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After Allegations Of Poor Care, Does Private Equity Have A Place In Nursing Home Operation?

Private Equity May have a Place in Nursing HomesOne of the worst trends in the nursing home industry is the fact that it is becoming increasingly ‘for profit’. With the federal and state government trying to save as much money as possible, many nursing homes now operate under private equity. What this means is that care facilities are being run as though they were a business – meaning that more attention is paid to the bottom line rather than the actual needs of the people who live in these facilities.

The case of Bruce Rauner

One of the recent cases that bring this problem into the national spotlight is Bruce Rauner and his GTCR private equity firm. Rauner, a Republican candidate for Illinois governor, promises that he is going to run Illinois ‘like a business’ if he is voted as governor. However, the problem is that Mr. Rauner does not have an excellent record of accomplishment when it comes to compassionate business.

Rauner’s former private equity firm was involved in multiple lawsuits. In order to take advantage of the change in the Medicare reimbursement because of the Balanced Budget Act of 1997, both GTCR and Rauner co-founded Trans Healthcare Inc. While the investment made Rauner a lot of money – Ms. Arlene Townsend is an example of what can go wrong when nursing homes operate ‘for profit’.

A billion dollar settlement

One of Rauner-controlled nursing homes was forced to pay the family of Ms. Townsend $1.1 billion in a landmark settlement. This comprise of $1 billion in punitive damages and $100 million in compensatory damages. According to the jury in Polk County, Florida, the ‘misconduct’ perpetrated by the facility was akin to ‘complete corruption’. The jury also suggested that the nursing home was under-supplied and short-staffed.

More underhanded dealings

According to the testimony from an expert forensic accountant, the Boards of Directors at GTCR was made up entirely of bankers and investors. Interestingly enough, there was not a single health care official on the board. With billions in revenues at that time and 220 facilities throughout the nation, GTCR quickly became one of the largest health care operators without any knowledge about the industry.

One of the most disturbing findings presented by the forensic accountant was that the former company leaders made illegal political contributions but received reimbursements through tax dollars after charging those contributions back to the government through Medicare reports. In short, this means that the company was using Medicare in order to make campaign contributions.

Drawing attention to the problem

Perhaps the most damning statement that came from the entire trial was the fact that this went beyond the extreme negligence shown by the nursing home. The investors were planning to run the nursing home chain into insolvency, without actually thinking twice about the level of care for the residents. While there is no denying that some privately owned nursing homes take far better care of their residents, the truth is that private equity and professional care facilities are clearly not compatible. One means caring about the wants and needs for the residents while the other is about making as much money as possible, oftentimes disregarding ethical and moral objections.

While the case is notable because of the spotlight it places on Bruce Rauner, perhaps the looking glass that it puts these nursing homes under will reveal that these two ideas are in fact not compatible. While it may be difficult to take private equity out of the nursing home industry, it appears that it is absolutely necessary.

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Learn more about the laws applicable to Florida nursing homes here.
Click on the links for information on nursing homes in Miami, Orlando and Tampa

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