Should For-Profit Nursing Home Owners Be Investigated?

Protecting Nursing Homes From Profiteering REITs

Posted by PKSD Law Firm on May 12, 2022 in Nursing Homes and Elder Rights

REITs in Americas Nursing HomesIt is no secret that the COVID-19 pandemic has called the widespread failures of America’s nursing homes into question, including how they are financed and operated. Healthcare REITs are a business model increasingly seen in many major nursing home chains today. However, what does the federal government know about these REITs and how they impact the daily operations of nursing homes and the residents who live there?

That is what Rep. Bobby Rush (D-IL) wants the government to find out. Following USA Today’s recent report on America’s nursing homes, Rush is urging Congress to further investigate the failures, as well as the “profiteering, cold-hearted” corporations in charge.

Rush cited findings from USA Today’s report, which, amongst other concerns, revealed the nursing home ownership webs that are invisible to both consumers and regulators. Trilogy is one of the large for-profit nursing home chains under scrutiny for its high death rates and atypical financial partnership with investors.

Calls for More Scrutiny and Increased Tracking and Regulation

The National Academies of Sciences, Engineering, and Medicine are also calling for major changes to America’s nursing home communities.

In the 605-page major recently released report, the group asks federal officials to:

  • Set new nationwide minimum staffing requirements
  • Increase the scope of government tracking and regulation of nursing homes
  • Crack down on the corporate owners with poor performance tracking records

A For-Profit Chain With An Atypical Business Model

During its investigation, USA Today discovered that Trilogy Health Services, a major for-profit nursing home chain, stood out for its high death rates. Even after claiming their original numbers were incorrect and revising those figures by over 40 percent, Trilogy still holds one of the highest nursing home COVID-19 death rates in the country.

What is Trilogy’s Business Model?

Trilogy Health Services is owned by American Healthcare, a Real Estate Investment Trust. REITs are not new to the health care industry or nursing home facilities. However, there is something unique about Trilogy’s business model.

Typically an REIT acts as a landlord to its tenants (the companies), collecting rent for the buildings and real estate. The inner healthcare operations, however, have always been kept separate. Until now.

Trilogy’s business model allows American Healthcare to do more than collect rent. Under the umbrella of the REIT Investment Diversification and Empowerment Act – RIDEA, American Healthcare shares profits from Trilogy’s daily internal operations as well. This model is concerning, but not illegal. Congress passed a law permitting non-healthcare REITs to use this model back in 2008. However, American Healthcare seems to be the first large healthcare trust to use an RIDEA for a nursing home chain.

More Profitability, Increased Risk

Under this model, if the facility has healthy financial gains, the REIT stands to earn more profits. However, if a nursing home chain is not performing well, the trust is also vulnerable to taking a financial hit. This vulnerability could create significant incentives for the REIT to cut back on care to maintain profitability.

According to USA Today, Trilogy did cut back on their care, drastically, and more than any other nursing home chain in the country. Was this pressure from the investment trust?

In his letter to Congress earlier this month, Rush argued that REITs should not be granted authority to operate nursing home facilities, nor should they receive public funding.

According to McNights Long-Term Care News, there are many large REITs in long-term care that already own hundreds of nursing home facilities.

USA Today discovered that 1,800 facilities are currently owned by either a publicly traded REIT or American Healthcare (not yet publicly traded). Roughly, that is one out of every nine nursing homes in the country. In contrast, the government’s data only identified about 500 major REIT-owned facilities nationwide.

The American Health Care Association, which represents both for-profit and nonprofit nursing homes in the industry, says it supports efforts to improve quality of care. However, it questions some of the recommendations for change.

In his letter to Congress, Rush wrote, “I believe that the profiteering, cold-hearted nature of these corporations must be exposed… It is Congress’s job to stand in-between greedy corporations and those who are the most defenseless.”

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