Hearing of the Senate Special Committee on Aging - Nursing Home Transparency and Improvement

Interview

BREAK IN TRANSCRIPT

SEN. BILL NELSON (D-FL): Thank you, Mr. Chairman, and I thank all of you for your participation on what is increasingly going to be an aspect of American life.

Naturally, you would expect from my state of Florida that we see a greater proportion of nursing homes per thousand of population, and that's the good fortune that we have in Florida of having so many people decide to spend their twilight years in Florida, the land called paradise.

Now, I want to ask you Mr. Muller. You'd come up with this study here, and it's about -- well, it's entitled "How private equity buyouts hurt nursing home residents." And I'm curious what are the unique concerns with private equity owned chains, and why single out them as your concern with nursing homes?

MR. MULLER: As I think I mentioned in my testimony, the private equity model sort of has a couple of things that are relatively unique about it, specifically that they take on a lot of debt -- they need to make money quickly in order to sell the nursing home assets again quickly.

While it's true that all these nursing homes need to do better, as our research in The New York Times article have pointed out, things seem to get even worse when private equity takes over. As I mentioned in the testimony with Mariner homes, actual harm deficiency has increased by 66.7 percent versus 1.5 percent for the overall industry.

We think Congress must take action to improve transparency, accountability enforcement for all nursing homes, but regulations must also keep up with industry trends, and private equity is one of those new trends that requires new regulation.

SEN. NELSON: So what is it about private equity, would you state that again?

MR. MULLER: Sure.

SEN. NELSON: Without reading it?

MR. MULLER: Okay.

SEN. NELSON: I want you to just tell me.

MR. MULLER: I think it was said before. With private equity, what makes it different from other type of ownership situations is that private equity, when they buy a nursing home company takes on a lot of debt, right.

They create a maze of operating structures, and they need to make money very quickly, because they have a relatively short time horizon in which to get in and get out, right.

We are concerned that those business imperatives are incompatible with providing quality care given what we have seen at Mariner, right, which is a company that was bought out by a private equity firm, and the number of increases in violations we saw there compared to the violations in peer (ph) group homes in those states.

SEN. NELSON: How many private equity firms -- let me put the question other way. How many nursing homes are owned by private equity firms?

MR. MULLER: That's a very good question and one to which I don't know the answer, and I think it's very hard to figure that out. In part, because it's very hard, given the maze of ownership and structures the way a private equity sets themselves up, it's very hard to figure that out.

I would certainly not want to contradict the gentlemen from CMS who spoke earlier who says he can't -- he doesn't know, and so I don't think we know either.

SEN. NELSON: Carlisle, a private equity firm as you point out in this document has announced its intention to buy Manicare, what are your concerns about this?

MR. MULLER: Well, Manicare is one of the largest --

SEN. NELSON: I don't want you to read your answer, I want you to talk your answer to me.

MR. MULLER: Okay. Manicare is one of the largest nursing home companies in the country, and so that is a cause for concern right there.

Secondly, when we've looked at the history of Manicare violations over the last three inspection cycles, their care deficiencies has increased by about 23 percent compared to about 14.5 percent for the other homes in the states they operate.

We're concerned given the history of private equity, and the trends in private equity we've seen in other companies that the care -- Manicare will get -- the care, I'm sorry -- the care at Manicare will get worse with the Carlisle group coming in.

SEN. NELSON: Now, the other side says something different, and in a recent Washington Post article, Manicare's general counsel was quoted as saying that they will continue to control all their assets, and it will be a transparent company. But in your review of the applications that Carlisle filed, can you tell us -- does that appear to be true?

MR. MULLER: What we saw in the public filings what there -- was that there was a, you know, a separation of the operating company from the property company and different layers of ownership set up to -- between the ultimate parent corporation and the operating company, i.e. the nursing home, the licensee.

SEN. NELSON: Down in my state, the Florida Agency for Healthcare Administration recommends that our state expand its definition of controlling interest, to include all subsidiary operations. And it recommends that this information be kept current with an online reporting mechanism. And of course, be available to the public.

Do you think these recommendations are enough to make sure that we know of the transparent ownership of nursing homes?

MR. MULLER: I've not had a chance to read those recommendations, so I wouldn't want to categorize them as being enough or not, but they certainly seem like a step in the right direction.

SEN. NELSON: And what would you say would be additional things that we must require to make sure that we have transparency?

MR. MULLER: I think some of the things I mentioned in my testimony about requiring surety bonds to make sure that the assets of the entire company are available -- if in case the federal government, state regulators, or other parties need some form of redress.

SEN. NELSON: Thank you, Mr. Chairman.

BREAK IN TRANSCRIPT

Source