Private equity, public accountability, nursing facilities and grandstanding

Bob Coffield’s recent post on a pending reconsideration of a West Virginia CON issued to The Carlyle Group (a private equity firm) for the acquisition of HCR Manor Care (a publicly-traded company with about 275 nursing facilities nationwide) got me thinking about the appropriateness of using these sorts of procedural acrobatics to address what may or may not be legitimate concerns about quality of care and transparency. 

SEIU 1199, the party that called for reconsideration, opposes transactions like this one all around the country, and even testified recently at the House Ways and Means Committee hearing on nursing facility ownership and accountability — the same day it filed its request for reconsideration in West Virginia, by the way.  The hearing focused on the advisability of allowing private equity firms to own nursing facilities through subsidiary corporations, given the opacity of the corporate structure, insulation of the folks at the top from liability for substandard care that may be provided at individual facilities, and general alleged propensity of private equity firms to cut costs in order to pump up profits at the expense of patient care.  See the NY Times article on this issue, a few weeks ago, covering the hearing.  The industry associations (still controlled by the public companies, as the private equity folks own just a small percentage of nursing facilities nationwide) seem to be carrying the water on this issue; The Carlyle Group didn’t even show up at the Ways & Means hearing.

Seems to me that SEIU is in this largely for the membership: Manor Care is essentially an open shop, and SEIU is presumably looking to cut a deal with management to ensure enrollment of a few new members among the company’s 60,000+ employees.  (Tip of the hat to Politico.) 

The key principled objection seems to be lack of accountability, though to hear the advocates tell the tale, it’s hard to see how regulators could hold anyone less accountable than they’ve held the large publicly traded companies (and their operating subsidiaries) that are now being bought up by private equity firms.  While the public companies — and the private equity firms — are all subject to the same licensure and certification standards as any local business owning and operating a nursing facility, in many states, they were (and are) considered "too big to fail."  Single-purpose entities and insulation of CEOs from front-line operational responsibility are nothing new; they’ve been part of corporate America — and part of the medical-industrial complex — for quite a while now.

Rather than simply continuing the demonization of for-profit ownership of health care operations, I hope that this dialogue results in one of three things: (1) some reasonable concrete standards for review of changes in ownership, and operations, of nursing facilities (hard to write, hard to enforce); (2) a policy decision that all health care facilities must be owned and operated by not-for-profit or governmental entities (not bloody likely); or (3) an acknowledgment that the present system, however imperfect, represents a reasonable balancing of interests.  The complaints are not new; the proposed solutions are not new.  Spinning wheels in political machinery are not new.  Perhaps there can be a new accommodation of interests so that appropriate operations of facilities, with a reasonable degree of accountability and transparency, can take place even in the presence of private equity ownership.

— David Harlow