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"Lawmakers Question Private– Equity Impact On Nursing Homes"

Original location:
Washington Post

By Cecilia Kang
Washington Post Staff Writer
Friday, November 16, 2007

At two Capitol Hill hearings yesterday, legislators highlighted the need for greater transparency in nursing–home operations and called for a government probe into the quality of care given at facilities owned by private–equity firms.

Experts presented studies that showed more incidents at private–equity–owned chains and lower staffing ratios compared to nonprofit and publicly owned facilities.

The hearings come as the Carlyle Group winds up its $6.3 billion takeover this month of Manor Care, the nation’s largest nursing home chain. The takeover has been challenged by some long–term–care advocates and a labor union trying to organize the Toledo company’s 60,000 employees.

Rep. Pete Stark (D–Calif.), chairman of the House Ways and Means subcommittee on health, called for the Government Accountability Office to look into the ownership structures of nursing homes and how they affect transparency, staffing levels and quality of care.

"I am concerned about quality issues and lack of accountability, particularly as more and more beneficiaries are now living in private–equity–owned homes. While we must not prejudge anything, these changes provide ample reason for us to reinitiate closer oversight of this industry to make sure that interests of beneficiaries are protected," Stark said at the hearing.

A chief complaint about privately owned nursing–home chains is that they often have complicated ownership structures with multiple stakeholders, which can obscure lines of ownership and accountability.

Manor Care has filed documents with state regulators that show it intends to reorganize into two categories, real estate and operations, after its takeover by Carlyle and form several corporations to oversee various parts of the business.

Carlyle has promised in letters to state legislators to provide quality care to patients and educate and train staff. Manor Care said the new organization would make it the sole owner of all the nursing homes in its chain.

"I think main point is that Manor Care is a leader in providing quality services for its patients now, and under Carlyle ownership will continue to be," David Marchick, director of regulatory affairs at Carlyle, said in a telephone interview after the hearings.

No nursing–home–chain owners were represented at the hearings.

In a testimony before both the Ways and Means subcommittee and a Senate panel, the Service Employees International Union presented its analysis of Centers for Medicare and Medicaid Services data on two major nursing home chains –– Mariner and Beverly –– which were bought by private–equity firms. Its analysis showed a 29.4 percent increase in violations of federal resident–care standards during the most recent inspections since Mariner and Beverly were acquired by National Senior Care, a private investment firm, the SEIU said.

In addition, Charlene Harrington, a professor at the School of Nursing at the University of California at San Francisco, presented results from her 18–month study beginning in 2006 of 105 nursing homes owned by a private–equity firm. The report showed that the number of registered nurses at those facilities dropped by 8 percent and that the total number of deficiencies that caused minimal harm, harm or immediate jeopardy to patients doubled to more than 1,000.

"Private–equity firms do not have the expertise and experience to manage complex nursing home organizations," Harrington said, adding "these firms appear likely to cut staffing to increase their profits."

At a hearing before the Senate Special Committee on Aging, Sens. Herb Kohl (D–Wis.) and Charles E. Grassley (R–Iowa) recommended legislation that would give consumers access to better and more timely information on the results of government inspections, number of staff and ownership. "Often the only way to ensure the improvement of any entity is to bring its failings to light," Kohl said.