Late last year, Politico published a special report about a growing problem in the nursing home industry. Nursing home operators are using private equity loans to pay themselves, depriving homes of the funds they need to take care of their residents.
Private equity firms and the lenders affiliated with them are speculating on nursing homes in ways traditional banks will not. They are lending large sums to nursing home operators, which allows them to take money out of their facilities and put it into their own pockets.
Both lenders and nursing home operators are benefiting from the steady stream of cash these facilities receive from Medicare, Medicaid and private insurance companies.
This puts nursing homes in dire financial situations, and when these facilities no longer have money to operate, residents are displaced. This often leaves state taxpayers with the bill.
The Politico piece discusses a specific instance of this type of financial scheme. Atrium Health and Senior Living in Weston, Wisconsin closed its doors in December 2018. This followed three years during which the owners are alleged to have paid themselves more than $37 million.
Atrium had previously secured a loan from MidCap Financial, which is affiliated with Apollo Global Management, a private equity firm. Atrium used the funds to expand their nursing home empire, even though bills for essential services went unpaid.
Unfortunately, legislators in Washington D.C. have not done much to protect the elderly. The Biden administration proposed new and stricter minimum staffing standards for nursing homes. However, this led to a lobbying campaign promoting the idea that staffing standards like these would force homes to close.
