Monday, September 24, 2007

The market answer to dementia: Soylent Green

Markets are good at solving problems. Shut out all the reasonable options, and markets will come up up with unreasonable solutions. That's what's happening with our dementia problem.

The traditional approach to the care of the demented is very expensive. Americans don't want to pay for full-service nursing home care, but they refuse to consider the alternatives. That means market is going to invent an alternative, which it has.

The answer is - kill the demented elders faster, but setup ownership to avoid prosecution...
More Profit and Less Nursing at Many Homes - New York Times

Habana Health Care Center, a 150-bed nursing home in Tampa, Fla., was struggling when a group of large private investment firms purchased it and 48 other nursing homes in 2002.

The facility’s managers quickly cut costs. Within months, the number of clinical registered nurses at the home was half what it had been a year earlier, records collected by the Centers for Medicare and Medicaid Services indicate. Budgets for nursing supplies, resident activities and other services also fell, according to Florida’s Agency for Health Care Administration.

The investors and operators were soon earning millions of dollars a year from their 49 homes.

Residents fared less well. Over three years, 15 at Habana died from what their families contend was negligent care in lawsuits filed in state court. Regulators repeatedly warned the home that staff levels were below mandatory minimums. When regulators visited, they found malfunctioning fire doors, unhygienic kitchens and a resident using a leg brace that was broken.

“They’ve created a hellhole,” said Vivian Hewitt, who sued Habana in 2004 when her mother died after a large bedsore became infected by feces.

Habana is one of thousands of nursing homes across the nation that large Wall Street investment companies have bought or agreed to acquire in recent years.

Those investors include prominent private equity firms like Warburg Pincus and the Carlyle Group, better known for buying companies like Dunkin’ Donuts.

As such investors have acquired nursing homes, they have often reduced costs, increased profits and quickly resold facilities for significant gains.

But by many regulatory benchmarks, residents at those nursing homes are worse off, on average, than they were under previous owners, according to an analysis by The New York Times of data collected by government agencies from 2000 to 2006.

The Times analysis shows that, as at Habana, managers at many other nursing homes acquired by large private investors have cut expenses and staff, sometimes below minimum legal requirements...
It's a "soylent green" class solution. Anyone could come up with the solution of "make them die sooner", but it took genius to figure out a way to do this and avoid prosecution.

Markets always answer "problem of the weak" questions this way. That's why we need government ...

1 comment:

Behind the Buyouts said...

Ouch. The timing of this story couldn’t be worse for the Carlyle Group, which is busy finalizing the largest-ever buyout of a nursing home chain, its $6.3 billion buyout of HCR Manor Care. It would be nice if Carlyle used the buyout to prove everyone wrong and improve care, given that more than 85% (!) of Manor Care facilities already report CNA staffing levels below 2.8 hours per resident day—a standard identified in a Centers for Medicare and Medicaid Services study as necessary to properly care for residents. Unfortunately, so far it looks like more of the same – “more profits, less nursing” – the takeover will result in a windfall of as much as $254 million for top Manor Care execs, including as much as $186 million for CEO Paul Ormond, plus Carlyle will get millions in fees. Read more here.