Feb 26, 2008

Senior citizen advocates say nursing home takeover by Carlyle Group is troublesome

LANSING - The controversy surrounding the acquisition of HCR Manor, a large operator of nursing homes and assisted living facilities, by the Carlyle Group, one of the world's largest private equity firms, is shaping up as the classic tension between profit and the best care possible.

The Michigan House of Representatives' Health Policy Committee and the Senior Health, Security and Retirement Committee held a joint hearing on the situation Thursday, and the age-old balance between profit versus the common good was on prominent display.

“The question is how do we maintain good, quality care for our seniors in this situation,” said Rep. Robert Jones, D-Kalamazoo, the chair of the senior health committee. “We are also very interested in maintaining transparency in this process.”

Some Republicans on the committee were upset that a for-profit company was being cast in a negative light just because it is trying to make a profit for investors.

“It’s hard not to be aggravated because this entire conversation is about profit,” said Rep. Kevin Green, R-Wyoming. “There is nothing wrong with making a profit because making a profit is what made this country great and fueled innovation and efficiency.”

Health Policy Chair Rep. Kathy Angerer, D-Dundee, said it’s not wrong to profit from providing health care, but that profit should never come at the cost of cutting quality health care.

“I am not against anyone making a reasonable profit, but not at the expense of the health care and the well-being of our senior citizens,” she said.

Sarah Slocum, the Michigan Long-Term Care Ombudsman, testified that the main problem she sees is that Carlyle Group is not a health care provider, and its main goal is to return a profit to investors.

“Their mission is to produce a profit for investors, not to maintain quality,” she said. “There are opportunities to squeeze certain areas to make more of a profit.”

Slocum said 75 percent of the costs in a nursing home are medical expenses paid for by Medicaid but the other 25 percent are what can be squeezed and cut to increase profit. Those include staffing costs, linens, vendors, supplies and food. She said the investment group could just put the word out to operators to increase profits and cut costs, not caring how that’s done.

Toledo, Ohio-based HCR Manor operates more than 500 nursing and rehabilitation centers, assisted living facilities, outpatient rehabilitation clinics, and hospice and home health care agencies all over the country employing some 60,000 people. The ownership transfer of HCR Manor has already taken place.

Rep. Fulton Sheen, R-Plainwell, said he is a licensed financial planner, and investment groups like Carlyle Group buy companies in varied fields that are already profitable and well-run. He said the management team that operates the nursing homes will stay in place, and more government regulation will only cause more problems and increase costs.

“For 20 years I have watched and read about what Carlyle has done,” he said. “There is a lot of misinformation about what the Carlyle Group does.”

But Slocum said it is because the people in nursing homes are so vulnerable that there are such strict regulations governing them.

“I think the regulations are hard to meet, and that’s the way it should be,” she said. “The regulations are there for a reason.”

Mark Cody, an attorney with Michigan Protection and Advocacy Service, a nonprofit group that protects the human and legal rights of people with disabilities, said the problem with large corporations and investment groups owning nursing homes is it’s hard to find out who is responsible or who actually owns it when a problem occurs, and he urged the committees to enact strict transparency rules.

“I recently looked at booking hotels online for a family vacation,” he said. “I found more information about the hotels I was considering than a nursing home I was considering putting my mother-in-law in.”

Neither committee took any action, and more hearings will be held on the transfer.

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