As long as they keep making some stupid conclusions, I am going to have a say on it. I am talking about the most recent study appearing in Health Affairs blasting PE and REIT ownership for a lack of transparency and a cut in nursing hours after an acquisition.
First, I do agree there should be more transparency in general since nursing homes are receiving about 90% of their revenues from the government. But once again, these researchers seem to be missing the point and simply jumping on the Elizabeth Warren and Bernie Sanders bandwagon. Or is it Joe Biden?
When a REIT buys a nursing home, it has little say over the operations, but can advise the provider, especially if things go south. And actually, they receive their financial information on a delayed basis because they are just receiving rent, and not the income from operations. There are not many RIDEA structures for SNFs that I know of, so as a result, REITs can’t simply reduce staffing. Now, the operator may be forced to cut some costs because of higher capital costs, but don’t blame the REIT. The better question might be, what did the provider do with the money it received from the sale to a REIT? Hmmm.
REITs and PE firms own only about 15% of nursing homes, so going after them or blaming them for recent problems seems to be misplaced. If staffing costs declined after the sale to a REIT, perhaps it was the operators making some adjustments because of higher capital costs with the lease. It is doubtful they are trying to cut care levels unless there was excess staffing. But when was the last time you heard that happening?
The researchers also targeted REITs for going after nursing homes with a higher Medicare census. Well, duh. Why would they want a 90% Medicaid census? They need tenants that have the ability to increase revenues and cash flow, not ones that rely on the underfunded Medicaid programs.
If the government wants to spend some money, how about increased training programs, or non-degree school programs for anyone wanting to become a CNA or LPN? And maybe pay them a salary to do it, with a guaranteed job upon completion? I am sure providers would line up.
The point is it is not the ownership type at nursing homes that is causing the problem, especially the REITs. It is the system itself that is broken, and it is a wonder that so many investors still want to get in.
