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Elder Care Business – Privatizing Nursing Home Care

The nursing home business has been a profitable one for many. As baby boomers enter their later years and require care, the customer base is undoubtedly growing. Add in the numerous insurance policies that cover nursing home and long-term care facility stays, including government programs like Medicare and Medicaid, and the sources of revenue for nursing homes are tremendous. Add to this the untenable yet unfortunately realistic incentive to cut overhead and staff levels in order to save even more money and generate greater profit margins.

Such lower staff levels reduce the time and attention paid toward patients who need constant care, and can result in injuries, untreated illnesses, and eventually death. In spite of allegations of abuse, neglect, or fraud in accepting federal dollars for fake services or overstated services, all of which can result in criminal and/or civil charges costing millions in fines and penalties, the business of nursing homes is a profitable one, and many companies are looking to get into this business.

There has been a trend of nursing home ownership becoming bigger and bigger. There are no longer smaller outfits or so-called “mom and pop” single homes. Rather, larger holding companies and management companies have acquired chains of nursing homes to run en masse for greater and greater profit. This has also been a similar trend for once-publicly-run nursing homes, which states are selling off to go under completely private management. Regarding acquisitions from the state, the government is generally motivated to sell because they consistently operate at substantial losses, and the deficits become too much.

The state may have no choice but to sell off to private interests with the cash to make the deal worth it for all involved. Such has been the trend in the state of New York, for example, where private interests can operate the facilities for profit, while the facilities stay open rather than face closure because the state can no longer effectively run it. Private owners work to cut costs, and may not owe the types of benefits and pensions that the state must use
Recent Example

In Orleans County, New York, for example, the government agreed to sell the Villages of Orleans Health and Rehabilitation Center to the management company Comprehensive Healthcare Management Services, for $7.8 million. As reported, this particular company, based out of Long Island, New York, owns a home in the Pittsburgh, Pennsylvania area and has targeted the takeover of other facilities around Buffalo, New York. The home, as unfortunately with many county-run facilities, in 2012 lost about $2.8 million. This deal follows another recent sale of a nursing home in Ontario County, New York for about $1 million, which had operated with relatively barely any revenue above costs.

Both of these homes will be cutting out staff benefits, or letting go of certain staff altogether in order to cut costs. It remains to be seen whether the new owners of these nursing homes, as well as facilities sold to private interests in general, will be able to cut costs while still maintaining adequate levels of care. It will be important for state and federal regulators, where applicable, to keep tabs on these facilities and their performances as well as investigate complaints. And it is important for prospective residents and their loved ones to be aware of the facilities’ records, staffing levels, and quality of care offered to residents to avoid elder abuse.

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