As the nursing home industry tried to digest a sweeping set of industry reforms proposed by the Biden administration on Monday, a Capitol Hill lawmaker got in on the action by proposing a bill to force private equity firms to disclose their ownership in facilities.
Amid all these developments, one thing has become evident: the rhetoric may not match reality.
It’s a sentiment articulated by American Health Care Association President and CEO Mark Parkinson, who discussed President Joe Biden’s State of the Union Address and his nursing home plans at a virtual press conference on Wednesday.
Parkinson said the idea that quality in nursing homes has gotten worse—which underpins the White House’s reform package—could not be further from the truth.
“We fell back slightly but the overwhelming objective data, not the anecdotes and not the adjectives, but the real data shows that we have made significant improvements in nursing homes over the last five years and even the last 10 and 15,” he said.
And that hasn’t happened because of additional government regulation, fines or penalties, he added.
Centers for Medicare & Medicaid Services (CMS) Administrator Chiquita Brooks-LaSure said in a statement Wednesday that the administration’s proposed reform was informed by meetings with industry experts, nursing home workers, resident advocates as well as residents and their family members.
However, nursing home industry leaders are objecting to several elements of the proposal. The attacks on private equity ownership are drawing pushback, and a call for CMS to set nationwide minimum staffing requirements is being roundly criticized by voices in the industry.
Evangelical Lutheran Good Samaritan Society CEO Nathan Schema called the timing of the proposal “tone deaf.”
“The workforce shortage and workforce crisis within our industry is palpable. We’re on fire right now,” he told Skilled Nursing News.
Private equity under fire
Biden specifically called out Wall Street firms taking over more nursing homes in his State of the Union address, and yet many in the space don’t see that playing out.
On the same day Biden gave his address to Congress and the American people, Congresswoman Pramila Jayapal of Washington introduced the Healthcare Ownership Transparency Act – a bill that would require private equity firms to disclose ownership stakes in nursing homes and other health care facilities.
Rep. Jayapal said in a news release that the legislation would bring “much-needed transparency” to senior care and health care ownership.
The news release announcing the legislation cites a National Bureau of Economic Research working paper published in February 2021, that was also cited by the White House in its reform fact sheet.
The paper found that over 12 years private equity ownership increased excess resident mortality by 10% – that’s an additional 20,150 deaths associated with private equity ownership, an increase in prescription of antipsychotic drugs by 50%, and decreased direct care staff hours by 3%.
The proposed bill would also require a study into the effects of private equity ownership and health care consolidation on patient care and outcomes, according to the news release.
It remains to be seen if this bill is associated with the White House’s efforts, but it strikes a similar tone. Rep. Jayapal’s office did not reply to inquiries from Skilled Nursing News on Wednesday.
Despite the strong rhetoric and legislative action coming out of the nation’s capital, private equity ownership of nursing homes actually is not substantial. Of the roughly 15,000 nursing homes in the country, an estimated 5% are owned by private equity firms, according to an October 2020 JAMA Network Open study.
Stifel analyst Tao Qiu told Skilled Nursing News on Tuesday that the reform package’s focus on private equity does not reflect the market patterns seen in skilled nursing today.
“We haven’t seen any big major deals involving those larger private equity players in the skilled nursing space for quite some time,” he said. “So I don’t think private equity is rushing to the space.”
Still, privately held buyers have been dominating dealmaking in the space. Of the $3.7 billion spent in total skilled nursing transactions in 2021, $3.3 billion, or roughly 89%, were considered private buyers, according to new data from the data service affiliated with the National Investment Center for Seniors Housing & Care (NIC).
The private buyer category, at least according to NIC, encompasses private REITs, smaller family partnerships and owner operators, whereas the public category includes publicly traded companies or public REITs.
Parkinson said during the news conference that while the private equity market got “very involved” in skilled nursing between 2005 and 2015 – and those efforts largely didn’t work out – the very large firms have, for the most part, exited the space. One notable example is Carlyle Group’s sale of the HCR ManorCare portfolio to a joint venture of nonprofit health system ProMedica and REIT Welltower (NYSE: WELL).
“What people really need to be looking at is leverage, super high lease payments, those are the things that need to be addressed. The continued focus just on private equity, I’m not here to defend the private equity people, but it’s looking in the wrong place for problems that do need to be solved,” Parkinson said.
Staffing requirements ‘would close every building in the country’
Both Parkinson and Schema expressed serious concern about the administration’s intended plans to impose a staffing minimum during the virtual news conference held Wednesday.
“The minimum staffing requirement is unrealistic and not possible. It ignores the fact that virtually every SNF in the country is unable to find the workers that it needs. The workers have simply left – over 200,000 of them have left our labor force,” Parkinson said.
Parkinson and Schema are not alone in their concerns.
Wanda Prince, senior vice president of government affairs at Brickyard Healthcare, said the lack of funding for the post-acute care industry to provide competitive wages has been largely due to decades of underfunding.
“This is more than just funding for wages, which is significant, but also for tuition forgiveness, childcare relief for healthcare workers, access to educational programs, investment in advanced nursing degree education to provide more nursing instructors for the significant need for nurses that will continue for years to come,” Prince told SNN.
And while Prince recognizes the importance of quality and safety at the highest level, when nursing homes close or cannot admit patients because they can’t meet “unfunded mandates,” it creates a back-up in the rest of the care continuum.
Cynthia Morton, executive vice president of the National Association for the Support of Long-Term Care (NASL), said that while the focus on staff is in the right spot, she worries establishing a staffing minimum, in this environment, could set nursing homes up for failure.
While the announcement includes some ways to attract staff, those actions were needed a long time ago, Morton told SNN.
“We’re in the middle of a shortage, and the shortage, I believe, is going to be with us for a while. We’re seeing it in therapy and nursing with respect to long-term care facilities,” she said.
Harvard University professor David Grabowski also believes having a minimum staffing standard is an important step for the industry.
He’s hoping that, given the time it would take to conduct a study before implementation of a requirement, that the labor force situation will be in a better spot.
“I like the spirit of trying to establish a floor in terms of the number of workers at a facility, I think that’s a positive development, but I’m just really worried about how nursing homes are going to meet that given the current economic situation ,” Grabowski told SNN.
It remains to be seen whether the White House plans to go through Congress to set a federal staffing minimum or do so through executive branch actions, but Parkinson said he believes that the process should go through Congress.
“It looks like their plan is to do this on their own. It’s not at all clear that they have the authority to do that,” he said.