have already employed union-busting lawyers to stop the movement onto their turf.
---------------------------------
Cutbacks by nursing homes because of Medicare and Medicaid reimbursement reductions may exacerbate short staffing, resulting in even harder work for the remaining employees. Spiraling of worker shortages and discontent may open the door to union organizing, said John Delaney, professor of management at the University of Iowa in Iowa City.

COMMENT:- This article describes working conditions and the problems.

Nursing homes in staff crunch; Worker shortage called threat to patient care
Milwaukee Journal Sentinel March 21, 1999

A serious shortage of health care workers is bringing patient neglect and frustration to a growing number of Wisconsin nursing homes and is threatening access to home care for the elderly and disabled.

Short-staffing citations against nursing homes from Milwaukee to Marshfield have tripled in two years, and the problems have led to harmed residents, burnout among front-line aides and licensed nurses, and widespread use of temporary workers, the Journal Sentinel found. Some understaffed homes are rejecting patients.

State nursing home files document cases of missed medications, panicky residents waiting an hour for help, overburdened aides forced to ignore basic needs and massive staff departures from facilities.

No home is immune , but most so far have used a variety of measures to avoid severe staffing-related care problems that can be detected by state inspectors. But people inside and outside the industry worry that a full-fledged crisis is looming.

The shortage is seen as deepest for nurse aides but also touches licensed practical nurses and registered nurses.
-------------------------------
The staffing squeeze, fueled by high turnover, is more pronounced at for-profit nursing homes and in the Milwaukee metro area compared with outstate, state figures show. Even temporary help nursing agencies, so-called pools, are running short of workers. They generally pay around $2 more per hour than nursing homes but offer lesser or no benefits.

Corporate-owned homes accounted for 30 of 35 facilities cited for violating federal nurse staffing standards since 1997, with non-profit homes making up the rest, state records show . The citations reflect only the most serious staffing problems at the state's 466 nursing homes.
----------------------------
Fighting to compete, homes are paying hire-on bonuses up to $1,000, rewarding employees who bring in new help, hiring "utility aides" to do non-medical chores and shelling out for overtime. Homes are getting workers through the W-2 welfare reform program.

A majority have reluctantly hired temporary aides. But that is widely seen as a stopgap, because residents get a parade of unfamiliar caregivers.

High turnover is nothing new in health care, but thanks to the state's economy, the long-term care industry now competes with service employers offering comparable or better pay.

Limited by government reimbursements nearly 70% of their residents are on Medicaid nursing homes pay their trench workers an average of $8.32 an hour, or $17,300 a year to care for much sicker people than in years past. Many home care workers make even less.

"Which is easier, flipping burgers or caring for the high demands of a frail elderly population?" asked Lee Morey, administrator at Lincoln Lutheran, a church-owned home in Racine.

The satisfaction of caring for people still attracts many, but these days working conditions can batter morale.

"You see people suffering, a 95-year-old lady who can't get to the toilet, or you can't feed people decent because you can't feed 10 at a time," said Arlys Downing, a longtime licensed practical nurse at River Hills West who considered quitting the 245-bed Pewaukee home during a staff crunch last year.

"You see what you should do, but morally you have to make decisions on what you can do," Downing said.
---------------------------
Unions representing nurse aides say increased health insurance costs are a major concern for nurse aides, many of whom are struggling single mothers.

Management turmoil can play a part in staffing problems. Willowcrest Care nursing home in South Milwaukee ran through seven administrators and four nursing directors last year, when it was cited for widespread poor care and short staffing. A 1999 survey found much-improved conditions.
--------------------------------
If anything, recruiting personal care and home health workers is tougher than finding nursing home aides, a fact that threatens Wisconsin's move toward more home and community-based long-term care, Leean said.
----------------------------------
Whatever the setting, dedicated health care workers are feeling undervalued these days.

Osborne, the nurse aide at River Hills West, works 65 hours a week and knows her residents' every need after 10 years on the same unit. The woman they call "Mrs. West" bemoans health care's revolving door but isn't surprised, given the low pay.

"You have to have some love for it, some compassion, to stick it out as I have," she said during a quick break Thursday.

After 15 years, she makes $11.06 an hour.

NOTE:- Not for profit homes and hospitals have been forced to compete with corporate homes and adopt similar practices. Government hospitals and homes in the USA are small in number so difficult to evaluate. In the majority of the reports I have seen they have outperformed both for profit and not for profit facilities. This is reflected quite dramatically in the figures, which follow.

Hanging on to staff

For -profit nursing homes have the most difficulty retaining nursing staff compared with their competitors, the latest figures show Nursing turnover is linked to quality of care.

One-year retention rates:
- - - - - - - - Government-owned homes: - -For-profits:- - Non-profits:

Registered nurses - - - - - -90% - - - - - - - 72% - - - - - - 76%

Licensed practical nurses - -98% - - - - - - - -81% - - - - - -83%

Nurse aides - - - - - - - - -90% - - - - - - - - 66% - - - - - 70%

THE SHAME OF OUR NURSING HOMES; nursing homes allegedly treat patients poorly
The Nation March 29, 1999
Eric Bates,

Millions for investors, misery for the elderly

Note:- This article is an excellent review of events in the nursing home industry starting in the 1800's and using Beverly Enterprises as an example of the corporatisation of care.

CLICK HERE to read the full article.

At a time when Republicans and Democrats alike are clamoring to let big business run everything from prisons to schools, nursing homes represent the nation's longest-running experiment in privatization-one that, after half a century, offers a graphic portrayal of what happens when private interests are permitted to monopolize public services.
--------------------------
From colonial times, caring for the elderly poor has been a responsibility of government.
-----------------------------
Spurred by scandals over conditions in public poorhouses, federal lawmakers decided to hand the elderly over to private industry. In 1935 Congress specifically framed the Social Security Act - - - - The massive transfer of tax dollars to private business fueled the creation of for-profit homes. Almost overnight, operators set up facilities to exploit pensioners.
-------------------
Today those empires represent a booming business. With the number of elderly citizens needing long-term care expected to double over the next two decades, Wall Street sees a steady stream of customers for nursing homes-with a guaranteed flow of cash consisting almost entirely of public funds.
----------------------
For its part, the industry knows how to use its political and financial clout to block any meaningful reform.

Outcry Grows Over Nursing Home PPS Losses, But Some Are Doing Fine.
Medicine & Health April 26, 1999
COPYRIGHT 1999 Faulkner & Gray, Inc.

When last July the Balanced Budget Act changed the way Medicare pays for nursing home care, adopting a prospective payment system that gives facilities a flat per diem rate to cover all needs of a resident, it was expected that the business would have to change dramatically. It has.
-------------------------
But in fact some are weathering the storm a lot better than others.
----------------------------
Nursing homes are responding by reassessing care, and cutting back on services that seemed vital when they were being reimbursed on a service-by-service basis. "We're learning that therapy is much more discretionary than we thought," Linda Greub, nursing home industry analyst for Nation's Bank Montgomery Securities in San Francisco, notes sardonically. At some homes, the use of such therapy has dropped 30 percent with PPS. And that means that chains like Sun, Integrated, Mariner, and Vencor that rely heavily on providing therapy for patients at independently owned nursing homes are suffering the most.
--------------------------------
But not every long term care facility is hurting. For one thing, many never went after Medicare business, so they are unaffected by the change. A lot of not-for-profit homes have relied heavily on private-pay residents, often those from churches or other organizations affiliated with the home's sponsor.
---------------------------------
In addition, one expert in the field notes, the winners and loser under the new system "sort of has to do with how much you gamed the system in the first place." Those who didn't let the reimbursement system become the basis of their treatment strategy now are doing better than those who depended on finding techniques to wring every last dollar out of Medicare.

Federal Pay Rules Hit Nursing Homes
The Daily Record (Baltimore, MD.) May 3, 1999
Bob Keaveney; Daily Record Business Writer

Market Slams Publicly Traded Firms Squeezed by Reimbursement Rules

Ever since the so-called Prospective Payment System (PPS) took effect for most nursing facilities in July, long-term care providers have been complaining that they aren't being paid enough.

As a result, the stocks of the public companies that provide these services, including Genesis, the Pennsylvania-based owner of 26 Maryland nursing homes; Owings Mills-based Integrated Health Services; and HCR Manor Care of Toledo, Ohio, have dropped like stones since last summer.
----------------------------
PPS is to the nursing home industry what the early days of managed care were to hospitals and other acute care providers.

Designed to reimburse the providers on the basis of what care should cost, rather than what it actually costs, PPS provides health care facilities up-front, per-day payments similar to "capitated" managed care plans.

The providers are paid a specific amount for patients -- with rates based on the provider's location and the condition of the patient -- and they then are responsible to manage the patient's care.

The method contrasts starkly with the traditional fee-for-service reimbursement, in which the providers simply would bill the federal Health Care

Financing Administration (HCFA).
------------------------------------
PPS applies only to the patients whose services are paid through Medicare, which covers only about 8 percent of nursing home costs. Some 70 percent is paid via Medicaid, with the rest covered by private health plans or long-term care insurance.

Still, because Medicare is the primary payer of ancillary services, providers say they must cut back or even eliminate many of those services.

COMMENT:- There is a strong move to a variety of assisted living services for the elderly who do not require nursing home care. Corporations found it profitable to include these facilities in their integrated empires. Additional profit was generated by providing therapy and charging Medicare. They were a captive referral source for future nursing home residents.

A HELPING HOME: A special report.; A Niche for the Elderly, and for the Market
The New York Times May 9, 1999

Today, in one of the most sweeping changes in the way the old live, assisted living is the focus of the industry that has grown out of caring for the aging. About 1.2 million people live in assisted-living facilities, and communities across the country are asking developers to build more so that their aging residents can stay close to home.
------------------------
Experts ask whether assisted living is a real solution for a new stage of life or a marketing opportunity directed at two fast-growing groups fearful about aging: the affluent elderly and their adult children.

Recalling the scandals of the nursing-home boom of the 1970's, the experts ask what will happen to assisted-living residents who run out of money or grow more disabled.

"I'm concerned that they will cater to the worried rich -- 'we'll cater to you in a nice setting, then when you get really sick, you're out,' " said Rosalie A. Kane, gerontologist at the University of Minnesota who applauds the philosophy behind assisted living. "I'm worried about their not being committed."
------------------------------
Five years ago, Massachusetts had fewer than a dozen assisted-living centers. Today it has 115 and more on the way as national chains and local hospitals compete for a piece of the market.
------------------------
Heritage was built in 1995 by a developer, ADS Senior Housing, in conjunction with a local nonprofit hospital, Metrowest Medical Center. Hospitals increasingly see assisted- living centers as sources of patients.
-----------------------
ADS Senior Housing, meanwhile, which was managing Heritage, was bought by the Multicare Companies Corporation, which owned and managed nursing homes. Multicare was then bought by the larger Genesis Health Ventures of Kennett Square, Pa. A division, Genesis Elder Care, now manages Heritage.
-------------------------------
"It doesn't look like a nursing home," said Rose Leverone, 94, a retired Framingham tax clerk. "Anyone can walk through and think it's a beautiful retirement home."

That is a chief selling point. Americans have such a dread of nursing homes that a recent survey found that 30 percent of people 65 and older would rather die than live in one.
-------------------------------
Market research tells developers like Mr. Grape that they have two customers: the older people who need a home that includes help, and their affluent children.
--------------------------
"The glitz is for the kids," said Carol Seager, a consultant. "They feel less guilty. They say, 'Look at this beautiful place, Mom.' " 

COMMENT:- This article lists the different types of Assisted Living.

HOME HEALTH CARE

Allows people with disabilities to remain in their home by providing part-time nursing, personal care and homemaking services.

CONGREGATE LIVING

A residence that provides private rooms or apartments with common areas for dining, socializing and programs. Housekeeping services are provided, but residents are relatively self-sufficient.

ASSISTED LIVING

Much like congregate housing, but for people with disabilities that would prevent them from living on their own. It provides daily meals, personal services, limited nursing and 24-hour care. Monthly rents vary according to the services provided. Assisted-living facilities may be associated with a nursing home or be part of a continuing- care community.

CONTINUING CARE

Retirement communities that offer a complete range of housing and health- care accommodations, from independent living to assisted living to 24-hour skilled- nursing care. They typically require residents to buy into the community, but guarantee housing and health care for life.

NURSING HOMES

For people who need 24-hour skilled-nursing care and can no longer live independently.

COMMENT:- If nursing homes understaffed and provided poor care when they were very profitable, what will they do when they are threatened with bankruptcy. This is a question which worries federal and state regulators, although they make reassuring public statements. The federal HCFA has written to all states warning of the threat impending bankruptcy poses to care.

Nursing homes feel the pinch of federal Medicare changes
The Associated Press State & Local Wire May 19, 1999

The possibility her nursing home will run out of money keeps Ruth Baron (a resident) awake at night.
--------------------------------------
Genesis and at least two other companies have taken a financial beating recently, largely because of a new payment system for Medicare, federal health insurance for the elderly.

Donald Shumway, the state's health and human services commissioner, warned this week that some national chains could run out of money or even go through bankruptcy reorganization.
---------------------
Shumway says the state is keeping close tabs on homes owned by the chains to ensure patient care doesn't suffer.
------------------------
An analyst with the nation's largest health-care workers union said chains failed to prepare for the changes.

"It seems a lot of these companies just didn't get a good grasp of how those changes were going to affect them," said Marcy Chong of the Washington-based Service Employees International Union.

She fears homes now will embark on a wave of cost-cutting.

COMMENT:- Nursing home chains are well versed in the art of political influence through political donations and lobbying. Money counts. They want more money. The next article opens up the conflict between claims that Medicare funding changes are responsible for the problems, and claims that the problems are primarily due to corporate mismanagement. Senator Grassley has chaired many of the inquiries into aged care and understands better than anyone what has been happening.

Chains are also pressing to have the oversight and regulatory structure changed claiming that the regulations are too harsh. Over the last few years investigations which responded to the anger of citizens have shown the inadequacy and ineffectiveness of a kindly regulatory system. The kinder regulation which corporations claim they want has already failed and it failed because of their intransigence.

One of the problems identified in regulation was the practice of assessing only a nursing home's performance, when the real problem lay with the corporate chains and their management strategies. The nursing unions investigated the causes of poor care and recommended that assessment of care and remediation should include corporate management. The chains are very threatened by this and are exerting pressure to stop it.

CHASING LOST MEDICARE DOLLARS
Legal Times May 24, 1999

The nursing home industry has launched a major lobbying campaign to try to regain some of the Medicare dollars it lost as a result of the Balanced Budget Act of 1997.

With recent studies showing that Medicare has spent less money since the law was passed than Congress anticipated, the nursing homes are making the case that steep drops in federal health care outlays pose an unforeseen threat to both the financial health of nursing homes and the physical health of their residents.

A coalition of 10 of the nation's biggest nursing home companies has brought on some top influence brokers to help them navigate this tricky terrain.

Ironically, the leader of the lobbying effort is Haley Barbour of Barbour, Griffith & Rogers, who as chairman of the Republican National Committee from 1993 to 1997 was one of the strongest proponents of cutting Medicare spending.

He is joined by former Reps. Vin Weber (R-Minn.) and Vic Fazio (D-Calif.) of Clark & Weinstock.
-------------------
So far the lobbying campaign has focused on directly pressuring the Health Care Financing Administration, which administers Medicare, to allocate more funds to nursing homes. Coalition lobbyists say Sens. Pete Domenici (R-N.M.) and Jeff Bingaman (D-N.M.) have collected 40 signatures on a letter supporting the nursing homes' position, and that the letter will be sent to Secretary of Health and Human Services Donna Shalala, whose purview includes HCFA.
--------------------------
If HCFA declines to act, say the lobbyists, they will ask Congress to alter the Balanced Budget Act so that more funds are directed to nursing homes.
------------------------------
Without some change in the current situation, the financial repercussions will be felt by nursing home residents, the lobbyists say.
------------------------
Further, says the aide, the program was just implemented, and it is still too early to tell how it is really affecting the industry.

Some legislators question whether the problems the industry is facing are of its own making. They suggest that ailing companies may merely be suffering from poor management and business decisions, such as overextending themselves when the Medicare system seemed flush with money.

"How is it that some providers are in such distress while others seem not to be?" asked Sen. Charles Grassley (R-Iowa) in a recent floor speech, noting that revised figures from the Congressional Budget Office show that nursing homes have lost substantially less Medicare money than they first claimed.
------------------------
"A host of questions need to be answered about the internal operation of these companies, " said Grassley, chairman of the Special Committee on Aging. "Otherwise, we could wind up subsidizing the mistakes of well-compensated executives."
----------------------------
But patient advocates say that the nursing homes' claim that lower reimbursements are endangering patient care is questionable, since complaints about inadequate care existed long before the cuts took effect last year.
------------------------
A report issued by the General Accounting Office in March noted that one quarter of the nation's approximately 17, 000 nursing homes had problems that "caused actual harm to residents or placed them at risk of death or serious injury."
--------------------------
Medicare payments are not the only thing on the nursing home chains' agenda: Their lobbyists also are seeking to alter how HCFA polices nursing home operations.

HCFA enforcement was stepped up last year after several well-publicized stories exposed mistreatment and neglect in nursing homes around the country.

One of the main industry proponents on this front is John Jonas of Patton Boggs, who is lobbying for HCR Manor Care Inc. The issue is also of concern to Beverly Enterprises --whose team from the Steelman firm includes former Bush administration aide Deborah Steelman and Steve Jenning, a former policy director for Sen. Ron Wyden (D-Ore.)--and to Mariner Post-Acute Network, which has hired Black, Kelly, Scruggs & Healey's Charles Black and Jerry Klepner, a former Clinton administration HHS assistant secretary for legislation.

The industry is not seeking legislation, says Jonas, but instead wants Congress to pressure HCFA to switch its emphasis from a punitive system of enforcement--which includes fines and closing down facilities--to one that aids nursing homes in achieving good performance. The industry also would like to ensure that an entire company is not tainted by a poor HCFA rating when just a few of its facilities fall out of compliance.

Bromberg says that while there are some bad nursing homes that should be shut down, HCFA has been overzealous in its enforcement efforts. "They are forgetting that the other part of their job is helping homes improve, upgrade, and correct deficiencies, "he says.

But Bruce Vladeck, who stepped down as HCFA's top official in 1997, says that while in office he acceded to some nursing home industry requests for more lenient treatment, and that it was a mistake.

"Every time HCFA has taken seriously the nursing home industry's claims that regulations were too harsh, it has ended up being screwed by the continuing failure of the nursing homes to clean up their own act, " says Vladeck, now a professor of health policy and geriatrics at the Mount Sinai School of Medicine in New York.

NURSING HOMES: LEAVE PATIENTS LINGERING IN HOSPITALS
Health Line June 7, 1999

Nursing homes are shunning elderly and disabled patients with "costly medical needs" because of payment restrictions that went into effect under the Balanced Budget Act, the Washington Post reports. As a result, "some patients are staying in hospitals much longer than necessary and other are being forced to enter nursing facilities far from their homes and families."
------------------------
Although federal law prohibits nursing homes from accepting some Medicare patients while rejecting others, monitoring compliance is difficult, as nursing homes can assert that they lack the room or resources to care for certain patients.

COMMENT:- Note the way in which money and not clinical requirements determine what happens to patients.

Nursing Homes Shun Some Medicare Patients
The Washington Post June 07, 1999

Many elderly and disabled patients are being shut out of nursing homes because a new restrictive Medicare payment system has prompted facilities to shun those with costly medical needs.
----------------------
Hospitals and nursing homes have been lobbying hard for relief from the spending restraints, and it serves their interests to publicize such "unintended consequences."
----------------------
"The system has created certain types of patients who a nursing home will not admit," said Thomas Zwicker, who runs a Milwaukee nursing home.
----------------------
Federal regulations say health care providers such as nursing homes can be disqualified from Medicare if they employ a double standard to turn away Medicare patients while accepting others.

Yet it's tough to prove whether nursing homes are doing that, according to hospital workers who arrange nursing home placements. When rejecting Medicare patients, nursing homes typically say they don't have room, or that they lack the resources to meet a patient's needs.
-------------------------
Until recently many nursing homes sought the types of patients they now avoid. The old Medicare payment system was a valuable source of revenue. But the system of cost reimbursement rewarded wasteful spending.
------------------------
The strict new nursing home admissions standards are a manifestation of the industry's financial distress. Several of the nation's largest nursing home chains are losing money and nursing home stocks have plummeted.

But hospitals seem to be complaining the loudest about nursing home admissions, because hospitals must absorb the expense of the Medicare patients stranded in their beds.

Nursing Home Industry's Financial Crisis Threatens Patient Care
The Washington Post June 19, 1999

Much of the nation's nursing home industry is in such dire financial straits that regulators and other observers are worried about the care elderly residents will receive.

Some of the largest nursing home chains have reported huge losses and missed payments to creditors. Shares of major companies are trading for mere pocket change. One large firm, Vencor Inc., reported in April that it may not be able to stay in business.

The industry's problems are so glaring that the Health and Human Services Department recently issued an alert to the state agencies that license and monitor nursing homes.

"While we hope that these organizations will see their way through these difficult periods, we are nevertheless concerned that the quality of care residents receive in chain facilities citing financial pressures be protected," Sally K. Richardson, director of the government's Center for Medicaid and State Operations, wrote in the May 7 letter.
-------------------------
A series of mergers and acquisitions in recent years and an accumulation of debt had left the industry in a precarious position, analysts said.

"Basically they've been expanding much too fast . . . and it sort of backfired on them," bond analyst Frank Bianco of McMahan Securities said of nursing home chains. "I'd say that had they not expanded to the extent they did they'd probably still be in good shape now," Bianco said.
------------------------
Though Medicare pays the bills for only a minority of nursing home patients, it has contributed a disproportionately large share of many facilities' revenue.
------------------------
One patient advocate says she is skeptical of the industry's pleas for relief from the new payment system. 'We've seen poor care for so long by so many of these large corporations that it's too early to tell whether this is going to make it worse or not," said Elma Holder, founder of National Citizens' Coalition for Nursing Home Reform. "If they were gaming [the Medicare system] and the . . . system changes and they're not able to do that the same way, that obviously would have a major impact on their financial situation."
--------------------------
Nursing home companies say they aren't compromising the quality of care, but some analysts wonder.

Some companies have halved the amount of rehabilitation therapy they provide, said Victor Seoane, a health care services researcher at the Robinson Humphrey investment firm.
------------------------
"We are receiving more complaints from staff themselves about facility conditions and the quality of care than we have in the past, a significant increase," said Mark Miller, Virginia's long-term-care ombudsman, an advocate for nursing home patients.

"If a facility's in trouble financially they're much more likely to make up the costs in the care they provide, which means less services, less staffing, and that all equates to a poor quality of care," Miller said. "People just aren't going to get the services that they need."
-------------------------
In Maryland, "I think that the quality of care in nursing homes has probably deteriorated in the last 12 to 18 months," said Carol Benner, director of licensing and certification.

Five Maryland nursing homes were dropped from Medicare and Medicaid during the fiscal year that began Oct. 1, compared with none during the previous fiscal year. The increase may partly reflect stricter government standards and heightened enforcement, Benner said.

COMMENT:- Note that for the financiers and accountants it is simply a matter of getting costs under control. That this means cutting staff and neglecting vulnerable people who are in need is never considered. This is not their job. The market is about money, not about people.

Nursing homes hit hard by cuts in Medicare pay
Business Dateline; Atlanta Business Chronicle July 9, 1999

Changes in reimbursement, from fee for-service to a flat rate, went into effect July 1, 1998, for the majority of the state's 370 nursing homes. About 200 facilities were hit hardest by the cuts, along with Georgia hospitals and homehealth agencies.

"No one really knew the real impact," Watson said. Yet, a year later, he is not surprised that one big publicly traded operator of nursing homes based in Atlanta is going bankrupt, and another has drastically cut its staff and is trying to find a new CEO after its chief executive resigned. A few other large, longterm-care companies that are based elsewhere, but have several facilities in Georgia, also are barely squeaking by.

Most of the companies nationwide have watched their losses mount and their stock values steadily decline, recently falling below $ 1. Many were completing mergers around the time the Medicare cuts took effect.

Feeling the most pain are companies that depend heavily on Medicare, the federal health insurance program for acutely ill elderly, and must show shareholder value, Watson said.
----------------------
About 80 percent of nursing home patients in the state have their care reimbursed by Medicaid, the government health insurance for the poor and disabled, Watson said. Seven percent to 10 percent are covered by Medicare. But Medicare typically pays at a higher rate - $ 230 to $ 250 a day per patient - compared with Medicaid's payment of $ 78 a day per patient, Watson said.

So, although the percentage of Medicare patients is small, nursing homes depend heavily on them for revenue, he said.
---------------------------
What the companies have in common is that "they haven't been able to react to get their costs under control," said Charles Dalch, a partner with Deloitte & Touche LLP in Atlanta. "A lot have gone through mergers as well, so they are (accumulating) debt at the same time that their revenues are increasing, squeezing their profits."
--------------------------
Public companies are having a rough time making enough money to satisfy stockholders, said Michael Rovinsky, president of Integrity Consulting Group Inc. "It's just about impossible for them to make their margins to meet the expectations of Wall Street."

COMMENT:- The next article talks about transitional care - subacute or post-acute care on a hospital campus. This has the same cost advantages as providing Post-Acute Care in a nursing home without all the disadvantages. Not only is there medical and nursing continuity of care but the hospital and its staff can supervise and ensure that standards of care are properly maintained. The full expertise of the hospital is available when it is needed. This is the principle of "progressive hospital care" and needs to be distinguished from specialised rehabilitation which is provided in rehabilitation hospitals when rehabilitation becomes the prime activity.

Post-Acute care in nursing homes was pure financial opportunism by entrepreneurs whose only interest was the financial opportunities it provided. They succeeded in selling this nonsense and even Australia's Dr. Wooldridge identified with it. He planned to revolutionise our hospital system this way when Sun Healthcare entered Australia in 1997.

The following article once again shows how providing health care using market principles rather than clinical benefit as the primary basis for decisions compromises that care. It is acceptable to adopt a cheaper and less effective option for providing desired care when there is not enough money. It is totally unacceptable to decide on a particular way of providing care because it is more profitable - or because it meets some theoretical economic theory.

Transitional care threatened by Medicare cuts; Inland hospitals may face painful choices about what to do with such facilities. One, in Murrieta, already has.
THE PRESS-ENTERPRISE (RIVERSIDE, CA.) July 18, 1999
Sandy Stokes, The Press-Enterprise

A few days after a heart attack or a hip replacement, patients in six Inland area hospitals need not leave their "acute care" bed to mend at home or in a nursing home.

They can spend a days or weeks recuperating in the hospital's "transitional care" ward, a skilled nursing facility which can be operated more cheaply than an acute care wing.
-------------------------
Government cost cutting is putting many of the 129 transitional care hospital beds in places like Banning, Redlands and Corona at risk, hospital officials say. They say hospitals spend more money keeping these beds operating than the government is willing to pay through Medicare and other programs.

"For a lot of facilities, this is a crisis point," said Kelley Queale, director of communications for the California Association of Health Facilities.
----------------------------
This summer, Rancho Springs plans to close the last of its 50 transitional care beds to make way for acute care beds. The hospital had considered keeping some skilled nursing beds to rehabilitate stroke and surgery patients, but can't afford them, Koenig said.
-----------------------
Transitional care is for patients who don't need regular hospital care but are still too sick to go home.
-----------------------
But like other hospital administrators, Holmes is reluctant to close the transitional care unit. Closure would mean interrupting patients' continuity of care and require they leave acute care beds and be sent to another facility across town or even out of town.

Doctors and therapists treating the patients may not follow them to a new facility.
----------------------
When the transitional care unit starts losing money after next year, it won't make financial sense to keep it open, but not closing will still make lots of sense in terms of patient care, Calderone said.

"They're very good for patients," he said. "Physicians don't mind following their patients through the continuum at the hospital. "

Still, "if Medicare maintains its current regulations, we'll probably follow suit with everyone else and phase it out," Calderone said.
--------------------------
While it isn't expected to make the hospital rich, the transitional care unit will remain open, Larkin said. "We've found the transitional care unit has been well received by physicians and patients. "

COMMENT:- Note also that the chains are funding a massive advertising campaign to gain public support for their position. This supplements their lobbying and political donations.

Note also that the market solution to financial losses is to cut costs - that means nurses. The market puts a big wall between cutting costs to restore profits and the human consequences of doing so. To them it is only a few words - not a prescription for human misery.

MONSTROUS PROBLEMS: MEDICARE'S NOT THE ONLY BOGEYMAN HAUNTING THE LONG-TERM-CARE INDUSTRY
Modern Healthcare July 26, 1999

The nursing home industry is putting its squeaky wheel into high gear. It's rolling out an aggressive public relations campaign blaming its fiscal woes on overzealous government cost-cutting.

But critics say what's ailing nursing homes goes far beyond reimbursement changes imposed by Medicare's new prospective payment system. They say that many publicly traded companies are to blame for their problems.

''A lot of these companies are sitting on a pile of debt they can't manage,'' says John Ransom, an analyst for Raymond James Financial, St. Petersburg, Fla. Companies borrowed to fund expansion but didn't anticipate government cost cuts and other factors that reduced cash flow, he says. As a result, ''the train wreck hit their balance sheets,'' he says.

Congress mandated the PPS in response to rising Medicare payments to skilled-nursing facilities.
-------------------------
The industry is also being pressured by regulatory and anti-fraud crackdowns, which have picked up steam in the past year.

And making matters worse, the industry reports a concurrent decline in nursing home occupancy.
-------------------------------
Other factors include an aggressive government campaign against fraud and improper payments, as well as slower claims processing under new systems, Robert Berenson, M.D., director of HCFA's Center for Health Plans and Providers, said in testimony before the Senate Finance Committee in June.

Spreading the word. The AHCA claims PPS reductions may hurt resident care, not just members' pocketbooks, and has leapt into action. Working with the Alliance for Quality Nursing Home Care, a Washington-based consortium of 11 of the country's largest nursing home companies, the AHCA is paying for a national cable television ad campaign and print ads running in 30 newspapers nationwide.

Officials at the AHCA and the alliance declined to reveal campaign costs.

The ads urge the public to call on their federal lawmakers to ''restore funding for nursing home care.''
-------------------------------
While not denying that heavy borrowing has hurt the fiscal health of some companies, Keegan maintains the PPS has caused a financial crisis in the nursing home sector.

But Ransom disagrees.

''The fact that a few public companies gambled and lost on Medicare is not necessarily a crisis for the government,'' Ransom says.

Despite the AHCA's claims to the contrary, most nursing home companies have not been devastated by the Medicare changes.
---------------------------
GMAC caters to nursing homes that typify the industry: small to medium-sized chains that draw most of their income from Medicaid.

''I don't see many facilities (of this type) collapsing or going bankrupt in the near future,'' she says. ''They are survivors, and they were not as impacted by Medicare.''
-----------------------
As hospitals responded to pressure to cut their lengths of stay under the DRG system, some revenue-seeking nursing home companies carved out niches in the subacute business. They have been hurt the most by the PPS.

Relatively generous Medicare payments also offset historically low Medicaid payments, but the PPS makes maintaining that virtual subsidy more difficult.
-----------------------
The fiscal problems of many of the large nursing home companies stem as much from management missteps as payment cuts, experts say.

''Those companies basically embarked on building ancillary provider businesses . . . and they did it largely with debt financing,'' says Debra Lawson, an analyst with Salomon Smith Barney in New York.

Other mistakes included badly timed acquisitions, such as Albuquerque-based Sun Healthcare Group's $320 million acquisition of Atlanta-based Retirement Care Associates just one day before RCA's 74 skilled-nursing facilities made a transition to the PPS.
------------------------------------
Victor Seoane, an analyst for Robinson-Humphrey Co. in Atlanta, says profitability is down for large publicly held companies, and debt burdens are up.
---------------------------
Highfliers nosedive. Highfliers under the old cost-reimbursement system tend to be most adversely affected by PPS.

Conversely, more conservatively managed companies have been better able to stay the course.
-----------------------------
Beyond the PPS, however, the entire nursing home industry is dealing with what many say is overaggressive and unevenly applied regulatory enforcement.

HCFA recently issued new guidelines to states, allowing them to impose higher fines more easily. To block the rules, the AHCA sued the agency in May in federal court in Washington. A motion for summary judgment, filed in June, is still pending.

A recent report by the U.S. General Accounting Office also supported HCFA's contention that increased punitive measures would help keep nursing homes with poor records in line.

If the bar were raised as HCFA proposes, about 15% of homes would be subject to immediate sanctions, according to the GAO. Industry representatives say that imposing fines is counterproductive. But Sarah Burger, who heads the Washington-based National Citizens' Coalition for Nursing Home Care, isn't buying that line.

''All industry has an allergy to fines,'' she says. ''That's how we know they are working.''
---------------------------
Others say nursing homes are also having trouble filling non-Medicare beds because of competition from assisted-living facilities, many of which added capacity in 1998.
-------------------------
Ransom predicts, ''Everybody will eventually learn to deal with the system. The industry will go back to (one) where guys who keep their nose clean and run a clean business can expect cash flows in the 5% to 8% range.''

COMMENT:- Nursing staff are now unionised and as nursing care is the primary problem they are pressing for any increased funding to go to nurses rather than profits. The union has been active in exposing deficiencies in care in corporate homes - starting with Sun Healthcare in 1994.

Despite more money, some Connecticut nursing homes headed for trouble
The Associated Press State & Local Wire July 29, 1999

Federal Medicare cuts combined with increased state aid have created a stew of trouble for some nursing homes in Connecticut.

Unionized workers are seeking more pay and better benefits because of state funding increases. The state earlier this year agreed to increase nursing home aid about $ 200 million.

But federal cuts have left many homes in financial trouble.
--------------------------
The homes also are now limited to $ 1,500 per patient per year for physical therapy, speech therapy and other work, where the payments used to be unlimited. Homes that invested in therapy centers as a way to make money now are getting less money under the new system.
----------------------------
The court-appointed receiver filed papers in Hartford Superior Court Wednesday to close the home. A hearing is scheduled for Friday.

The union that represents 240 workers at the home plans to oppose the home's closing and instead will ask the state to try to find a buyer.

The home needs about $ 2.5 million in repairs, is losing up to $ 75,000 monthly and owes millions of dollars to vendors, creditors and the city, the receiver said in court papers.

The Chapter 11 bankruptcy filing of a Boston-based company is affecting eight other nursing homes around the state, as well as a home health care business and a temporary health care staffing agency.
------------------------------
Meanwhile, Arden House of Hamden, one of the largest nursing homes in the state, faces an Aug. 6 strike deadline if its 240 newly unionized workers do not get a contract.

Chernoff said the home's management is not making significant progress in talks for higher wages, lower costs for health benefits, pensions and other demands.

COMMENT:- The majority of the large corporations in bankruptcy have been the subject of fraud investigations. The government has claimed hundreds of millions of dollars. Paying these large sums plus the triple damages dictated by law would have made it impossible for these companies to trade out of Chapter 11 bankruptcy. This would present government with an enormous problem. Hundreds of homes to staff and run. Government fell over backwards to reduce their claims and devise strategies to minimise their impact.

GAO Found Array Of Overcharges By Providers Troubled Times in Nursing Homes
Albuquerque Journal August 1, 1999, Sunday

* Auditors estimate about $3.1 billion in improper Medicare payments were made in '96 and '97
-------------------------------------
The Health Care Financing Administration, which runs Medicare, told a House committee in 1997 that examples of nursing-home fraud included billings for unneeded mental-health services, inflated prices for medical supplies, residents wrongly enrolled in hospice programs to increase Medicare payments and excessive occupational and speech therapy charges.
-------------------------
"The nursing-home population has a high percentage of patients who are incapable of monitoring their own bills and may not have family members to do this for them; this makes them easy prey for unscrupulous providers and suppliers."

Nursing homes received about $23 billion in fee-for-service payments for nursing-home stays in 1996 and 1997. Federal auditors estimate that about $3.1 billion of those payments were improper.

COMMENT:- Note that Medicare fees for nursing homes rose from US $2.8 billion in 1989 when Sun was founded to US $12.8 billion 8 years later in 1997 when government pulled the plug. This 4.6 times increase far exceeds the increased costs of needed care. It is a measure of the extent to which Medicare was exploited.

An Ailing Industry Troubled Times in Nursing Homes
Albuquerque Journal August 1, 1999, Sunday

First of a four-day series

Medicare Reforms Have Sent Firms Reeling -- N.M.'s Sun Healthcare Among Them

The Albuquerque headquarters of Sun Healthcare Group, with its modern architecture, elaborate art and employee-fitness center, could become a monument to the good times of the nursing-home industry in the 1990s.

Or it could become a tombstone.

Fueled mostly by taxpayer dollars, the industry's revenues shot up billions of dollars and its profits by hundreds of millions in the '90s. Corporate mergers and acquisitions became commonplace. Large, for-profit national chains dominated the business.

Sun was a chain of seven nursing homes when created in 1989; it has grown into a multinational corporation with some $3 billion in annual revenues.
------------------------
The government's goals: to slow dramatic increases in Medicare payments by forcing the industry to become more efficient and by reducing Medicare abuse.

The results: Nursing-home chains, along with companies that sell medical services and supplies to nursing-home residents, have laid off thousands of workers and reported losses in the hundreds of millions of dollars.
------------------------
In addition to cutting Medicare payments for nursing-home care, the federal government is doing more to combat fraud and abuse of Medicare and Medicaid in the industry.

And the Clinton administration has launched a massive initiative to crack down on abuse and neglect in the nation's 17,200 nursing homes, which care for some 1.6 million people.

In short, the nursing-home industry is under the gun.
---------------------------
Simply put, (before 1997) the more services and supplies a nursing-home company provided to Medicare beneficiaries, the more it billed and the more it was paid.

And bill they did.

Fee-for-service payments for Medicare-covered nursing-home stays increased from $2.8 billion in 1989 to $12.1 billion in 1997.

The average Medicare payment for a day's stay in a nursing home was $98 in 1990 and $292 in 1996.

The rise in payments far exceeded the growth in the number of Medicare beneficiaries.

Increased billings for ancillary services, such as rehabilitation therapy, accounted for most of the growth in Medicare payments for nursing-home stays, according to the General Accounting Office.

Providing ancillary services particularly rehabilitation and respiratory therapy became a profit center for a company like Sun Healthcare Group.

The nursing-home industry an $83-billion-a-year business was accused of overcharging Medicare.

Federal auditors said the growth in Medicare payments couldn't be "readily linked to demonstrated changes in beneficiary needs." They also said Medicare was paying "significant amounts for medically unnecessary physical and occupational therapy."
-------------------------------
"We had numerous companies growing over 20 percent a year in earnings," said Nancy Weaver, a health-care services analyst with the brokerage firm of Stephens Inc. in Little Rock, Ark.

"For some providers, profits doubled," Weaver said.

Awash In Red Ink Troubled Times in Nursing Homes
Albuquerque Journal August 3, 1999, Tuesday

Third of a four-day series

Industry Blames Medicare Cuts; Critics Say Bad Business Decisions Played Role

The nation's large nursing-home companies took a financial beating in 1998 after the government slashed Medicare payments, but some chains are weathering the cuts much better than others.
-------------------------------
"What factors have put certain companies at particular risk?" Iowa Republican Charles Grassley, chairman of the Senate Special Committee on Aging, asked in a floor statement May 5.

"Did these companies try to grow too large, too fast? Did they take on more debt than they could manage? Was their business strategy flawed?"
------------------------------
The industry says the cuts have created a financial crisis and wants the government to start pumping more money into reimbursements for nursing-home care.
---------------------------------
But Grassley said questions about the operation of companies need to be answered before the government acts.
------------------------------------
Providing therapy doesn't require a great deal of investment in equipment and other capital, and a large volume isn't required to make a profit.

"Ancillary services historically provided more than half of the company's (Sun Healthcare) operating profits," the company has said in its financial statements.

Sun used the revenues to acquire an ever-increasing number of nursing homes, earning it the nickname "Pac Man," according to The Wall Street Journal.

Expansion, debt

Sun Healthcare Group was created just a decade ago but today has some $3 billion in annual revenues and nearly 400 nursing homes and other facilities in the United States. It also is one of the largest nursing-home chains in the United Kingdom.

Sun increased its exposure to the Medicare-payment changes by continuing to expand even when it knew the changes were coming.
---------------------------
Sun also has a major problem that isn't directly related to the changes in the Medicare reimbursements. That is debt. It totals about $1.6 billion.
------------------------
So why are some nursing-home chains doing better than Sun Healthcare Group?

In the case of HCR Manor Care, it is partly because it has a relatively high percentage of nursing-home residents whose stays are covered by private insurance or other private-pay sources.

Executives for Beverly Enterprises said in its annual report that the company began preparing in 1994 for the eventual shift to Medicare fixed rates and the efficiencies that would be demanded.

"We deliberately rejected opportunities to use nursing homes as a platform to sell expensive ancillary services to the government and to exploit the Medicare-reimbursement system," the report said.

(Note:- Beverly subsequently paid US $270 million for defrauding Medicare)
-------------------------
The Health Care Financing Administration, which runs Medicare, doesn't believe Medicare changes are the only causes of the financial troubles of some nursing-home chains.
-----------------------------------
"Some of these organizations invested heavily in the nursing-home and ancillary-service businesses not long before the enactment of the (Medicare changes), both expanding their acquisitions and upgrading facilities to provide higher-intensity services," the General Accounting Office said in a report in June.

COMMENT:- Citizen's groups believe that the major difficulty in getting any meaningful reform is the vast financial and personnel resources devoted to misleading the public, influencing politicians and controlling the political process. They cannot compete. They also blame politicians who receive campaign contributions and who control the jobs of surveyors and prosecutors for the leniency shown to nursing homes corporations.

Pressing for Cash Troubled Times in Nursing Homes
Albuquerque Journal August 4, 1999, Wednesday

Last of a four-day series

Industry's Lobbyists Urge Washington To Loosen Medicare Purse Strings

WASHINGTON -- As chairman of the Republican National Committee, Haley Barbour supported efforts to slow growth in Medicare spending. And Congress and the Clinton administration did just that in the Balanced Budget Act of 1997.

Now, as a lobbyist for a consortium of nursing-home companies, Barbour advocates that billions of dollars more be pumped into Medicare reimbursements for the industry.
----------------------------
The hiring of Barbour is part of a massive lobbying and public-relations effort by the nursing-home industry to get more Medicare dollars an effort that also includes television and newspaper advertisements across the country.

The nursing-home industry is no stranger to politics.

The industry has spent millions of dollars on lobbyists and contributed millions more to President Clinton, members of Congress and the Democratic and Republican parties.

Representatives of the nursing-home industry have attended White House coffees, and at least one nursing-home owner, Alan Solomont of Massachusetts, has been an overnight guest of the president.
----------------------------
Barbour headed the Republican National Committee from 1993 to 1997. - - - a partner in Barbour, Griffith and Rogers, considered one of Washington's top lobbying firms. - - - Other clients include BellSouth, Philip Morris and the Swiss government, according to a published report.
-------------------------
The lobbyist said his job is to work Republican members of Congress.

Former House leader Vic Fazio, D-Calif., was hired by the same group to take the lead in lobbying Democrats, Barbour said.

Fazio, while a member of Congress, voted for the Balanced Budget Act of 1997.
---------------------------
The Wall Street Journal reported in May that the American Health Care Association -- a trade group that represents nursing-home companies and other long-term care providers -- was mapping out an extensive lobbying effort, including a possible $1.5 million advertising campaign.

Linda Keegan, vice president of the association, said in an interview that she didn't know where The Wall Street Journal got the $1.5 million figure. But she added, "We have to make our case.
------------------------
The ad features a daughter talking about her father, who has suffered a stroke, and his need for nursing-home care.

"My dad, his generation, did everything for us," the daughter says. "And this is their reward? This is the big payoff?"

The TV ad asks viewers to call Congress and the White House and ask that Medicare funding be restored.

An ad similar to that of the TV spot has been published in newspapers. Another newspaper ad urges health-care workers to call their representatives in Congress and the White House.
------------------------
Nursing-home companies have traditionally acted individually and through trade groups to try to influence policy-makers in Washington and at the state level.

For example, the American Health Care Association gave nearly $725,000 to Democratic and Republican candidates for federal office in 1997 and 1998.

The association has lobbyists on staff and spent at least $224,000 on outside lobbyists last year, according to lobbyist data collected by the Center for Responsive Politics and Public Disclosure Inc., both of Washington. Series summary

Healthcare Sector Now The Patient Nursing homes continue to take it on the chin.
High Yield Report August 09, 1999

The sector got almost no relief last week from new regulations from the Clinton Administration that were published in the Federal Register, which didn't help the short-term prospects for the industry or its outstanding securities.

While Medicare payments will be increased marginally for nursing homes - less than 1% - analysts said the industry had optimistically planned for more. Some in the industry had been pinning hope to the idea that the Administration may act without Congress to help alleviate the cash woes stemming from low Medicare payments for the care of sicker patients.
----------------------------
The news was the just the latest in a tough year for health care providers in both the stock and bond markets.

COMMENT:- Note that in spite of the collapse of nursing home chains, HMO's and many hospital companies -and in spite of the extensive evidence of dysfunctional care - financiers still see the gleam of gold in an aging and more vulnerable society. Not for a moment does it occur that this might be the wrong way to go. This next article tells us a great deal about how the marketplace is thinking and about how the care which citizens receive will be controlled. US citizens have much more pain to endure. Can Austrlalia see the pitfalls and avoid falling into the same trap.

HEALTH CARE GETS HOT ON WALL ST.: BIDDING WAR ON FOR SPECIALISTS
Crain's New York Business August 09, 1999
Jon Birger

Russell Ray's biggest deal last year turned out to be a doozy.

Mr. Ray, then head of health care investment banking at BT Alex. Brown, helped negotiate the $1.2 billion sale of Mariner Health Group to Paragon Health Network. The combination was supposed to create a powerhouse in the U.S. nursing home business, but within five months the company's stock had lost three-quarters of its market value.

Today, Mariner is trading at under $1 per share -- which is ironic considering that Mr. Ray's own stock has never been higher.

In May, he and 40 members of his department bolted for Credit Suisse First Boston, and headhunters put the value of Mr. Ray's new contract at an eye-popping $2.5 million a year.
----------------------
Mr. Ray is hardly the only health care banker who has been cashing in despite declining deal flow and a general malaise in the sector.
----------------
The aging of the baby-boom generation will mean bigger markets for pharmaceuticals, medical devices, hospitals and, eventually, nursing homes. The upshot for investment banks should be more initial public offerings, more bond deals and a surge in merger-and-acquisition activity.

Huge incentives

With the talent pool thinning, health care bankers and analysts now have huge incentives to test the job market.
-----------------------
More than a dozen top health care bankers have switched firms since February, sometimes bringing their entire departments with them.
------------------------------
''I've never seen anything like this,'' says Brian Brille, who started the musical chairs when he quit Morgan Stanley Dean Witter in February to join Banc of America Securities.
----------------------------
Rik Kopelan, the headhunter who negotiated the hiring of Salomon's new health care head, believes Wall Street's intense interest in the sector stems as much from supply and demand in the job market as from expectations for future deal flow.
-----------------------------------
However, both Mr. Scura and Charles Stonehill, deputy global head of investment banking at Credit Suisse First Boston, believe health care is poised for a rebound. They say demographic trends were key factors in their firms' respective decisions to invest in health care.

Still, Wall Street may be acting prematurely. Some economists believe it will be at least 20 years before the graying of baby boomers has a major impact upon health care.

COMMENT:- To the market mergers and acquisitions are about making money and are highly desirable activities. It is "unhealthy" when the incidence of M&A'sfalls. That these impersonal monoliths are unable to respond to the needs of those they claim to serve is never a consideration.

Home Healthcare M&A Deal Volume Dips by an Unhealthy 50 Percent
Mergers & Acquisitions Report August 23, 1999

The past 12 months have seen the number of M&A deals in the home health and contract therapy sectors drop by nearly 50%, according to a new study.

The report, to be published this month by Irving Levin Associates, Inc., singles out the Balanced Budget Act of 1997 as the culprit that has put those sectors on their sickbeds.
------------------------
The numbers paint an unhealthy picture. There were 135 M&A transactions in the home healthcare sector in 1997, which dropped to 84 last year. This year has seen only 35 deals through the end of June.

Staffing rules advocated for nursing homes. U.S. should step in to set minimum levels, advocates say
Milwaukee Journal Sentinel September 19, 1999, Sunday Final

Severe staffing shortages and financial problems at nursing homes in Wisconsin and across the country are generating new calls for strong federal intervention in the industry.

The staffing crisis is reviving talk of a national standard mandating the minimum number of workers needed to ensure adequate care. The problem was underscored in Wisconsin by new evidence confirming high turnover of nurses aides.

In Congress, a bipartisan move to restore Medicare funding cuts that lawmakers made to the industry in 1997 gained momentum last week when the for-profit nursing home chain Vencor Inc. filed for bankruptcy.
---------------------------
Speaking in Madison days after Vencor's announcement, one of the country's leading nursing home reform advocates called for a national minimum staffing standard. The idea was discussed but left out of landmark 1987 legislation that aimed to clean up the industry.

"That has come back to haunt residents, families and workers," said Sarah Greene Burger, executive director of the National Citizens' Coalition for Nursing Home Reform. She addressed a Wisconsin Board on Aging conference Thursday.

In Wisconsin, which has some bare-minimum staffing requirements, short-staffing citations against nursing homes have tripled in two years. Serious care problems have been blamed on the labor shortage, and some homes have turned away patients because of lack of nursing staff.
-----------------------------
Meanwhile, the nursing home industry has launched a national TV advertising campaign to pressure Congress into restoring 1997 cuts in Medicare reimbursements to nursing homes. The reductions were part of the Balanced Budget Act of 1997 and were aimed at ensuring Medicare's survival.

COMMENT:- The past and present problems of understaffing and poor care are extensively addressed on the web pages dealing with individual companies. The next article addresses the widely held belief that threatened bankruptcies are likely to make the plight of residents in nursing homes even worse than it has been. Understandably the companies use this as a pressure point in their lobbying for increased funding.

Not-so-golden years Nursing homes face cutbacks, closures; patients face uncertain future
USA TODAY September 30, 1999

The nursing home's roof leaked for so long that a section of ceiling fell into one wing. Towels were in short supply. Fewer nurses' aides worked the day shift.

"I looked at the situation and thought, 'This place is going to go under,' " recalls Anna Spinella, who relied on a Tampa nursing home to care for her frail sister and two other relatives.

After years of reaping generous profits and anticipating more of the same, much of the nursing home industry is now heavily in debt, understaffed and losing money.
--------------------------------
Either way, lenders and stockholders are anxious.

But their anxiety pales next to that of the families of the 1.5 million Americans who live in the nation's 17,000 nursing homes. "If it's your mother, you're more than a little concerned about this," says Don Muse, a health care consultant in Washington.

Cases of nursing homes abruptly closing, leaving aged, disoriented residents uprooted, their health threatened, are not new. But fears are growing that such stories may become more common as the industry's financial troubles deepen.
----------------------------
Bigger problems ahead

Current industry troubles, Springer (from Beverly Enterprises) says, are "a snapshot for what could be a larger problem in the next couple of decades," and a wake-up call to a nation that has no long-term strategy for caring for its elderly.
---------------------------
But industrywide, residents, their families and advocates are concerned.

* Florida has begun an "early warning system," that tracks homes' financial status; special inspection teams are sent to money-losing facilities.

* Texas lawmakers boosted the ceiling on a fund used to take over troubled homes from $ 500,000 to a maximum of $ 10 million. California and several other states have passed laws requiring homes to hire more aides.

* The director of Alabama's Bureau of Health Provider Standards wrote federal officials in June, warning that if a nursing home chain were to close multiple facilities, it would "create problems no state has the authority or resources to adequately address." The letter stressed that, "facilities known to have serious financial problems should be closely monitored."

Few experts expect widespread nursing home closures. But money-strapped companies could scrimp on staffing, food or linen changes.

"These are things that could have a dramatic and direct impact on the quality of life," says George Potaracke, president of the National Association of State Ombudsmen, a group which acts as advocates for nursing home residents.
--------------------------
Chronic staffing problems

Staffing has always been a problem. Even in the best of circumstances, experts say, it is difficult to find qualified employees willing to work a challenging and often low-paying job. Certified nurse assistants, the backbone of the nursing home industry, earn a median hourly wage of $ 7.44, often without benefits.

With bankruptcies possible and a strong economy luring workers to better paying and less emotionally taxing work, vacancies are up.
-------------------------
She's (patient's wife) worried that things could get worse because the home's owner, Vencor, has filed for bankruptcy protection.

"We're terrified the home is going to close," she says. "They kept saying, 'Oh no, we're not going to file for bankruptcy,' " says Olson, who now fears the administrators may be mistaken when they assure her the home won't close.

COMMENT:- Many senior executives have been earning well over $1 million a year. Don't you feel sorry for them? One of the most constant complaints has been the enormous salaries of executives in their board rooms when contrasted with the pay given to those who actually do the work.

HEALTH CARE: EXECUTIVES TAKE HIT WHEN STOCKS PLUNGE
Pensions and Investments October 04, 1999

When a health care company's shares experience a free fall on the stock exchanges, it's not only bad news for shareholders. The company's executives take a hit too.

William M. Mercer has analyzed how executives at 56 investor-owned health care companies fared when the stock market was hammering their companies' shares. The results: pay packages flattened.

COMMENT:- To the market it is all about money and investment. Healthcare is a word associated with more or less profit. It has nothing to do with people and our humanity.

The Wall Street Transcript Publishes Long Term Care Stocks Report
PR Newswire October 21, 1999, Thursday

Four leading analysts examine the Long Term Care & Nursing Home Sector in the latest issue of The Wall Street Transcript (212-952-7433) or http://www.twst.com/10-18-99.htm. In a vital review of this sector for investors and industry professionals, this significant 24-page report features:

1) Long-Term Care Operators - Detailed Analyst Interview with Howard Capek, Executive Director of Warburg Dillon Read. He investigates the effects of the Balanced Budget Act, using capital flow analysis to time a bottom for the sector, investigation outcomes and the outlook for sector investors.

Basically PPS, in my view, made several of the strategies employed by companies somewhat obsolete, Capek states, "And exacerbating that obsolescence was constraining or very high debt levels.

2) Assisted Living Stocks -- Extensive Analyst Interview with Jean Swenson, Director with Credit Suisse First Boston. She investigates the GAO assisted living report, M&A outlook, overbuilt markets, independent living vs. assisted living and the outlook for investors.
-----------------------
There's no doubt that the market sentiment is overwhelmingly negative right now, Swenson states, "What we're suggesting is selective investment in the sector. - - -
------------------------
3) Nursing Homes & Assisted Living -- Detailed Analyst Interview with Andrew Gitkin, Senior Vice President with PaineWebber. He investigates the outlook for legislative relief from the Balanced Budget Act, cost-based reimbursement vs. prospective payment systems (PPS) and sector bankruptcies.
------------------------
Several companies are currently under significant financial distress as a result of ill-timed acquisitions during 1997 and 1998. Several companies, in a bid to increase market share and gain operating efficiencies, embarked upon a two-year long acquisition spree. The result of this was highly leveraged balance sheets. Given the increased leverage, along with lower cash flow as a result of PPS, several publicly traded operators find themselves in desperate situations.
---------------------------
4) Nursing Home Stocks -- Detailed Analyst Interview with John Hindelong, Vice President of Equities Research with Donaldson, Lufkin & Jenrette. He investigates the abysmal sector stock performance, contract therapy exposure and the impact of government investigations.
-----------------------------
There is no quick-fix solution to the problem, Hindelong cautions, "The reimbursement provided for a certain kind of care is just inadequate. The simple solution, if there were one, would be to convince the government officials that there needs to be a change, a massive change in reimbursement levels, and that's just not going to happen anytime soon. But there almost has to be some relief."

COMMENT:- Another example of the way decisions based on economic considerations without reference to the needs of the community results in a distortion of care and increased suffering.

Home Health care was seen as a pot of gold because of Medicare payments. Most of the major corporate for profit nursing home chains expanded into home care.

With the new funding system corporations were in financial difficulty and Home Care no longer made money. The chains were forced to accept massive losses on investments and close down or sell off Home Care divisions at bargain basement prices.

Medicare cuts: Industry taking a big hit; Home health care agencies, hospitals and nursing homes are still reeling
The Atlanta Journal and Constitution October 31, 1999, Sunday, Home Edition

After the weekly nurse visits to her home stopped, Susie Crocklin ran Into medical trouble.

Crocklin, 82, of Bainbridge, is an insulin-dependent diabetic who's also legally blind. At $ 52 a visit, VNA of Southwest Georgia had been coming out weekly to draw Crocklin's blood and pre-fill her insulin syringes.

But under changes by Medicare, the federal health program for Americans 65 and older and the disabled, VNA says it would get just a $ 3 fee for the same job. So the home health care agency stopped making the visits.
----------------------
Her experience is just one result of Medicare budget cuts that have reverberated across the health care industry since the Balanced Budget Act of 1997. Approved with great fanfare in Washington, the BBA was projected to remove about $ 115 billion from the Medicare system, which covers 39 million Americans.
-------------------------------
The carnage includes:

The closing of at least nine home care agencies in Georgia and hundreds nationally. The trade group for home health companies, the Georgia Association of Home Health Agencies, has shut down because of dwindling membership.
----------------------------
The steady deterioration of several publicly traded nursing home companies, with stock prices in single digits and two landing in bankruptcy court. Staggering numbers of layoffs have piled up: Atlanta-based Mariner Post-Acute Network, for example, cut more than 7,000 jobs, and another national chain, Sun HealthCare, eliminated 10,000 positions.
-------------------------
The Health Care Financing Administration, which runs Medicare, denies the BBA has a widespread impact on patient care. HCFA also suggests that anti- fraud initiatives and bad business decisions have contributed to the industry's financial plight.
--------------------------
Two years ago, the home health care industry was a ripe target for budget cutters, says Ken Thorpe, a health policy expert at Emory University. Medicare spending on home health, he says, "was going through the roof." Along with publicized fraud cases in home health, a wave of new agencies had raised concerns about the quality of care, Thorpe adds.
-------------------------------
As a result, says Halamandaris, "Many patients are coming back into (the hospital) through the emergency room, who previously could be cared for in the community."

About 25 percent of Medicare-certified home care agencies have closed since 1998, he says, adding that surviving companies have seen a 40 percent decrease in their revenue.
------------------------
Nursing homes

From an investment standpoint, the nursing home sector has been in a free fall since the BBA.
-------------------------
"Seventy percent of this industry is controlled by mom-and-pop (businesses), " Weaver says. Without the debt load --- and overreliance on ancillary businesses --- smaller operators "aren't experiencing the same degree of financial stress."

NURSING HOMES: THE CHAINS' SINKING STOCKS...

Selected Public Companies:...1/2/98......... Now..........Pct.change

Manor Care. .................................... $ 40................ $ 15.75.... ......-60.9%

Beverly Enterprises. ..................$ 13.06 1/4......$ 3.93 3/4........-69.9%

Centennial HealthCare. ... ............$ 22.50.................$ 2.50............-88.9%

Genesis Health Ventures...............$ 26.50...............$ 1.75............-93.4%

Integrated Health Services. .......$ 32.12 1/2.........28 cents.......... -99.1%

Vencor. ..................................... $ 29.37 1/2*...... 17 cents.......... -99.4%

Mariner Post-Acute Network...... $ 19.00.............. 9 cents........... -99.5%

Sun Healthcare Group............... $ 19.81 1/4.. .......6 cents.. .........-99.7%

*price on April 8, 1998

Source: National Association for Home Care

ELIZABETH LANDT / Staff

COMMENT:- Consider first of all the strata of society and the sort of people who are hired to care for the elderly, people who requires patience and endless understanding - These employees get peanuts for doing so. We are asking a lot of them.

Beverly has one of the worst records for worker safety in the USA but other nursing home chains are not far behind. This article discusses some of these issues. It gives a large number of examples which I have omitted.

The Hazards of Elder Care; Overexertion, Assault Put Aides at High Risk for Injury
The Washington Post October 31, 1999

Yvonne Hawkins's day began in morning quiet, bathing a woman in a big steel tub. Then came chaos.
---------------------

She saved the woman from injury. It was Hawkins's shoulder that absorbed the impact. Her ligaments tore, her muscles bruised. She was away from work for two weeks, but had to return, in pain. There was no one else to support her four children and grandchild.
----------------------
Hawkins, 34, works in private industry's third most hazardous job. A nursing aide's risk of serious injury is higher than that of a coal miner or steel mill worker, according to the Labor Department. The most common cause of on-the-job injury is overexertion: lifting immobile or disabled patients without proper assistance, leading to back problems and other ailments. About 50,000 nursing aides report injuries of this type each year. Assaults by patients are another major risk. Of all serious workplace assaults in private industry during 1997, the most recent year for which statistics are available, nursing aides suffered 27 percent of the attacks, compared with 7 percent for security guards.

Nursing aides work in neglected corners of the country's occupational health system, protected by few regulations or inspection regimes and rarely organized in unions.
------------------
But OSHA's proposals (to protect nurses) face resistance from Congress and the nursing home industry, and they are entangled in a larger controversy over how to control the emerging boom in workplace injuries caused by repetitive lifting and other straining motions.

Oversight problems are compounded by the marginal economic status of nursing aides and their high turnover rate on the job. The country's more than 1.3 million nursing aides constitute a white-shoe ghetto of women and blacks, many of them immigrants. According to the Labor Department, 34 percent of nursing aides are black, as opposed to 12 percent of the population. Nursing aides' average hourly wages are $ 6.94. Given such low pay and the demeaning and sometimes dangerous work involved, it is hardly surprising that every year, 93 percent of those who enter the profession leave it.

Labor union activists argue that the biggest, preventable cause of on-the-job injuries incurred by nursing aides is chronic understaffing in the nursing home industry. Hawkins, for example, is responsible for the care of 15 seriously ill residents. Nursing home reform advocates say the federal government should mandate staffing ratios, allocating no more than five residents per nursing aide. So far, 18 states have adopted staffing ratios; others are considering them.

Nursing home owners, while generally opposing ratios, say that changes in Medicaid and Medicare policies could help ease the burden on aides. They specifically want Medicaid to earmark more money for nursing aide care. But as the federal health care system seeks to contain spiraling medical costs, cutbacks in Medicare and Medicaid reimbursement policies continue to crimp support for relatively unskilled jobs such as nursing aides.

(Note that when months later the states did allocate more money to chains to pay nurses, the money often did not get into pay packets)

All this leaves aides caught, each day they go to work, between the risk of injury and the need to deliver personal, dedicated care to patients who are often helpless and needy. Nursing homes can be difficult, even shocking places to work. Some patients lose control of their physical functions. Others can become irrational, lashing out at those around them without even being aware of their actions. Yet at the same time, many patients are fully aware and in control, struggling to hold on to dignity and morale, in need of care that is careful, gentle, respectful.
------------------------
Freeman doesn't even know the causes of her patients' symptoms at the Mariner Health of Overlea nursing home in Baltimore, a corporate chain-run facility with about 180 beds. All she knows is they are incontinent and immobile. They live in their beds, most on feeding tubes, most unable to speak or hear. Those who can express themselves shift between infantile pliancy and furious frustration.
---------------------------
OSHA hopes to publish next month its proposal for a workplace standard for "ergonomics"--the science of matching a job's physical requirements to the physical capabilities of workers. OSHA hopes to begin public hearings in February. Labor unions have spurred on OSHA, arguing that the agency has been dragging its feet during many years of study and review.

COMMENT:- This is a very long article examining very poor standards of care in assisted living and nursing home facilities in Ohio. It compares for profit with not for profit and describes the failure of the regulatory system.

FRAIL ELDERLY AT MERCY OF SYSTEM :: Lack of affordable choices, low staffing lead complaints
SERIES: WHO WILL CARE FOR THEM?
Dayton Daily News December 5, 1999

There, she could move about as she pleased, decorate her room with her own furnishings, bathe herself, eat meals when she felt like it and find fellow residents who could talk about one of her passions: the Cincinnati Reds. (NOTE:- THIS WAS AN ASSISTED LIVING FACILITY)

Then her money ran out.

Blankenship was transferred to Wood Glen's nursing home unit for severely demented and often combative patients - a place she insisted she didn't belong, but one where the state would pay her bills. Within six months, a male resident attacked her in her room, threw her against a wall and broke at least three of her ribs.
-------------------------
She died, at age 81, at 6:40 a.m. July 5, 1993.
-----------------------------
Grace Blankenship died because Ohio's $ 2 billion publicly funded system of caring for the elderly is itself seriously ill.

An eight-month Dayton Daily News examination found the state's frailest citizens are at the mercy of a system that gives companies few incentives to maintain quality homes and limits choices primarily to those who can afford them.

The Daily News analyzed more than 100,000 Ohio Department of Health records on complaints, inspections and enforcement actions over a five-year period, examined regulatory systems in three states and conducted more than 200 interviews with government officials, industry representatives, consumer advocates, caregivers and patients and their families. Among the findings:
------------------------
Nursing homes that neglect or abuse patients face few penalties, even if they violate standards repeatedly.
------------------------
The nursing home industry is increasingly dominated by for-profit companies that typically have more health and safety violations and fewer staff members per resident than non-profits.

The most recent Ohio Department of Health data available show that for-profit homes in 1995 and 1996 averaged more than twice as many serious violations than non-profits, and they made up a disproportionate number of the state's worst-performing nursing homes.
-----------------------------
The number of inspectors who monitor Ohio's facilities for the aged has dropped by a third since 1995, and overworked inspectors are writing fewer citations.

Staffing problems have reached epidemic levels in the elder care industry.
-----------------------
The system of caring for the aged couldn't be failing at a worse time. Seniors 65 and older will soon become the fastest-growing age group in Ohio, doubling in size by 2030. And the frailest and most vulnerable among them - those 85 and older - will quadruple in that time.
---------------------------
Nursing home industry representatives and the state officials who regulate the industry defended the quality of care, insisting there is plenty of punishment in Ohio's enforcement system.

Some even said the system focuses too much on penalties and that regulators should work together with homes to improve quality.

Tougher enforcement hurts nursing home quality by making the homes look bad, and thus making it harder to recruit and retain good employees, said Peter Van Runkle, spokesman for Ohio Health Care Association, the state's largest nursing home trade group representing some 760 institutions.
---------------------------------
But like cruise ships, they (Assisted Living) aren't available to everybody. Assisted living costs anywhere from $ 2,500 to $ 4,000 a month, and government programs in Ohio won't cover any of it. That puts assisted living out of reach for most Ohioans. About 36 percent of those 75 and older are either poor or "near poor," according to the Ohio Department of Aging.

Assisted living facilities also are virtually unregulated. Anyone can pay to enter an assisted living center without first undergoing an independent assessment to determine if the facility can properly care for them. The state also lacks licensing standards and staffing requirements specific to assisted living.
-----------------------------
The staffing disparity may be hurting patient care. The Daily News analysis found for-profit homes averaged twice as many serious health and safety violations than non-profits, and they are nearly four times as likely to have three or more serious violations.

"There are a lot more violations in the for-profit homes," said Charlene Harrington, a nationally known researcher at the University of California at San Francisco who has examined national data on nursing homes over the past five years.

"They're trying to cut corners too much."
---------------------------
A nurse who quit working at a for-profit nursing home in Kettering this year said poor staffing levels there left as many as 43 patients in the care of a single nurse and nurse's aide.

"I've seen patients lying in urine overnight and stuck in wet diapers for most of the day," she said. "And many of them are not getting proper nutrition and hydration. You can tell just by looking at them - their skin is dry and flaky and their eyes are sunken."

For the frail elderly, dehydration can kill.
------------------------------
'NOTHING WAS EVER DONE'

Under federal regulations, the Ohio Department of Health can use three main penalties to enforce standards in nursing homes: deny government payments for new patients, impose fines or terminate a home's eligibility for Medicare and Medicaid payments, effectively closing the facility.

However, in nearly all cases, homes can escape penalties if they correct their problems within an allotted period of time, usually 50 days.

Critics say that's the crux of the problem. "It's no enforcement system at all if all you're doing is saying, 'Gee, do better next time, guys,' ' said Toby Edelman of the National Senior Law Center, a non-profit advocacy group in Washington, D.C.
----------------------------
Weak enforcement leads to a yo-yo pattern among bad homes.

A recent national study by the General Accounting Office, the investigative arm of Congress, found that although most homes corrected their problems to avoid sanctions, nearly half - 40 percent - again showed serious violations within three years.

COMMENT:- This is another very long article examining the failures of regulation and enforcement. What has happened is extensively documented and many examples are given. I have included extracts from the regulators and from the corporations. They obviously see things very differently. The regulators have come to absorb the culture and patterns of thought used by the credible corporations,

Regulators and inspectors would be out of step if they failed to do so. If they rocked the boat their political masters would listen to their credible corporate lobbyists and get rid of them.

We saw a very good example of this in Australia recently. Dr Wooldridge got rid of regulators whom the pharmaceutical industry did not like and appointed a lobbyist for the industry to the regulatory body. An Australian government department official recently indicated that if you want people of quality you have no choice but to look to the corporate sector.

PENALTIES FEW FOR POOR CARE ::: Nursing homes usually prepare for 'the game'
SERIES: Who Will Care For Them?
Dayton Daily News December 6, 1999, Monday, CITY EDITION

When state inspectors walked into the Bethany Lutheran Village nursing home in October, they didn't hear complaints about staffing problems. They didn't find any incident reports in charts. And if they learned anything they didn't know, it wasn't because some staff member volunteered the information.

That's because at Bethany, officials have made a science out of preparing for the annual visit from the Ohio Department of Health. Before the inspectors showed up this fall, Bethany administrators distributed a copy of a "surveyor arrival punch list" to the Centerville nursing home's weekend and evening staff members.

Among the suggestions:

* "Remove any accident/incident reports from charts and place under door of unit manager's office."

* "Don't talk about being 'short-staffed' or any staffing issues."

* "Don't volunteer anything unless asked specifically."

* "If you see something is wrong, don't be afraid to correct immediately ... try to do it without calling attention to it if the surveyor is with you."
-----------------------------
Nursing homes are seldom surprised by "surprise" inspections. State health department inspection records show that just 15 percent of state surveys fall within a year of the previous visit, and 60 percent occur 14 to 15 months after the last inspection. "It's a no-brainer. Homes can usually predict within a few weeks of their next annual survey," said Debby Allen, spokeswoman for the Ohio Association of Regional Long-Term Care Ombudsmen, an umbrella group for agencies that investigate nursing home complaints.

Federal funding cutbacks and state hiring freezes have slashed the number of inspectors.
-------------------------------
The enforcement system is so riddled with waivers, appeals and correction periods that most homes cited for providing bad care get off the hook. Three-quarters of all enforcement actions result in no penalties, -----
-------------------------------
The industry has a revolving door with the agencies that regulate it. The top legal counsels to both of Ohio's trade associations of for-profit nursing homes are former state regulatory officials.
--------------------------------
"When (state employees) go to the other side, which happens all the time, their job is to tell providers how to stay within the law and, at the same time, how to get around the law - 'legally,'
------------------------------
"If you looked at any other industry, I think you would find the same thing," he (Industry spokesman) said. "Where do you find the people who have the expertise that you need?"

State health department officials also said Ohio is a national leader in collecting fines.

"We feel we're pretty aggressive in our enforcement scheme in Ohio," said Alan Curtis, chief of the health department's bureau of regulatory compliance.

Nursing Home Operators Could Get Booster Shot
Bank Loan Report December 13, 1999

For the ailing long-term health care sector, relief may be on the way - sort of.

A recently approved adjustment to the Medicare interim payment system will give nursing home operators approximately $400 million in additional reimbursements for a limited time.
---------------------
Unfortunately, for those in-patient care facilities crippled by huge bank debts, the additional revenues are probably too little, too late.

COMMENT:- Even in the USA some have major reservations about the impact of the share market on health and aged care. Some states like New York and Rhode Island have wisely barred publicly traded companies from providing care.

Change and Crisis in Nursing Homes
The New York Times December 13, 1999, Monday

Homes for the aged in the 19th century were often founded by churches and towns as small, not-for-profit institutions. The trend in the last decades, however, has been toward ownership by large, publicly traded, for-profit chains. Wary of how the profit motive can compete with the cost of giving good care, New York State blocks publicly traded companies from operating nursing homes in the state.
-----------------------
Five of the largest chains, with almost 20 percent of all the nursing home beds in the country, are now operating at a loss. Another big chain, Beverly Enterprises, recently agreed to reimburse the federal government for more than $170 million in Medicare billings after a federal audit.
-----------------------
At the same time one part of the federal government was tightening its payment policies, another began cracking down on recurrent evidence of abuse and neglect of residents in nursing homes, much of which has occurred in chains.
------------------------
Only recently, in such states as California, have efforts begun to appropriate dollars targeted to raise the wages of the nurses' aides who give residents most of their care. In California, that money was included in the most comprehensive nursing reforms passed by the legislature in 20 years, but the bill was vetoed in October by Gov. Gray Davis.

(Note that this bill was passed as a result of a public plebiscite. Proponents believe that it was vetoed because of the close relationships with, and campaign contributions from nursing home owners)

The changes and crises in the nursing home industry are occurring without national debate and the participation of those most affected, the homes' 1.6 million residents. They do not, for the most part, vote. They often cannot walk or talk.

As the handsome new assisted living facilities that have sprung up everywhere in this decade have attracted the youngest, most vigorous and affluent of the elderly, nursing homes have become filled with the poorest, sickest and neediest. The change has come about very quickly.
---------------------------
Assisted living facilities have been popular with developers because they are not burdened by the licensing requirements or regulations that govern nursing homes, and the elderly are glad for an alternative.

Portrait of an industry in turmoil ; Survey paints picture of doom and gloom for many post-acute-care companies
Modern Healthcare December 20, 1999

Nineteen ninety-nine in retrospect proved to be one of the most devastating years for the entire post-acute-care industry," says Andrew Gitkin, a New York-based healthcare analyst for PaineWebber.

"Just when you thought you got the worst of it behind you, it always seemed to get worse," he says.
--------------------------------
This year an unprecedented number of large nursing home chains have sought protection in bankruptcy court.
---------------------------------
Some 2,500 home health agencies, many of them hospital-based, have closed their doors since the interim payment system began.

But the changes of 1999, however dramatic, didn't come suddenly.
-----------------------
Survey (undertaken by Modern Healthcare) respondents include many of the industry's largest players. What emerges is a map of where the industry stood as it headed into 1999.
-------------------------------
Despite these limitations, the survey does provide a snapshot of an industry already beginning a decline that would only steepen in 1999.
-------------------------
Home health revenues shrank, reflecting lower Medicare payments under the interim payment system, which went into effect in October 1997.

Revenues for other sectors rose, with the largest gain in assisted living. Assisted-living growth is independent of Medicare changes, because the industry relies almost entirely on private-pay residents.
-------------------------------
Reversal of fortune. Survey responses showed that the large publicly traded nursing home chains experienced the largest downturn in financial fortunes.

For the 12 publicly traded respondents, the average profit of $37.3 million per company in 1997 fell to an average loss of $147.5 million per company in 1998.

Many of these companies had borrowed heavily to fund expansion, counting on Medicare payments to keep cash flow strong. When Medicare payments fell off, some could no longer make good on their debt.
------------------------------
Not-for-profits, by contrast, made gains, with an average 10% growth in net income, to $8 million from $7.3 million.

Some not-for-profits did report improved Medicare rates under the PPS, as did some private companies.
-----------------------------
But many not-for-profits, including American Baptist, traditionally take patients with fewer medical needs who are less likely to have Medicare-covered stays, so even a steep drop in Medicare payments wouldn't necessarily appear in the bottom line.
---------------------------
The post-acute-care industry will receive some $2.7 billion in givebacks over five years from the fiscal 2000 budget, which rolled back Medicare policies for all healthcare providers.
----------------------------
Medicare will now pay separately for several extremely costly services and items, including ambulance services, chemotherapy and prosthetics.

The legislation was a turning point for the industry, Gitkin says, because it marked the government's admission that it had gone too far in cutting payments to providers of healthcare, including post-acute care.

Long-Term Health Despair
The Motley Fool (Dec. 21, 1999)
http://www.fool.com/
Brian Graney (TMF Panic)

(Dec. 21, 1999) --For the second year in a row, it was a tough year to be a publicly traded long-term healthcare provider. - - - - - The one-two punch of Medicare reimbursement cutbacks and governmental fraud investigations sent the shares of nursing home operators crashing down as earnings dried up and investors ran away from the business.

The destruction has been startling, as the following chart shows:

Company......................................... 52-Week High ...........12/10/99 .........Price % Decline

Beverly Enterprises (NYSE: BEV) ...$8 3/16 ....................$3 7/8 ...................-52%

Manor Care (NYSE: HCR) ..................$33 1/2 ...................$16 1/16 ...............-52%

Genesis Health Ventures (NYSE: GHV) .. $9 1/2 .................$2 3/8 ...................-75%

Centennial HealthCare (Nasdaq: CTEN)..$15 9/16 .............$2 15/16 .............. -81%

Integrated Health (NYSE: IHS) ............. $14 11/16 ...........$9/32 ................... -98%

Vencor (OTC BB: VCRI) .......................... $5 ....................... $0.085 ................. -98%

Mariner Post-Acute (OTC BB: MPAN).. $6 3/8 ................. $0.09 ................... -99%

Sun Healthcare (OTC BB: SHGE) ............$6 7/8 ................. $0.04 .................. -99%

For the most part, the companies that find themselves in bankruptcy proceedings and trading in the pink sheets can only blame the government to a certain extent for their inglorious fates.
---------------------------
Go-go growth investors piled on as the companies shifted gears into all-out consolidation mode in the middle of the decade, a strategy that produced not only higher earnings but enormously leveraged balance sheets in the process. Between 1995 and 1998, the buying spree effectively dwindled the number of publicly traded nursing home operators from 28 to 10.

The music stopped in 1997, - - -

Suddenly, nursing homes that had grown accustomed to asking for -- and receiving -- federal reimbursements of $500 or more per patient, per day in extreme cases to care for seriously ill patients were left in the lurch.
------------------------
Meanwhile, the government further put the screws to the industry by opening up Medicare billing fraud probes at several operators, including Beverly, Centennial, and Vencor, scaring away even more investors.

What happened next could quite possibly be termed as the low-point of the modern American healthcare system. Vencor started to evict Medicaid patients from about a dozen of its facilities to make room for patients with higher-paying forms of health coverage, sparking a public outcry and the speedy passage of legislation banning the practice. Sun Healthcare laid off 10,000 workers in short order, sending a flood of skilled therapists scrambling for new jobs at the most inopportune time. Elsewhere, Medicare's $1,500 per patient cap on rehabilitation therapies was producing unfortunate instances where nursing home seniors were forced to choose between physical therapy or speech pathology, a dilemma which came to be described as "walk or talk."
--------------------------------
Nursing homes are not like badly managed sub-prime lenders or faddish theme restaurant operators, which can undergo massive short-term, industry-wide re-valuations in the marketplace with limited effect on the country's societal framework. Along with their assisted care facility cousins, nursing homes are increasingly looked upon to provide an essential and gargantuan day-to-day service to the nation's elderly citizenry, a slice of the population whose ranks are about to swell substantially as the first batch of Baby Boomers start to hit retirement age in ten years or so.

If anything, the recent history of the long-term care industry underscores the true uneconomic nature of the current American healthcare system and the need for reform if for-profit medical care is ever to work as a viable, long-term business. Some observers have suggested that the U.S. healthcare system at the close of this century is in a state of "paradigm stall," where anyone with any sense at all understands that the current model doesn't work economically but no one seems to know what to do about it.

---

---

CLICK HERE TO GO TO PAGE II

Page II contains extracts from articles published in 2000 and 2001 

CLICK HERE TO GO TO UPDATE PAGE 2003

This page contains extracts from good articles published between June 2001 and August 2003

---

LINKS TO MAPS
Central Map ..... Initial Map ..... USA Map ..... Australian Map ..... International Map ..... Corporate Practices Map..... (to print)

---

Path
  Home Page ..... US Corporate page ..... Aged Care ..... Overview

---

Reference pages
1996-1999 ..... 2000-June 2001..... 2001-2003

---

The corporate chains
Sun Healthcare ... Beverly ... Vencor/Kindred ... IHS ... Genesis ...
Mariner ... Extendicare ... NHC ... Centennial ... Guardian

---

This page created March 2001 by Michael Wynne
Updted and divided into two pages Aug 2001