For-Profit Nursing Homes' Pleas For Government Money Brings Scrutiny For-profit nursing homes say the coronavirus has left them almost broke and needing financial help from the government. But critics say their business model is the problem.
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For-Profit Nursing Homes' Pleas For Government Money Brings Scrutiny

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For-Profit Nursing Homes' Pleas For Government Money Brings Scrutiny

For-Profit Nursing Homes' Pleas For Government Money Brings Scrutiny

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STEVE INSKEEP, HOST:

Why did the pandemic kill so many people in nursing homes in the early months? One reason is obvious - coronavirus is more deadly for seniors. Another reason is now coming into focus. Recent studies suggest that for-profit facilities endangered residents by running their operations on a shoestring. Instead of spending on care, they sent money to owners and investors. Here's NPR's Ina Jaffe.

INA JAFFE, BYLINE: The chain of nursing homes called Aperion Care isn't the largest or the most famous. It owns 45 facilities, mostly in Illinois and Indiana. It's worth looking at not because it's special but because it's typical of the way many for-profit nursing homes operate. For starters, staffing is cut to the bone, says one nurse's aide.

UNIDENTIFIED NURSE'S AIDE: One of our floors has 65 people, and they expect three or four of us to do that on our own. You know, we need at least six, maybe seven people.

JAFFE: We're not using her name because she's afraid she'll be fired for talking to the media. She wants to provide good care for the residents, but she says it's a struggle, like the time she arrived for her morning shift and found that only one nurse's aide had been on her floor overnight.

UNIDENTIFIED NURSE'S AIDE: No one's changed. No one's ready for breakfast. I have a good two hours to get this entire floor up. You're going to think, how do you have enough time to do that? Someone's not getting care. It's impossible.

JAFFE: The federal government agrees. The agency that oversees nursing homes gives Aperion Care low marks for nurse staffing. In fact, the agency gives them low marks overall. Out of a possible top rating of five stars, most Aperion Care homes get just one or two. Charlene Harrington, professor emerita of social behavioral sciences at the University of California, San Francisco, says 70% of nursing homes are for-profit and low staffing is common.

CHARLENE HARRINGTON: They're trying to make money. And the main way to make money is to keep the labor costs low.

JAFFE: Aperion Care's general counsel, Fred Frankel, declined a recorded interview. But in a phone conversation, he justified the chain's low ratings by saying that they've taken over some troubled facilities that were in danger of closing. He also argued that the government's star ratings don't always reflect the quality of a nursing home. But Charlene Harrington says that low ratings, especially for nurse staffing, are a direct result of the for-profit business model.

HARRINGTON: It's a deliberate strategy as part of making money, and that means that they're leaving their residents unprotected.

JAFFE: The pandemic shows that this strategy comes at a cost. Studies looking at thousands of nursing homes across the country have connected for-profit ownership and low nurse staffing to increased coronavirus infections. The nursing home industry rejects those studies and promotes earlier research that concluded that outbreaks are caused by community spread of COVID-19 outside of nursing homes. The experience of Aperion Care suggests all of those studies could be right. Records from Illinois show that some of the chain's rural facilities have had few, if any, cases of COVID-19. But some Aperion Care homes that did have outbreaks reported almost as many infections as they had beds and dozens of deaths.

MARK PARKINSON: We haven't faced a virus like this before.

JAFFE: Says Mark Parkinson, president and CEO of the American Health Care Association, which mostly represents for-profit nursing homes. He says that in the beginning, no one understood that people could be positive for the virus without showing symptoms.

PARKINSON: The system didn't know how to react to it. And unfortunately, mistakes were made.

JAFFE: And when the crisis hit, he says, nursing homes didn't have the reserves to deal with it.

PARKINSON: Nursing homes, for the most part across the country, were underfunded coming into the pandemic.

JAFFE: Parkinson means underfunded by the government, especially Medicaid. In fact, most nursing home revenue comes from the taxpayers, through Medicaid and Medicare. But it's also the nursing home owners themselves who keep the operations lean. You can see that in financial documents that Aperion Care filed with the state of Illinois, says nursing home real estate appraiser Jim Tellatin. He reviewed some of the records at NPR's request.

JIM TELLATIN: Aperion has different entities that own the real estate and the operating companies. And those two entities have essentially the same individual owners.

JAFFE: Tellatin says that some of those nursing homes are barely breaking even. But documents show that the owners could be doing just fine. They've paid themselves hundreds of thousands to millions of dollars in annual rents for each building. Documents also show that the owners have stakes in companies that the nursing homes do business with, from consulting to insurance to therapy to laundry. The money is kept in the family, so to speak. The American Health Care Association's Mark Parkinson says this arrangement is common.

PARKINSON: They do that for liability reasons. They want to separate the real estate. They want to separate the operation because there are so many lawsuits against nursing homes that if you have everything combined, you put the entire operation at risk.

JAFFE: So if someone sues the nursing home, there won't be much there to win. The money is in the real estate, says Jim Tellatin.

TELLATIN: The real wealth in this industry is created through real estate and not so much the operations. You need the operations to generate increased value to your real estate and other assets of the business.

JAFFE: This system has worked out well for the industry, says Dr. Michael Wasserman, president of the California Association of Long Term Care Medicine.

MICHAEL WASSERMAN: The operations have a very low margin. And it allows the industry to complain that they need more money.

JAFFE: But now the system is showing cracks. Occupancy rates are down, so there are fewer residents to bring in money. At the same time, the costs for testing and protective equipment have risen. In fact, the American Health Care Association warns that only about a quarter of their members can last more than a year without help from the government. Nursing homes have already received about $7.5 billion from federal coronavirus relief legislation. Now the industry is asking for another 100 billion for all health care providers, with a significant amount going to nursing homes. Michael Wasserman wants to know what they'll do with the money if they get it.

WASSERMAN: What percentage of that funding is actually finding its way to direct patient care, to the front-line staff? And what percentage has ultimately, for lack of a better word, literally been siphoned off to real estate?

JAFFE: Nursing home operations may be on the brink because of COVID-19, says Wasserman. But the real estate they occupy is immune from the virus.

Ina Jaffe, NPR News.

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