Selling Out Grandma

Monday 21 January 2008

In late 2007, the investment firm The Carlyle Group purchased one of the country's largest nursing home chains despite the concerns of regulators, lawmakers and workers' groups that the acquisition would lead to staffing cuts and cause a decline in quality of care for residents. The $6.3 million purchase of Toledo, Ohio-based Manor Care Inc. closed after a Michigan judge lifted a restraining order that temporarily halted the sale.

"The problem is, in the nursing home industry, making money means cutting care," says Julie Eisenhardt, a spokeswoman for Service Employees International Union (SEIU), which represents employees at about 15 Manor Care homes and which spearheaded a campaign to raise awareness about the buyout.

In 2006, Manor Care, which operates more than 500 nursing, rehabilitation and assisted living facilities in 32 states, posted $167 million in profits and $3.6 billion in revenues. Manor Care shareholders were slated to get $67 for each share as part of the deal.

The Carlyle Group has holdings in several industries, including healthcare, defense and energy. Former President George H.W. Bush was one of its advisers until 2003.

Officials from both firms have denied plans to reduce staffing or slash services following the takeover, and have said Manor Care will continue to be run as it was before the buyout. "There's not going to be a cut in staff and there's no reason for quality to go down," says Rick Rump, a spokesman for Manor Care. "Carlyle is going to realize a return in investment by our company growing and becoming a better provider of healthcare."

The deal's critics also say investment companies create Byzantine ownership structures that impede regulation and shield the firms from accountability for negligent care or wrongful death accusations.

Rump says that Carlyle would not separate its assets from its operations as some private equity firms have done and that the Manor Care management team would remain the same.

Carlyle officials did not return calls by deadline, but Karen Bechtel, the company's managing director and global head of healthcare, said in a statement: "We are pleased to back a high-quality company and management team. We support Paul Ormond's strategic vision and support his commitment to quality patient care."

But a preliminary study of a large nursing home chain owned by a private investment firm found that staffing of registered nursing homes dropped by 8 percent and deficiencies that harmed residents doubled.

http://www.truthout.org/docs_2006/012108H.shtml

Something's wrong, either it's a typo or this is the best deal in history.

Nonetheless, it's very bad news.