The Biden administration is at it again. While he had just a passing reference to skilled nursing in his State of the Union address, Joe Biden is back at it now.
They are continuing with the mantra that after private equity firms buy nursing homes, the mortality rate increases by 10%. However, they do not say why and what other influences there may be, such as higher acuity rates, which would by definition result in more deaths. Private equity firms always try to get their operators to increase the Medicare census in facilities they purchase because that is where the profits are, not in custodial care Medicaid patients.
This is partly why there is an increase in taxpayer spending after a purchase by PE firms. Not only will they try to increase the Medicare census with its higher rates, but they will also work harder on the proper coding. In addition, they always will push census, and most of that increase will come from government-funded patients.
The report that was cited also claims that after a REIT purchase of a nursing facility, RN staffing tends to decline by 6% on average. But they do not discuss if there are other reasons, such as staff departures. Also, REITs own only the real estate and usually have little to no say over the operations, unlike PE firms. We are not claiming that all these buyers are angels, but the government should be more transparent in what they are feeding the public.
First of all, most of the REIT investments are by publicly traded REITs, and there is usually plenty of disclosure in their financial documents. The REIT ownership may not be displayed at the facility, but why should it? The REIT is not responsible for the care provided, since they only own the real estate, so why would a family member want to contact the REIT? The only plausible reason is to have one more deep pocket to sue if something goes wrong. But suing the REIT would be a lost cause, since they do not operate the SNF.
The Biden administration wants to work on defining what a REIT is. Well, it is well defined in the tax code, and in fact is a product of the tax code. There really is no need for further definitions.
PE firms are another matter. There are traditional PE firms that take investors money, usually in major funds, and re-deploy it in various investments. These firms have moved away from the skilled nursing market in the past several years and are mostly not looking for new targets. Then there are private real estate investors, which make up the bulk of the buyers of SNFs today. There has not been a lot of transparency here, but for a legal reason, and a practice that goes back for decades to separate the ownership of the operations from the real estate. Basically, you can sue me for being a bad operator, but that does not mean you can take my real estate away (to put
it simplistically).
Since we know that trial attorneys financially support the Democratic Party by probably 10 to 1, the Democrats and Joe Biden have an interest in pandering to what they want. But the real problem is that there are a relatively small number of bad apples in the sector that make everyone else a target. What should happen is for the bad apples to get their licenses revoked and not be allowed to own or operate nursing homes, and the various states should track this. But let’s be transparent on the entire picture, all the reasons for increases in mortality, increases in government spending, and decreases in SNF staffing, and not just put the blame on the legal ownership type. Not holding our breath on that one.
