Make Me Smart January 23, 2024 Transcript

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Kimberly Adams 

Hello, I’m Kimberly Adams. Welcome back to Make Me Smart, where none of us is as smart as all of us.

Kai Ryssdal 

It is Tuesday today, the 23rd of January. Thanks so much for joining the pod. We’re going to talk about the nursing home industry today. And more specifically, what happens when money, money, money, money in the form of private equity gets involved.

Kimberly Adams 

Yes, if we are lucky, all of us will get older and need some kind of help. Many of us would love to age at home and place, you know, comfortable and whatever. But the truth is that a lot of us are going to end up in nursing homes or assisted living facilities. And if not us, then maybe our loved ones. And a couple of years ago, the Biden administration raised a lot of concerns about the state of nursing homes and corporate investment in that industry. So, to learn more about this and hopefully get some guidance on what the future may look like for some or all of us, we wanted to get smart about it. So here to make us smart is Mark Unruh. He’s a professor of population health sciences at Cornell Medical College. Welcome to the show.

Mark Unruh 

Thank you. Thank you for having me today.

Kimberly Adams 

So first, can you lay the kind of groundwork about how big this industry, the nursing home, assisted living facility industry, and you know, who lives there?

Mark Unruh 

Sure. So, there are about 15,000 nursing homes in the U.S. Most are for profit, about two thirds of the facilities. They take care of basically two populations. One population is for post-acute care, and these are generally individuals who are just discharged from the hospital but aren’t quite well enough to go home yet and spend a few weeks in the facility receiving rehabilitation therapy. And the other population is there for long-term care, and these are individuals who reside in the nursing home. They aren’t going back home; they receive custodial care.

Kai Ryssdal 

Keep going a little bit because there’s more to adjust than that, right?

Mark Unruh 

Yeah, yeah, absolutely. So, the amount spent on nursing home care aren’t trivial. For example, as I mentioned, with the post-acute care population. That’s mainly covered by Medicare, and Medicare spends in the neighborhood of $26 billion annually on post-acute care in these facilities. And Medicaid is the primary payer for long-term care in nursing homes. And those Medicaid programs spent about $57 billion each year on long-term care in nursing homes. As I mentioned, about two thirds of these facilities have for profit ownership. And about 5% of these facilities have private equity ownership. Private equity ownership peaked roughly between 2013 and 2017, according to our estimates. It’s tailed off a bit, but it still remains about 5% these days to the best of our knowledge, but private equity differs a little bit than other for-profit owners. And I can go through a few of those issues, if you like. Yeah, go for it. Well, first of all, there’s some of the concerns around private equity ownership involve these owners potentially having little or no experience in nursing home care. That seems important. Yeah, definitely. Also, they differ from other for-profit owners, and they seek high short term profits. So, returns of 20% annually is a common target that’s cited, for example, this might lead to more of a focus on increasing profits than on the quality of care. Additionally, Medicare payments for post-acute care in nursing homes are much higher than Medicaid payments for long-term care. So, this might lead private equity firms to prioritize Medicare patients over those who are receiving those covered by Medicaid for long-term care.

Kai Ryssdal 

Let me ask you, professor, to make a value judgment here. If this was your mom, would you put her in a home run by a private equity company?

Mark Unruh 

Probably not. Based on our research, we found that these facilities have higher hospitalization rates, higher rates of emergency department visits, higher Medicare spending on residence. Likewise, other studies have shown that they have higher mortality rates as well.

Kimberly Adams 

I want to lean into a distinction you made about when these services are paid for with Medicare versus when they’re paid for with Medicaid, because Medicaid tends to be the program relied upon by people who have lower income, or maybe don’t have other types of health insurance. So, what you’re talking about is people who really, maybe can’t afford or their families cannot afford to put them into a different facility. And so, they’re relying on Medicaid funding for their nursing care. Is that about right?

Mark Unruh 

Yeah, that’s correct. And also, a common scenario too is that someone may be in need of long-term care to the point where that care can’t be provided in their home and they need to go to a nursing facility. As an example, the majority of long stay residents in nursing homes have some degree of dementia. And so, what happens is many of them begin by paying out of pocket because Medicare does not pay for long-term care. That’s a common misconception. As you point out, Medicaid does, but if your income or assets are too high, you can’t qualify for Medicaid. So, you end up paying out of pocket until you spin down your assets, and then you eventually qualify for Medicaid.

Kai Ryssdal 

Is there an upside to private equity owning a nursing home facility?

Mark Unruh 

Well, we like to be even-handed, and there are some potential benefits. For example, private equity firms have a lot of financial resources that could conceivably be used to improve quality, or you know, regulatory compliance, which is an area where nursing homes have consistently performed poorly. They could also help bring sophisticated management systems to improve efficiency. Likewise, nursing homes have lagged behind physician practices and hospitals in their adoption and use of health information technology. There are some programs that went into effect, maybe 12 years ago, that provide financial incentives for physicians and hospitals to adopt Health IT and adopt more sophisticated Health IT over time. However, nursing homes were left out those programs as a result, they’ve lagged behind. But private equity firms could improve the Health IT infrastructure of these facilities. They’re often associated with large chains, they again, they have large financial resources, and they could help out in that respect. Whether they do or not is an open question.

Kai Ryssdal 

Well, I was just going to say there were a whole lot of conditional “coulds” in your answer there, sir.

Mark Unruh 

Yes, that’s correct.

Kimberly Adams 

Oh, I guess that means that they’re not actually doing that?

Mark Unruh 

Well, we don’t know it, you know, and, you know, not every private equity firm is the same. You know, there are large investors that may, you know, for example, buy up large national chains of nursing homes. And then there are smaller private equity firms that might buy two or three facilities in a specific area of the country.

Kimberly Adams 

So, I’ve done a bit of reporting on these new regulations around staffing requirements in nursing homes for the number of nurses and the number of on-call physicians and things like that. And the thing I heard over and over again, was that there are not enough nurses, there are not enough nursing homes and assisted living facilities, to adhere to the regulations, much less, you know, even meet the demand that’s coming with aging baby boomers. And I wonder how you think about sort of the intersection of private equity and for-profit nursing homes, and just this growing demand that is unmet at this point?

Mark Unruh 

Yeah, it’s a huge problem. But one thing we see in regard to specifically with staffing levels in nursing homes after prophetically acquisitions. In our research, we’ve consistently seen that there’s a reduction in the staffing levels of registered nurses after these acquisitions. So, registered nurses serve as a crucial component of care provided nursing homes, lower levels have been associated with poor quality of care and numerous studies.

Kai Ryssdal 

So, just sort of very big picture here. Nursing homes are expensive. They are challenged in staffing; they are challenged in care sometimes. Do you suppose? Is it a good business model for private equity? I guess is my question.

Mark Unruh 

Well, it can be. So there are a couple of factors that make nursing homes attractive to private equity firms. First of all, they receive steady payments from Medicare and Medicaid. But probably the biggest interest in nursing homes by private equity firms is the real estate. So common strategies for the.

Kai Ryssdal 

Sorry, sorry, sorry to jump in.

Kimberly Adams

I hadn’t thought about that at all.

Kai Ryssdal

But but that’s like, I mean, when Sears was you know, circling the drain, all the stories were about Sears is a real estate play, and then the actual company itself goes kablooey. Practically. That’s not a great example, for nursing homes might I just say.

Mark Unruh 

Yeah, no, it is an issue. So, first of all, when a private equity firm acquires a nursing home, typically it’s that transaction is done mainly with debt, the private equity firm uses very little of its own cash. So then that debt is then placed on the acquired facility. Now, the private equity firm is not responsible for the debt used to purchase that nursing home. So that leads you know, often nursing homes are, you know, operating on very thin margins, so that adds further financial strain. But then a common strategy is for the financial, as for the private equity firm, and this happens with other owners too. It’s not limited to private equity for firms, but they’ll turn around and immediately sell off the real estate. And then they’ll use that revenue to disperse to investors, not for investments back in the facility to improve the quality of care. So now you have a facility that’s paying off the debt used to acquire it. And now it also has to make lease payments. So, you can see where this can, you know, sort of snowball and create further financial hardship for facility.

Kimberly Adams 

So then for all of us who are thinking about either our own future or that of loved ones, like, how do you approach thinking about and planning for the future of aging in your family knowing what this business model is like?

Mark Unruh 

Yeah, it’s a difficult question, and it’s not easy for families. And there have been a number of articles that have come out in the media about this recently. How do you finance these days? You know, it’s hard to predict whether you’re going to need to stay in a nursing home or not. And with just the tremendous expense, it’s hard to plan for, there is private long-term care insurance available, but it’s very difficult to get. The companies that provided those plans, starting in the 90s, made bad bets. And a lot of people, a lot more people who purchased those plans ended up cashing in on them than they anticipated. And so, the underwriting for them is now very strict. And it’s difficult to sign up for one of those plans. And especially if you’re a little bit older, or if you have any chronic conditions, you’re almost certainly not going to be accepted for one. Now, if you’re lower income, as you raised the point before, if you’re covered by Medicaid, your long-term care in a nursing home is covered by the state Medicaid program. For people whose incomes, if you don’t qualify for Medicaid, then you have to pay out of pocket. And that can be very expensive. You know, a nursing home stay can easily be 10 or $12,000 a month, and it varies quite a bit across the country. So, you know, the average family certainly can’t afford that.

Kimberly Adams 

So what do we do?

Kai Ryssdal 

What do we do? Right? Because this is clearly not sustainable. 10 to $12,000 a year with an aging population? I mean, come on.

Mark Unruh 

Yeah, yeah. Well, you know, a number of years ago, when the Affordable Care Act was first passed, there was a provision called the CLASS Act. And forgive me, I can’t remember what that acronym stands for. But it was basically a public long-term care insurance program. But it turned out not to be financially feasible. So, it was cancelled immediately. But there just isn’t the political will to implement some sort of public program to cover this cost because the spending on long-term care is just so high, no one wants to bite that bullet.

Kai Ryssdal 

Does it make you crazy studying this stuff and investing your professional life? You are a professor of population health sciences at a renowned medical institution. And here, you’re banging your head against the wall. It must make you crazy.

Mark Unruh 

Yeah, it does. But, yeah, I mean, you know, there’s a common saying you sort of get this system you pay for, and, you know, the way nursing homes are set up now and the way they’re paid and the financial systems in place, and the way regulations and oversight are set up, creates this situation. So there needs to be served, you know, across the board reforms to change this.

Kai Ryssdal 

Which, oh by the way, I thought was what Obamacare was supposed to be, no? Sorry, I just keep dragging us farther down into this.

Mark Unruh 

That’s a very broad question.  And there are a number of efforts being made. I will say that, but more definitely needs to be done.

Kai Ryssdal 

Fair enough. Mark Unruh is a professor of population health sciences at Cornell Medical College. Professor, thanks for your time. And thanks for sticking with us as we dragged you through.

Mark Unruh 

Thank you again for having me. I appreciate you bringing attention to the issue.

Kai Ryssdal 

So, we’ve got a family friend whose mother now has had to be put in a nursing home. And it is, I believe, $15,000 a month, and it’s insane. It’s not. I don’t want, as I said to my kids, when we moved into the house we moved into when they were younger, you’re going to have to carry me out of here and sell this house out from under my dead body because I’m never going anywhere else. They’re just going to have to deal with it.

Kimberly Adams 

My sister works in nursing homes. And just some of the stories that she tells you know about the workload on the very few staff there and the waiting list to even get in there. It is a problem, that it’s sort of like one of those things where you like peek under the hood and you’re like, oh no. I don’t want to look under there because it’s bad and you know, people kind of can choose not to think about it until you have to think about it. And then you realize how awful it is. And that’s too late to be thinking about it, you know, when your loved one really needs a place to go. And he’s, you know, Mark is right, there’s not a lot of political energy behind doing anything about it. I mean, they’re barely willing to touch social security. And that’s just now coming up. Long-term care? Not even on the radar for a lot of politicians. Okay, well with that uplifting bit, if you are supporting a loved one in nursing, home care, assisted living, assisted living facility, if you have thoughts on this topic, or maybe you’re doing your best to keep yourself or a loved one at home, we want to hear about your experience where at 508-827-6278, also known as 508-U-B-Smart, and we will be right back.

Kai Ryssdal 

All right, we shall do some news. Kimberly Adams, you shall go first.

Kimberly Adams 

A quick one and then a longer one. So, the quick one is about tax season. We’ve talked a couple times on this show about all of the legal troubles related to TurboTax and these online tax filing companies, basically lying to the American people about free file. And the IRS is working on its own free file program, which it’s piloting this year. But TurboTax in particular, has gotten in a lot of trouble over the years. And so now, reading here for The Verge, “The Federal Trade Commission cracked down on TurboTax, issuing a final order that prohibits the company from calling its services ‘free’ when most customers end up having to upgrade to paid services. Parent company Intuited advertised TurboTax as ‘Free, free, free free,’ even though a majority of customers were in fact ineligible for free services. The FTC sued TurboTax in 2022 over misleading advertising, and now they’re saying that the character of the past violations is egregious. For at least six years, Intuit blanketed the country with deceptive ads to taxpayers across multiple media channels.” So now, “Intuit can’t say that any of its goods or services are free unless it’s free for all customers, or unless the company clearly displays which percentage of customers qualify or discloses that a majority of customers actually aren’t eligible. Now, the TurboTax website says roughly 37% of filers qualify for its free basic tier of tax filing assistance.” And as someone who has used TurboTax, I can tell you that it’s usually only for the federal return, not your state return. So, that’s something to keep in mind around tax season. And FYI, as I’ve heard from many tax experts over the year, if you’re making like under 80k, and you have a relatively simple setup, you do not need to pay to do your taxes. There are free services all over the place. There are tax clinics. There is the IRS website that has a lot of actually free services. Most people do not need to pay somebody to do their taxes, FYI. Okay. So, there’s that public service announcement. Other story, I get sent a lot of polls and surveys from different outlets, and I got an interesting one today from LegalShield, which is you know, a website and call-in line. It’s sort of like a place that you can go to pay for legal advice, counsel protection representation. Reading here, where they say on their about page, “LegalShield is one of the world’s largest platforms for legal, identity, and reputation management services in North America.” Okay, so anyway, they do a poll, looking at how many people are calling in or requesting their help with financial issues. And their LegalShield data reveals the highest consumer financial stress levels in three years. So, it rose there. They have a consumer stress legal index rose for the 10th straight month in December hitting its highest level since November of 2020. They say this is a leading indicator of consumer confidence index and consumer confidence has been improving, but they’re getting more calls for help, and this is including help with bankruptcies foreclosures, auto repossession, payday loan assistance. and their quote here says, it “suggests rising financial instability for customers nationwide. And it’s in contrast to a string of recent positive economic indicators, including robust GDP growth, easing of inflation and a strong jobs report.” It’s from a dataset of more than 35 million customer requests for legal assistance since 2002, is the overall poll. Anyway, there’s an interesting quote in here that says, “people don’t call attorneys unless they are genuinely worried about something. The strength of our data relies on the source — unprompted calls. And so, these are real concerns from real people who sought out affordable legal advice to take action.” All of this to say, I am, you know, I’ve been looking at the same economic data that you have, I think it’s looking good, it’s looking up. But people at the lower end of the income spectrum seem to still be struggling. And a lot of those struggles are mounting. We’re seeing credit card delinquencies on the rise. And this is just another little tidbit. I wonder if we’re going to start, you know, seeing more of that K-shaped recovery stuff that we saw kind of right out of the pandemic, that are we going to end up in a situation where one sector of the economy recovers and the other just doesn’t?

Kai Ryssdal 

Yep. Yeah. It could totally be could totally be. God, K-shaped recovery? I haven’t heard that in a while actually.

Kimberly Adams 

I know, right? All right. What’s your news?

Kai Ryssdal 

All right, so I don’t usually put a whole lot of stock in the whole workers are dissatisfied, and it’s costing the economy 11 gazillion dollars, blah, blah, blah. Except when it comes from a really reputable organization, and Gallup is one of those organizations. I saw this in Bloomberg yesterday. I guess. “Disgruntled employees cost US companies” says the first sentence in this article, “an estimated $1.9 trillion in lost productivity last year, and that is a price tag on workplace unhappiness. More Americans feel detached from their employers in the aftermath of the pandemic.” Blah, blah, blah, yadda yadda. “The disruption in the last few years has reduced satisfaction in the workplace, with more employees saying they don’t clearly know what’s expected of them. A symptom that reduces engagement.” We’ll put this on the showpage. It’s really interesting. It resonates in not a couple of ways, with at least one of the people in this conversation who was not named Kimberly Adams. And also, friends of mine around the public radio universe and also in just general life. It’s really interesting, just going to what you were talking about, about people, you know, feeling stressed and all that. This is part of it. We spent so bleeping much time at work. And it’s less and less fulfilling. You know?

Kimberly Adams 

Yeah. Especially if you know, I got a lovely message from someone on LinkedIn the other day, who said something to the effect of, “I can hear in your voice that you’re feeling a little down about the news. I hope that you’re okay.” And thank you for your concern. It does get to be a little, I don’t even know how to describe it. You know, we’re out here doing the best we can. And we see the democracy going the way it’s going. And yeah, it can weigh on you for sure. Yeah.

Kai Ryssdal 

Sure does. Sure does.

Kimberly Adams 

Okay, okay. That is it for news. Let’s do the mailbag.

Mailbag

Hi Kai and Kimberly. This is Godfrey from San Francisco, Jessie from Charleston, South Carolina. And I have a follow up question. It has me thinking and feeling a lot of things.

Kai Ryssdal 

We were talking last week about how stimulus checks during the pandemic were sort of a natural experiment of guaranteed income or universal basic income, which was our Tuesday program last week. And we asked about how those checks might have affected you and or your family. And here’s one that we got.

Montage

Hi, my name is Renee from Graham, North Carolina. We were able to actually take that money and buy some small equipment and it kind of kicked started this fundraiser, and I was able to open a business, the custom framing business. We just celebrated our two year anniversary. I think about it, and if it wasn’t for that stimulus, we would not have been able to open the business. It was such a small amount of money, but it has made such a big difference.

Kai Ryssdal 

I read somewhere the other day that new business formation in this economy is that a record last year or was it a record last year so that totally resonates. That makes a lot of sense to me what she was saying.

Kimberly Adams 

Yeah, I also, I’m interested in the impact of, you know, TikTok and Reels and social media on new business formation. I want to see a study on these businesses that go viral online with whatever product, especially the startups, like how lasting that is. So, I just bought this thing that I saw on TikTok that holds plants, you know, because I’m like plants. It like allows you to clip plant pots to your railing in a kind of unique way. And it had gone viral, and you know, I jumped on the bandwagon and I’m just like, I wonder how lasting that bumped to your businesses? And can you, does it like get you in on the ground floor and give you enough stability to really keep your business going? Or is it just like a flash in the pan?

Kai Ryssdal 

Right? Totally. Did it work? The thing you bought.

Kimberly Adams 

It arrives today. I will let you know.

Kai Ryssdal 

And also now do you have ads following you around on TikTok for more things like that? Because that’s what happens to me when I click on something on Instagram.

Kimberly Adams 

Oh my gosh, so many all I mean, I’m pretty deep into gardening TikTok and gardening Instagram Reel, so I mean, like that and a lot of like DIY home stuff that I will like bookmark knowing no, I am never going to make my own bread. But you know, the videos are pretty. Okay. Anyway, before we go, we’re going to leave you with this week’s answer to the Make Me Smart question, which is what is something you thought you knew, but later found out you were wrong about? This week’s answer comes from Damian in Ridgefield, Connecticut.

Montage

I thought that when my wife 2010 Prius with 246,000 miles on it finally kicked the bucket, we buy an EV, and we will have entered the promised land, and it died. And we bought an EV, and it was not the promised land. We bought the Bolt. We drove it for a weekend, had a ton of range anxiety. I mean, I’m talking like, are we going to make it home? Are we going to make it home? It was awful. Fortunately, the dealer was able to take it back. And we since have gone and are taking delivery on a Tesla. So, I thought all EVs were going to be great. Turns out the EV market is starting to come to the dance. But everybody but Tesla has their fly down and a stain on their shirt.

Kai Ryssdal 

Well so, look with all possible respect Damian, I think Tesla has its fly down and stains on its shirt as well. Right? I just. There’s lots of quality control problems with that car, which was about all the time production problems. Also, Elon Musk, but that’s a whole different deal. So, look, it’s new technology, not everything’s going to be great. I’m sure that when internal combustion engine cars came out, they weren’t all great. Full disclosure. I’m an EV guy. Brand new. I mean, like a year old. So far, so good. You do pay attention to range, I totally get that but you have to manage it. But yeah, you know, it’s we got to get there as the short answer or we just have to stop driving, you know?

Kimberly Adams 

Yeah, I’ll leave it to you. I’m going to stick with the Metro, my feet and car share services here in DC because I’m lucky to live in a city that has it. Alrighty then. We want to hear your answer to the make me smart question of whether you have anxiety about things or not. Our number is 508-827-6278, also known as 508-U-B-Smart.

Kai Ryssdal 

Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Today’s program was engineered by Jayk Cherry. Drew Jostad is going to mix it down later. Our intern is Thalia Menchaca

Kimberly Adams 

Ben Tolliday and Daniel Ramirez composed our theme music. Our senior producer is Marissa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the Executive Director of Digital, and Marketplaces Vice President and General Manager is Neal Scarbrough.