Heritage Care and Rehabilitation Center in Mason City is one of 29 Iowa care facilities recently sold to a private-equity firm. (Photo via Google Earth)
The private equity firm that recently purchased 29 Iowa nursing homes has been hit with 17 times as many federal fines for poor quality care as the homes’ previous owner, according to federal data.
Recently, the real estate brokerage firm of Marcus & Millichap announced the $85 million sale of 29 Iowa nursing homes by the Iowa-based ABCM Corp. to a private-equity firm called the Cascade Capital Group.
Marcus & Millichap told Skilled Nursing News the transaction represents the largest nursing home sale ever recorded in Iowa, with the 29 facilities representing 7% of the 410 nursing homes operating in Iowa. The sale involves 2,346 skilled-nursing beds and 326 assisted living units.
The national trend of nursing homes and hospitals being acquired by private-equity firms has raised concerns in Congress and among consumer advocates who fear that such firms may pursue short-term returns for investors at the expense of patients.
John Hale owns the Hale Group with Terri Hale. (Photo courtesy of John and Terri Hale)
“Private-equity firms aren’t buying nursing homes because they are humanitarians driven by a desire to help people lead better lives,” said John Hale, an Iowa consultant and advocate for seniors. “They are doing it because they see an opportunity to make money for investors. They value profits over people.”
Data from the federal Centers for Medicaid and Medicare Services indicate Cascade Capital and its management affiliate, Legacy Healthcare, have a worse record than ABCM with regard to compliance with government-imposed minimum standards of care.
The data, compiled by the Center for Medicare Advocacy, a national consumer group, compares the past performance of the 29 Iowa facilities while under ABCM’s management with 57 other facilities owned by Cascade Capital and managed by its affiliate, Legacy Healthcare.
Among the findings:
— Violations: Collectively, the 29 Iowa homes were fined 11 times for regulatory violations while operating under ABCM over the past three years, while the 57 Legacy-managed homes were fined a total of 189 times. That’s 17 times more fines overall and nearly nine times more fines on average for Legacy than ABCM.
— Fines: The total amount of federal fines imposed against the 29 ABCM homes was $139,634, or $4,815 per facility, during the past three years. During that same time, the total amount of fines imposed against the 57 Legacy homes was $4,787,645, or $83,993 per facility.
— Abuse: On its website, CMS hasn’t flagged any of the 29 ABCM homes for issues related to abuse, while 15 of the 57 Legacy-managed homes are flagged for abuse.
— Overall quality: CMS’ overall rating for the ABCM homes averages out to 4.2 stars on the agency’s five-star scale. The Legacy-managed homes average 2.4 stars.
— Staffing: Workforce levels, long considered the single biggest factor in determining quality of care, is a bigger issue at the Legacy-managed home, which have averaged 1.9 stars on CMS’ five-star scale for staffing levels. Under ABCM, the 29 Iowa homes averaged 3.7 stars for staffing.
— Medicare denial: The Legacy-managed homes averaged six times as many payment denials – a process through which CMS temporarily cuts off Medicare money for new admissions due to issues with care – as did the ABCM homes.
Hale says that typically when private-equity firms acquire nursing homes, staffing levels decrease and there is an increase in emergency room visits and hospitalizations.
“Would I want a loved one, or any Iowan for that matter, to be a resident of a facility owned by a private equity company? Absolutely not,” Hale said.
During the Democratic administration of Gov. Chet Culver, Dean Lerner headed the state agency that inspects nursing homes. He says he shares Hale’s concerns and that “the words ‘profit’ and ‘private equity’ and ‘nursing home’ don’t even belong in the same sentence.”
Toby Edelman, senior policy attorney with the national Center for Medicare Advocacy, (Photo courtesy of the Center for Medicare Advocacy)
Toby Edelman, senior policy attorney for the Centers for Medicare Advocacy, agrees and says “private equity and health care are incompatible.”
In May, Edelman wrote to the U.S. Department of Justice and Federal Trade Commission, warning the acquisition of nursing homes by “private equity firms and other predatory, for-profit, privately-held owners endangers those who receive care from their facilities, their workers, and all taxpayers.”
In her letter, Edelman cited several studies, including one that estimates about 21,000 nursing home residents died between 2000 and 2017 due to private-equity takeover of their care facilities.
Edelman said Friday she has forwarded information on the Iowa nursing home sale to U.S. Sen. Elizabeth Warren, D-Massachusetts, who is investigating private-equity’s impact on nursing home care.
A spokesperson for Marcus & Millichap did not return calls from Iowa Capital Dispatch seeking comment for this story.
State information on Cascade Capital kept confidential
Richard Allbee, the head of ABCM Corp., has declined to discuss the sale with the Iowa Capital Dispatch, but the transaction had been anticipated for several months. In July, officials at ABCM informed its employees and residents that the company had filed change-of-ownership papers with the state.
Under a state law that was approved in 2023, nursing home buyers in Iowa must submit to the state documentation showing they have sufficient capital on hand to meet the needs of residents before they can be licensed and must disclose their relationships to any related corporations.
When asked whether the Iowa Department of Inspections, Appeals and Licensing imposed such requirements on the buyers of the ABCM facilities, a department spokesperson said only that it followed the requirements of Iowa law, “which includes a robust financial analysis.”
The spokesperson noted that under state law, all of the information a buyer provides to the state related to their business relationships and their compliance with the new financial regulations are treated as confidential and are not subject to public disclosure the state’s Open Records Law.
“I’m deeply concerned about the state’s approval of this sale,” Hale said, “and the lack of transparency about the vetting done and the specific terms agreed to.”
The 29 homes involved in the sale are located in the Iowa cities of Allison, Aplington, Armstrong, Battle Creek, Belmond, Bloomfield, Britt, Clear Lake, Elma, Emmetsburg, Garner, Guttenberg, Hampton, Independence, Indianola, Lake Mills, Lisbon, Mason City, Morning Sun, Mount Vernon, Nevada, Nora Springs, Sac City, Sigourney, Waterloo, Waukon and Webster City.
In addition, the deal includes two facilities in Oelwein: the Oelwein Health Care Center and the Grandview Health Care Center. The Morning Sun facility closed on Sept. 9, 2024, shortly before the sale was announced.
Hale says state lawmakers “need to be asking lots of questions about this sale,” and the implications for resident care.
“Once they get answers,” he said, “they need to be taking action — to put a pause on further sales to private-equity firms, to have serious conversations about how to handle future sales or mergers, and to ensure that the lives of residents and the workers who serve them are a priority rather than an afterthought.”
Edelman notes that a bill being considered in California would require the state’s attorney general to either approve or deny the sale of any health care facility to a private-equity firm. She says Congress should enact federal legislation that would give that same authority to the U.S. Attorney General’s Office.
“It’s really bad,” Edelman says. “As things stand now, these changes in ownership are a done deal by the time the public hears about them.”