Dec 3, 2007
The Carlyle Group, a private equity firm, just spent six billion dollars to buy HCR-Manor Care.
Manor Care has 550 long-term care and assisted living facilities, the most of any chain in the country. Older people, from those living independently to those needing round-the-clock care, live in these facilities.
The Manor Care deal with Carlyle is not the first of its kind. Many health-care facilities have become part of chains run for profit. In 2000, Warburg Pincus, a big financial firm, spent 65 million dollars to buy a nursing home chain. In 2006, the financial arm of General Electric spent 1.8 billion dollars to buy a nursing home chain from Formation Capital.
The elderly already are vulnerable to problems in nursing homes and assisted-living facilities, such as mistakes in medicine and too few aides or nurses to care for them.
But a recent study of reports made to the Centers for Medicare and Medicaid Services shows that care for the elderly gets worse when investment firms take over. In 12 categories tracked by the Center, nursing homes or long-term care facilities under private ownership did not perform as well as those under public ownership. For example, sometimes there were staff cuts, below legal requirements. The New York Times article said 60% of homes bought by private equity firms had cut the number of registered nurses working in these facilities.
Private companies often split apart the real estate property of these nursing homes from the management. In some cases, they spread the liability among as many as 15 different companies or subsidiaries. So whatever happens at the facilities, the firms cannot really be sued. Carlyle Group has already proposed such a plan for Manor Care.
Companies like Carlyle bring not the slightest experience to the job, except for great experience in making profit. To show what they are about, Carlyle’s offer to buy Manor Care will provide its chief executive with at least 115 million dollars when the deal is complete.
As for the elderly, they continue to pay thousands of dollars per month, providing Manor Care with profits of 167 million dollars in 2006.
In other words, when health care is provided for profit, anything up to and including death can happen to our elderly parents and grandparents.