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

Nursing homes have been overwhelmed by the coronavirus. Residents account for more than a quarter of all COVID-19 deaths nationwide. The industry says that facilities have also been overwhelmed by costs, and they're asking for billions in aid from the federal government.

But recent studies suggest that for-profit ownership may have endangered residents by skimping on care, while funneling cash to owners and investors.

A chain of Midwestern nursing homes called Aperion Care provides a good example of the way for-profit nursing homes are run and why that business model is is coming under scrutiny in the wake of the pandemic. Their 45 facilities, mostly in Illinois and Indiana, get low ratings from the Centers for Medicare and Medicaid (CMS), the federal agency that regulates nursing homes. Out of a possible 5 stars, most Aperion Care homes get just one or 2. They also get low marks for nurse staffing.

Those conditions create a daily struggle, says a nursing assistant in one of their Illinois facilities. We're not using her name because she's afraid she'll be fired for talking to the media.

"One of our floors has 65 people and they expect three or four of us to [provide care for them] on our own," she says. "We need at least six or seven people."

These conditions make her sad. She thinks of the residents as family. Some of them she's known for years and they've only grown closer during the months when visitors were banned. But the short-staffing is an insurmountable obstacle. She recalls the time she arrived for her morning shift and found just a single nursing assistant had been on duty on her floor overnight.

"No one's changed. No one's ready for breakfast." She and her coworkers had 2 hours to get all the residents up and ready for the day. "You're going to think, 'how do you have enough time to do that?' Her answer: "Someone is not getting care. It's impossible."

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.

"They're trying to make money," she says. "And the main way to make money is to keep labor costs low."

But Fred Frankel, Aperion Care's general counsel, complains that it's hard to find nursing staff in some areas. He justifies the chain's low ratings by saying they've taken over some troubled facilities that were in danger of closing. And he argues that the government's star rating system doesn't always reflect the quality of a nursing home.

Charlene Harrington contends that low ratings, especially for nurse staffing, are a direct result of the for-profit business model.

"It's a deliberate strategy as part of making money," Harrington says. "And that means that they're leaving their residents unprotected."

The pandemic has revealed 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 largely caused by community spread of COVID-19 outside of nursing homes.

The experience of Aperion Care suggests all of those studies may be right.

Illinois records show that some of their rural facilities have had few if any cases of COVID-19. General Counsel Fred Frankel says they followed all federal and state guidelines. But the homes that did have outbreaks appeared helpless to stop them. A handful reported almost as many infections as they had beds. Just 4 homes accounted for almost 80 deaths.

Mark Parkinson, president and CEO of the American Health Care Association, which mostly represents for-profit facilities, says they hadn't faced a virus like this before, where people could be positive without showing symptoms.

"The system didn't know how to react to it," says Parkinson, "and unfortunately, mistakes were made."

When the crisis hit, he says, nursing homes didn't have the reserves to deal with it. "Nursing homes, for the most part across the country, were underfunded coming into the pandemic."

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 examples in financial documents that Aperion Care filed with the state of Illinois, says nursing home real estate appraiser, Jim Tellatin. He reviewed some of of the records at NPR's request.

"Aperion has different entities that own the real estate and the operating companies," Tellatin says. "Those two entities have essentially the same individual owners."

Tellatin says that some of those nursing homes are barely breaking even. But the 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, though some of that could be going to pay mortgages. But 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. So a lot of the money is kept in the family, so to speak.

This is a common arrangement in the industry, according to the American Health Care Association's Mark Parkinson. He says it's absolutely necessary.

"They do that for liability reasons," says Parkinson.

"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."

So if someone sues the nursing home, there won't be much for them to get. The money's in the real estate, says Jim Tellatin.

"The real wealth generally in this industry is created through real estate and not so much through the [nursing home] operations. You need the operations to generate increased value to your real estate and other assets of the business."

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

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

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 government help.

Nursing homes have already received about $7.5 billion from federal coronavirus relief legislation and billions more in Paycheck Protection funds. Now the industry is asking for another $100 billion for all health care providers, with a "significant" amount of that going to nursing homes. Michael Wasserman wants to know what they'll do with the money if they get it.

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

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.

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