Privatized Care Prioritizes Profits Over Lives

Produced for the Office of New York State Assemblyman Ron Kim

Ron Kim Member of Assembly, District 40

David A. Lee Legislative Director

Rachael Safirstein Communications Director

Executive Summary

As part of a three-part series, this is the final report on nursing homes and the root problems that resulted in close to 6,100 nursing home deaths and counting in New York during the 2020 coronavirus pandemic.

The first report, which covered the correlations between early corporate immunity and nursing home fatalities across the country, was covered by the The Guardian and Jacobin Magazine.

The second report focused on New York’s corporate immunity law, which was disguised as worker protection and a Good Samaritan law, leading to the introduction of bill S.8497/A.104275 (Biaggi/Kim) and was covered by WCBS, WPIX, NY Post, Law360, and other news outlets.

This final report focuses on the performance data between for-profit nursing homes, which often intersects with private equity and hedge fund investments and not-for-profit nursing homes. Our data from New York and New Jersey reflect a common theme across many states and countries, which is that privatized care results in unnecessary and tragic deaths.

The fact that more than 63.3 and 58.9 percent of the nursing home industry in New York and New Jersey, respectively, is driven by profits is a critical factor that explains why, prior to the devastation the pandemic wrought on our communities, these businesses wrote legislative language and lobbied for legal immunity status so they could protect their bottom lines.

Indeed, it is no mere coincidence that prior to the legislation of this corporate immunity, New York State Governor Andrew M. Cuomo received millions in contributions to his 2018 re-election campaign from entities like the Greater New York Hospital Association (GNYHA), the group responsible for drafting and securing immunity for its constituent stakeholders. It is necessary to argue that publicly-run and -owned and not-for-profit services operate for the public benefit and not for opportunistic economic gain; it is however, insufficient to argue this, as it is unambiguously clear that the public sphere of governance – the seemingly immutable and inherent nature of elderly health care as a public good – has been compromised, and that the interests of capital and shareholders have superseded those of the people of New York and New Jersey .

The entire conception and organization of nursing home care as a business, in the words of Darryl Kennedy, whose 88-year-old uncle was evicted from the Lakeview Terrace nursing home in Los Angeles, has led nursing homes to treat their residents like “trash.”

This cannot solely be attributed to the malfeasance of the for-profit private sector; the directives of the state and its executive authority to collude with such corporations to maximize profit are also to blame. According to The New York Times, in Fall 2019, the Centers for Medicare and Medicaid adjusted the reimbursement formula for nursing homes accepting Medicare patients; in practice, on a daily basis, this yields at least $600 more for COVID-19-positive patients who are admitted to a nursing home. Not only is it convenient for the state to order hospitals to admit their COVID-19-positive patients to nursing homes under the guise of creating more bed capacity, it is also profitable for the nursing home industry to do so.

It would be grossly naïve to accept this as sheer coincidence, as the very function of the capitalist model for nursing home administration and operation is dependent on the state to shirk its mandate to protect and defend the public interest, and in lieu of that, play an active role in facilitating the complete monopolization and profiteering of private nursing homes executives.

Instead of investing to save lives, profit-driven nursing home executives cashed in their political favors and paid extra fees to their lawyers and lobbyists to secure their get-out-of-jail-free cards.

The immediate solution is to hold for-profit nursing homes accountable by repealing their immunity status. The long-term solution, which will be covered in this report, is to create resident and patient-driven benefit systems.

I. Background

In May 2020, the New York Times reported that approximately one-third of coronavirus-related deaths in the United States consisted of residents or workers at nursing homes and long-term care facilities. The findings reveal that New York and New Jersey lead the nation in absolute number of deaths, amounting to 5,403 and 4,855 deaths, respectively, at the time the study was conducted. In this report , we examine the coronavirus-related cases and deaths in New York and New Jersey long-term care facilities, with a focus on the ownership type of the facilities (namely if they are publicly- or privately-run, or if they are run for- or non-profit), and the implications that has for why both states individually experienced disturbingly high death tolls.

It would, however, be remiss to engage in a discussion of purely policy that is divorced from the political entanglements that we argue was indisputably influential in historically deficient decision-making. As mentioned in the executive summary, GNYHA was responsible for contributing millions to Governor Cuomo’s 2018 re-election campaign, but its support did not stop with politics – once the state budget was approved in late March, GNYHA touted their success in “securing” immunity from liability for hospitals and nursing homes, a policy that we analyze in our second report as strategic for the private nursing home industry and inconsistent with the state’s pledge to protect frontline medical workers.

In this analysis, it is most helpful to consider the motivations of power and profit: power in the private nursing home industry’s near-monopolization of the entire elderly health care sector and its outsized political clout, and profit from the monetary incentives that the current scheme of short-term rehabilitative Medicare and long-term care Medicaid benefits provide.

II. New York Nursing Homes: An Overview

Daily reports on deaths – confirmed and presumed – in nursing homes and adult-care facilities attributed to COVID-19. – are provided by the New York State Department of Health (NYSDOH). Unfortunately, these public figures do not include the corresponding caseload for each facility, which should be reported as a means for determining the severity of transmission of the novel coronavirus at that facility.

According to the Department of Health, private sector nursing homes in New York State are classified as either proprietary (namely for-profit) or voluntary (not-for-profit). The breakdown of ownership types of New York nursing homes is as follows:

In New York State, 48.8 percent of all nursing homes are owned and operated by proprietary LLCs (a similar percentage do so in New Jersey as well, as we will discuss below). Private sector entities overwhelmingly run New York State nursing homes, a majority of which are for-profit proprietary organizations. We argue that the sheer amount of nursing homes under the purview of the for-profit private sector has had a devastating effect on the health and safety of residents during the 2020 coronavirus pandemic.

The NYSDOH reports attributed deaths as both “confirmed” and “presumed” deaths. While the proportion of confirmed deaths in proprietary nursing homes is slightly lower than their percentage of ownership of facilities in New York State, when examining the presumed deaths, the share of deaths in proprietary nursing homes abruptly rises to 73.8%, an over ten percentage point increase from the proportional share of proprietary nursing home facilities.

It is also worthwhile to look at the distribution of deaths between the different ownership types:

The histogram representation in particular provides insights on how for-profit facilities performed in relation to voluntary and public nursing homes. Namely, the distribution of deaths for voluntary and public facilities is almost strictly left-skewed, while this is not the case for the proprietary nursing homes. In other words, it is reveals one significant difference between for-profit and not-for-profit nursing homes: the infection rate.

Nearly three-quarters of proprietary nursing homes had at least one case of COVID-19, while fewer than half of public and voluntary nursing homes had infections. One important note is that due to bed shortages, the governors of both New York and New Jersey ordered all nursing homes to unconditionally accept coronavirus-positive patients. This likely contributed to an inflation of the absolute number of infections as well as the rate of infections at public and voluntary nursing homes, which are incentivized to prioritize the health of their residents, unlike their proprietary counterparts.

In one remarkable instance, a publicly-run nursing home in Rensselaer County, New York went as far as to disobey the aforementioned March 25th Executive Order issued by Governor Andrew M. Cuomo. Most fortunately, this facility (the Van Rensselaer Manor, run by Rensselaer County) has functioned unscathed with zero incidences of COVID-19 cases and deaths. An optimistic yet reasonable assumption is that had this executive order never been issued, then public and voluntary nursing homes would have been able to adhere to their moral and health imperative of prioritizing the safety of their staff and residents, and that case and death tolls could have been mitigated to a great extent.

Another distinction lies in the variance, or dispersion of the data:

Observe that the variances for both the public and voluntary nursing homes are more than double than that for the proprietary facilities. One elementary explanation for this discrepancy may be attributed to the striking difference in sample sizes for the share of deaths that transpired in proprietary facilities, as opposed to those in public and voluntary ones. Another line of reasoning, as discussed earlier, may be that public and voluntary nursing homes were most likely to comply with the executive order than for-profit facilities, leading to catastrophic outcomes in a select few nursing homes with over sixty deaths, ergo the outlier data points contributing to the high variance.

We provide analogous data below for New York City:

II-a. A Response to Alternative Perspectives

One approach has been to measure the death rate within nursing homes using bed count as the metric (in lieu of the number of facilities). Using this formulation, the disparities between for-profit, public, and not- for-profit are minimal:

We note once more that public and not-for-profit nursing homes likely had an inflated death toll due to their mandatory compliance with state orders to accept COVID-positive residents.

One study commissioned by the New Jersey Department of Health did not find a strong correlation between the profit or not-for-profit status of a nursing home and its death toll, and instead attributes the deaths to geography (infection rates in nursing homes mirroring the infection rate of the community they are in) and staffing and PPE deficiencies. While these are certainly legitimate and nontrivial factors to consider, we argue that all of this must be contextualized as part of a privatized system that is designed to maximize profits for nursing home corporations and not health care for nursing home residents.

Moreover, an analysis that divorces the politics from policy will necessarily be incomplete, as in the case with New York, we have seen that the two have more likely than not been conflated in GNYHA’s campaign contributions to Governor Cuomo and their participation in the creation of the immunity policy.

Another report published by the New York State Department of Health attributed the nursing home death toll to previous infections by nursing home staff, and actually go as far as to claim that the March 25th policy issued by the Cuomo administration to unconditionally admit COVID-positive patients to nursing homes had no bearing on the COVID-attributed deaths that took place in nursing homes.

One of the assumptions that this report makes is that the only COVID-positive residents admitted to nursing homes were those initially in nursing homes, admitted to the hospital for COVID treatment, and then re-admitted to their original nursing home; ergo, no new infections could have been possibly seeded in nursing homes. However, the language in the directive clearly states both “residents returning from hospitalization and for nursing homes accepting new admissions” (see below).

Moreover, this report does not examine any possibility of a profit motive in a private nursing home industry that is largely operated as a business; we disagree with an analysis that does not warrant this significant enough to include in a study.

III. Breakdown of New Jersey’s Long-Term Care Facilities

The New Jersey Department of Health (NJDOH) provides on their website a comprehensive list of all long-term care facilities (LTCs) in the state, complete with data on the type of ownership, the nursing home operator, down to the name and contact information for the administrator of the facility. Matching the information from this list to the daily reports that the NJDOH puts out on COVID-19 infections and deaths at LTCs, we are able to determine the proportion of cases and deaths that transpired at public, private not- for-profit, and private for-profit facilities.

Four types of facilities experienced the greatest amount of cases and casualties from the coronavirus. In the order of most to least severe, they are: nursing homes (NH, 331 out of 369 infected), assisted living residences (ALR, 133 out of 210 infected), comprehensive personal care homes (CPCH, 11 out of 35 infected), and residential dementia care homes (RDCH, 15 out of 28 infected). Each facility is defined as follows according to the New Jersey Department of Health , with the exception of RDCHs (reproduced here for convenience):

In general, irrespective of the type of facility (nursing home, assisted living residence, etc.), the proportion of facilities classified as for-profit LLCs constituted a plurality, if not an outright majority of ownership type. As Figure 9 below illustrates, 44.8% of New Jersey long-term health facilities are classified as for- profit LLCs.

When we aggregate the tallies of ownership classification into the larger categories of government, nonprofit, and profit, a greater narrative of ownership emerges:

This means that an astonishingly low 1.4% of LTCs are publicly-owned and run, leaving the remaining 98.6% of facilities privately-run, with a substantial majority of those run for-profit.

The proportion of cases and deaths also roughly parallel the proportion of ownership, although depending on the actual ownership of the unclassified facilities, it is possible that the proportion of either one of the privately-owned categories sees a substantial increase in the burden of deaths:

We also note that in addition to having a long-term care sector largely dominated by for-profit institutions – meaning the bottom-line is a priority more fundamental than the care of residents – the New Jersey Commissioner of Health on March 31st issued a directive ordering nursing homes and post-acute care facilities to unconditionally accept COVID-positive patients. Undoubtedly and tragically, this contributed to an increase in infections and likely, additional deaths (particularly in publicly-owned facilities).

IV. Conclusion and Policy Prescriptions

The data is quite unambiguous that a clear association can be drawn between the near-monopolization of ownership the private sector has on long-term care facilities to an increase in the overall death toll. In particular, the plurality, and in some cases even a majority, of ownership is by for-profit LLCs. By incentivizing profit over the health and well-being of residents, it is clear that many of the COVID-19 infections and deaths could have been prevented had human life been prioritized from the beginning.

The grave inadequacy of response to the COVID-19 pandemic is due to a fundamentally capitalist model of ownership and governance in nursing homes, one that maintains and preserves the incentive of profit over that of human well-being in private-sector homes, while also tarnishing and violating the mandate of publicly-owned nursing homes to serve their residents without condition and compromise from placating stakeholders.

At the crux of the matter, we can see that profit is in fact the central motivation for the actions of the governments of New York and New Jersey and the private nursing home, be it through the codification of immunity from any financial, criminal or civil liability, or through the extraction of individuals’ Medicare and Medicaid benefits through reimbursement formulas partial to the nursing home industry. In this sense, it is almost futile to draw a clear distinction between “public” and “private” administration of nursing homes, as in this case, government executives and private stakeholders have actively colluded for the shared aim of maximizing profit.

We prescribe the following policy initiatives:

  1. Pass Bill S.8497/A.10427 and repeal Article 30-D from the Public Health Law, which will enable medical workers and nursing home residents to hold nursing home executives and shareholders legally accountable for their injurious actions.
  2. Portable and Fluid Benefits: As long as secondary markets exist to extract and maximize profits from Medicaid and Medicare benefits, powerful private equity firms and for-profit entities will manipulate policies to make as much money during a crisis instead of saving people’s lives. One clear way to eliminate the ability of external stakeholders to extract profits from public benefits is to center all benefits around the needs of individuals; in this case, that would be nursing home residents. The Inclusive Value Ledger (IVL) , which was recently covered by MIT Technology Review , will help redesign our entire public benefit system by making people’s benefits transferable, fluid, and even fungible.
  3. Local attestation protocols: During a time of crisis like #COVID19, the residents, their family members, or legal guardians should have direct control over their public benefits like Medicaid reimbursements. This can be achieved through a self-sovereign identity (SSIDs) protocol that allows individuals to carry an identification system that allows for self-attestation or trusted attestations of individual needs. Assembly Bill No. 1046222 offered specific details on SSIDs.

NY lawmaker, focused on busting up monopolies, canceling student debt, & building resilient local economies.

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