Harris Meyer | (TNS) KFF Health News
Shelly Olson’s mother has dementia and has been living at the Scandia Village nursing home in rural Sister Bay, Wisconsin, for nearly five years. Initially, her mother received excellent care while the facility was owned by a not-for-profit organization, the Evangelical Lutheran Good Samaritan Society.
In 2019, Sanford Health, a not-for-profit, tax-exempt hospital system, took over the nursing home. Shortly after, the COVID-19 pandemic hit. Since then, the facility has consistently had a shortage of staff, and residents have experienced long wait times and other care issues, according to Olson, a registered nurse who previously worked there.
Now, Scandia Village has a new, for-profit owner, Continuum Healthcare. Olson was relieved when Continuum hired two local individuals as the facility’s new administrator and nursing director.
However, Kathy Wagner, a former Scandia Village nursing director, is not hopeful. “The for-profit owner will encounter the same issues,” said Wagner, who is now retired and serves on an informal task force that monitors the facility’s quality of care. “No one has explained what the for-profit owner will do to change the situation.”
The sale of Scandia Village this year is part of a trend of for-profit companies, including private equity groups and real estate investment trusts, acquiring struggling not-for-profit nursing homes, many of which were operated for decades by Lutheran, Catholic, Jewish, and other faith-based organizations.
The rate of sales has increased, reaching a peak last year, according to Ziegler Investment Banking. Since 2015, 900 not-for-profit nursing homes and senior living communities nationwide have changed ownership, with over half of them being acquired by for-profit operators.
For-profit groups own about 72% of the roughly 15,000 nursing homes in the United States, which serve more than 1.3 million residents.
While the overall percentage of for-profit ownership hasn’t significantly increased in recent years, the types of for-profit companies that own these facilities have shifted toward private equity, real estate investment trusts, and complex ownership structures, according to David Grabowski, a health care policy professor at Harvard Medical School.
Consumer advocates, researchers, and regulators are cautious about this trend. They refer to studies indicating that nursing homes owned by for-profit companies — especially investors in private equity and real estate — generally have inadequate staffing, lower quality ratings, and more regulatory violations. In response to these concerns, the Biden administration issued a rule last fall that requires nursing homes to reveal more information about their owners and management firms.
Officials at not-for-profit organizations, as well as researchers who study nursing homes, are unsure how for-profit companies can achieve what the previous not-for-profit owners could not: revitalizing financially struggling nursing homes.
“I don’t know how these investor groups can cut costs without reducing the level of quality,” Grabowski stated.
One issue is that many companies that aim to make money set up a group of connected businesses to offer paid services like management, physical therapy, and staffing. They might also sell a nursing home's land to a related company, which then charges high rent. This reduces the available funds for staffing and care.
Last year, Letitia James, the Attorney General of New York, took legal action against the for-profit owners of four nursing homes for financial fraud and neglect of residents, claiming that they used over $83 million in public funds to enrich themselves through a complex network of related companies while providing terrible care.
Sam Brooks, the director of public policy for National Consumer Voice for Quality Long-Term Care, said, “When nonprofits are sold, you start to see a sharp decline in quality.” He explained that nonprofits generally have better staffing than for-profits. When nonprofits sell these homes, for-profits take over and the care becomes very poor.
The leaders of not-for-profits that have sold facilities to for-profit operators mention various reasons for leaving or downsizing. These include state Medicaid payment rates that are too low to cover costs, a shortage of nursing and other staff making it difficult to provide good care, and declining admissions, partly due to changes in Medicare Advantage plans that have made coverage policies stricter for rehabilitation care in nursing homes.
Susan McCrary, chief executive of St. Ignatius Community Services in Philadelphia, explained that her organization sold its nursing home because it was losing money. She said low state Medicaid rates forced their hand, even after the state increased its Medicaid payments by 17.5% in January 2023.
McCrary said the St. Ignatius board was concerned the losses would threaten the organization's ability to continue serving low-income seniors, for whom it also runs three independent-living and assisted living buildings.
At the same time, “our board definitely had concerns about selling to a for-profit because we’re aware of the research that shows the quality of care is not the same as with a nonprofit,” McCrary said. “But we knew we needed to move forward with this process to continue our services in West Philadelphia.”
Nate Schema, CEO of the Evangelical Lutheran Good Samaritan Society, said his organization chose to sell some of its long-term care facilities to Continuum Healthcare, a New Jersey-based company, and a second company, Idaho-based Cascadia Healthcare, as part of its strategy to better serve its communities. Good Samaritan now operates in seven Midwestern states, down from 22 states. Consolidating markets allows his organization to launch programs for nursing home residents in collaboration with Sanford’s hospitals and clinics.
“We’ve been very intentional about finding quality partners to carry on our mission,” Schema said. “Unfortunately, we haven’t seen a lot of nonprofit providers coming to us.”
Continuum, which acquired Scandia Village nursing home in January, plans to tackle staffing shortages by enhancing wages, benefits, and career opportunities, according to Tim Hodges, the corporation’s communications director. Continuum, which is possessed by private investors and commercial lenders, possesses eight nursing homes across four states.
Likewise, Steve LaForte, executive vice president of Cascadia, stated that his company has improved the finances of the nine Good Samaritan nursing homes it assumed control of in the Pacific Northwest by increasing patient referrals and strengthening relationships with state policymakers, with the hope of prompting more realistic Medicaid rates. LaForte mentioned that Cascadia has also emphasized workplace culture by avoiding the use of workers from staffing agencies and empowering the facility leaders to choose vendors for pharmacy, rehabilitation, and other services.
LaForte stated that Cascadia does not utilize tactics like engaging sister vendors to enhance its profits, emphasizing that this approach tarnishes the entire industry.
Zach Shamberg, CEO of the Pennsylvania Health Care Association, argued that the general perception of for-profit corporations being unfair, as all nursing homes struggle due to insufficient Medicaid rates and high labor costs stemming from a worker shortage.
He expressed hope that Pennsylvania’s Medicaid rate increase, along with a new minimum staffing requirement and a mandate to allocate 70% of total costs to resident care, will address the financial and quality issues. Nursing homes in Pennsylvania and nationwide are also lobbying state lawmakers and the federal government to provide additional payments linked to resident quality outcomes. extra payments tied to quality outcomes for residents.
Shamberg remarked, “If for-profit entities do not acquire these facilities, they will close, exacerbating the existing care access crisis as the population ages.”
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(KFF Health News, previously known as Kaiser Health News (KHN), is a national newsroom that produces comprehensive journalism about health issues and is one of the primary operating programs of KFF — the independent source for health policy research, polling, and journalism.)
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