For decades, nursing home care around the U.S. has been provided primarily by non-profit operators – or at least that’s what most of us think. Most nursing home care took place in facilities that were run by religious groups and other non-profit operators whose top priority was to provide proper care to residents while striving to stay afloat financially. Patient care, not profit, was the driving force within the nursing home community.

But if that were true once, it’s less true today, as reporter Harris Meyer writes in this troubling article from KFF Health News (formerly Kaiser Health News). Meyer explains that rising costs and reduced Medicaid reimbursement have conspired to drive many non-profit operators out of the enterprise of running nursing homes, to the extent that nearly three-quarters of U.S. skilled nursing facilities are now owned and operated by for-profit firms.

Sadly, while some adhere to a high standard of care, many do not, as the KFF Health News article reveals. What’s more, with the financial pressures inherent in operating these facilities, experts predict that the care crisis will only get worse. Let’s take a look.

Nursing Home Care Declines When New Owner Takes Over

Meyer begins his article with the story of rural Wisconsin residents Shelly Olson whose elderly mother suffers from dementia. Olson’s mother lived quite comfortably at the Scandia Village nursing home—owned by the not-for-profit Evangelical Lutheran Good Samaritan Society—for almost five years, receiving great care.

“Then in 2019,” Meyer writes, “Sanford Health — a not-for-profit, tax-exempt hospital system — acquired the nursing home. The COVID-19 pandemic struck soon after. From then on, the facility was regularly short of staff, and residents endured long wait times and other care problems, said Olson, a registered nurse who formerly worked at the facility.”

Nursing Home Care: Optimism Gives Way to Uncertainty

As a result, Scandia Village changed hands, and is now owned by the for-profit Continuum Healthcare. Olson was nervous about the change, but was reassured when Continuum hired on two locals as the facility’s new administrator and nursing director.

But not everyone’s worries were assuaged. Kathy Wagner, a former nursing director at Scandia Village, now spends her retirement serving on an informal task force monitoring the facility’s quality of care. She told Meyer, “The for-profit owner will face the same problems. No one has articulated what the for-profit owner will bring to the table to change the picture.” Wagner is pessimistic about future standards of care at Scandia Village.

Nursing Home Care Declines When For-Profit Firms Step In

In his article, Meyer tells us that Scandia Village is not an isolated case. He cites what he calls a recent “trend” of for-profit companies—including private equity groups and real estate investment trusts—buying up struggling not-for-profit nursing homes, many of them operated by faith-based organizations for decades before that.

“The pace of sales has ticked up, reaching a high last year, according to Ziegler Investment Banking. Since 2015, 900 not-for-profit nursing homes and senior living communities nationwide have changed hands, with more than half of them acquired by for-profit operators,” Meyer explains. “For-profit groups own about 72 percent of the roughly 15,000 nursing homes in the United States, which serve more than 1.3 million residents.”

A New Type of For-Profit Owner: More Complex, Less Accountable

Dave Grabowski, a professor of health care policy at Harvard Medical School, says that the actual percentage of for-profit ownership of skilled nursing facilities hasn’t changed all that much – but the type of buyers has. The companies getting involved in nursing home ownership today, he explains, have “shifted toward private equity, real estate investment trusts, and complicated ownership structures.”

This trend is leaving consumer advocates, researchers, and regulators “leery”. Meyer writes, “They point to studies showing that nursing homes owned by for-profit companies — particularly investors in private equity and real estate — tend to have skimpier staffing, lower quality ratings, and more regulatory violations.” In other words, these owners are in the field for short-term profit, not long-term care.

These concerns have not gone unheard, and the Biden administration issued a rule last fall that requires nursing homes to disclose more information about their owners and management firms. We’ll be monitoring the new law to see what develops.

Economic Realities of Nursing Home Care a Major Challenge

Much of the skepticism from expert observers—such as executives at not-for-profit organizations and researchers who study nursing homes—surrounds the question of how for-profit companies expect to revive financially struggling facilities, something the not-for-profit organizations could not manage to do.

Summing up the fears, Grabowski says, “I don’t know where these investor groups can see savings without cutting back on the level of quality.”

Meyer explains, “Part of the problem is that to boost profits, many for-profit operators set up a network of related companies to provide fee-based services such as management, physical therapy, and staffing. They also may sell a nursing home’s real estate to a sister company, which then charges high rent. These payments cut into the available operating funds to provide adequate staffing and quality care.”

New York Attorney General Letitia James sued the for-profit owners of four nursing homes for financial fraud and resident neglect last year, “alleging that they used more than $83 million in public funds to enrich themselves through a complex network of related companies while providing horrendous care,” Meyer writes.

Nursing Home Care Hit by Cost-Cutting, Reduced Staffing

There is, sadly, a precedent for the connection between the sale of not-for-profit organizations and a decline in standards of care. Sam Brooks, director of public policy for the National Consumer Voice for Quality Long-Term Care, says, “When nonprofits are sold, you start to see a precipitous decline in quality. Nonprofits generally staff well above for-profits. When churches and nonprofits divest these homes, for-profits move in, and the care gets really bad.”

The reasons for these sales vary. Some not-for-profits sell to for-profit companies because state Medicaid payment rates are too low to cover operating costs, or because of staff shortages. “In addition,” Meyer adds, “they say their facilities have seen fewer admissions, at least partly because Medicare Advantage plans have tightened coverage policies for rehabilitation care in nursing homes.”

Non-Profit Operators Often Sell so Other Activities Can Continue

Meyer provides two examples of this trend in action. In Philadelphia, St. Ignatius Community Services sold its nursing home because it was losing money. The organization’s chief executive, Susan McCrary, says that “low state Medicaid rates forced their hand, even after the state bolstered its Medicaid payments by 17.5 percent in January 2023.”

Though they had concerns about selling to a for-profit, knowing keenly what it could mean for the facility’s quality, McCrary says that in the end, they felt they needed to protect and continue their mission of serving low-income seniors in their three independent-living and assisted-living facilities. Selling the nursing home was the only way forward.

For Evangelical Lutheran Good Samaritan Society, the organization that once operated Scandia Village, downsizing became the only viable option. The organization decided to sell some of their long-term facilities to Continuum Healthcare and Cascadia Healthcare, and the not-for-profit now operates in only seven Midwestern states when they used to operate in 22.

Nate Schema, Good Samaritan’s CEO, says, “We’ve been very intentional about finding quality partners to carry on our mission. Unfortunately, we haven’t seen a lot of nonprofit providers coming to us.”

For-Profit Operators Claim They Can Provide Care, Stay Solvent

Tim Hodges, communications director for Continuum, states that the corporation will address staffing shortages by improving wages, benefits, and career opportunities. Meyer tells us that Continuum is owned by private investors and commercial lenders, and currently owns eight nursing homes in four states.

In a similar vein, Cascadia’s executive vice president, Steve LaForte, reports that his company has focused on workplace culture, not using workers from staffing agencies and instead empowering those who run individual facilities to select their own vendors for pharmacy, rehab, and other services.

Also, he says that Cascadia has “revived the finances” of the nine previously Good Samaritan-owned nursing homes it took over in the Pacific Northwest through bringing in more patient referrals, and by bolstering relationships with state policymakers. According to LaForte, the hope is that this could lead to “more realistic” Medicaid rates.

Industry Execs Say, All Nursing Homes are Struggling

Zach Shamberg, CEO of the Pennsylvania Health Care Association, says that this is chiefly about perception, and that the overall negative optics of for-profit corporations is “unfair”. He notes that all nursing homes are struggling under inadequate Medicaid rates and high labor costs due to a shortage in workers.

Shamberg’s hope is that Pennsylvania’s Medicaid rate increase will address the financial and quality issues, along with a new minimum staffing requirement and a mandate that 70 percent of total costs be dedicated to resident care. Meyer adds, “Nursing homes in Pennsylvania and across the country are also lobbying state lawmakers and the federal government to offer extra payments tied to quality outcomes for residents.”

In Shamberg’s view, if we want these facilities to stay open, we’re going to have to be more open to for-profit companies, saying, “If there aren’t for-profit entities to buy these facilities, these facilities are closing, which would exacerbate the existing access to care crisis as the population gets older.”

Rajiv Offers a Different Perspective

Rajiv Nagaich has some strong opinions when it comes to senior care in America.  “Look,” he says, I understand that skilled nursing care is a necessity for some people. But what I can’t understand is why so many people end up in institutional care even when that’s the last thing in the world that they want. This article and others like it should send shivers down your spine!”

Rajiv goes on, “The great news is, there’s a much, much better approach. Why not start planning now so that, when you fall ill and need care, the care comes to you? Imagine what a blessing that would be, for you, your spouse, your family. Talk to us and let us show you how to make that happen.”

For more perspective into why avoiding nursing home care is not simply about how much money you have, check out Rajiv’s insights in this article from our Blog. You’ll be glad you did!

(originally reported at www.kffhealthnews.org)