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When Private Equity Firms Takes Over Nursing Home Chain, Disaster for Patients Ensues

When Private Equity Firms Takes Over Nursing Home Chain, Disaster for Patients Ensues

The Carlyle Group is one of the largest private equity firms in the world, with $201 billion in assets under management. Some of those assets, until recently, included HCR ManorCare, a Toledo, Ohio-based nursing home chain with 34,000 beds and 500 locations, itself the second-largest such chain in the nation.

During the years that Carlyle Group owned HCR ManorCare, conditions in the nursing homes deteriorated significantly, with health code violations rising by 26 percent between 2013 and 2017, according to the Washington Post. That was a rise in violations from 1,584 to approximately 2,000, and behind many of those violations were patients suffering from neglect and substandard care.

Citations increased for lack of bed sore prevention and treatment, improper care for those with colostomies and other special needs, lack of assistance for a patient requiring help with personal hygiene and eating, and medication errors. One Pennsylvania patient was given so many opioids he required emergency hospitalization, while many patients soiled themselves regularly because there was no one to help them to the bathroom.

When it came to the most serious violations, those posing “immediate jeopardy” to patients, the number of citations increased by 29 percent. All HRC ManorCare violations rose at a number three times faster than comparable nursing home chains during that period.

Carlyle Group ceded control of HCR ManorCare in June of 2017, because HRC defaulted on $380 million in loans from the International Swaps and Derivatives Association. That organization “was created to make the world of privately negotiated derivatives safer and more efficient,” according to Investopedia, but such financial instruments played a large role in the housing collapse of the Great Recession.

In addition, HCR ManorCare was also under investigation by the Department of Justice for allegedly pressuring nursing home therapists to exploit their patients for profit. In March 2018, HCR ManorCare filed for bankruptcy with $7.1 billion in debt. A nonprofit group, ProMedica Health, has since bought the chain. HCR ManorCare’s longtime CEO, Paul Ormond, walked away with $117 million in a deferred compensation agreement.

Private Equity and the Poor

The average person probably doesn’t think of private equity firms and their billionaire managers as having much, if anything, to do with the lives of poor people, but that’s not the case. During the Great Recession, private equity firms discovered industries they had previously ignored, many of which involved the most vulnerable, including nursing homes and payday lenders.

In the case of HRC ManorCare, which Carlyle Group acquired in 2011, $1.3 billion was taken out of the company for investors, leaving the nursing home chain with tremendous debt. The deal involved HRC ManorCare selling its real estate to the private equity firm and then paying rent to the Carlyle Group.

Shortly after, hundreds of HRC ManorCare employees were laid off, and various cost-cutting measures took place. Staffing was 10 percent below the national average. Still, many of the nursing homes could not pay their rent to the Carlyle Group.

Patient’s family members complained about the lack of staffing and poor care. One woman found her father in a wheelchair, naked with just a blanket thrown over him. Lifting disabled patients is usually a two-person job, but lack of staffing many nurse’s aides had to lift patients on their own, often with disastrous consequences for the patient and staff member.

Many of the nursing homes were infested with roaches and were just plain dirty. That lack of sanitation just exposed patients to more health risks.

A Business They Didn’t Understand

One nursing home consultant who worked with HCR ManorCare on health code violations and interacted with Carlyle Group executives said they were an “interesting” group. That’s a careful choice of words because he makes it obvious that these investment bankers had no clue about this business.

The bottom line is that some industries, such as nursing homes, are not suitable for the pure capitalism practiced by private equity firms.

Victim of Nursing Home Abuse or Sexual Assault?

If you or a family member are the victim of nursing home abuse or a sexual assault in a nursing home, visit our nursing home abuse and neglect page.

Think you may have a case? We are happy to listen and see if we can help. In an emergency, call 911 and report the incident to police and then call us. The quicker you call, the more effective we can be in finding witnesses and making sure video surveillance evidence is preserved. For more information, contact us ONLINE, by email [hidden email] or toll free at 833.201.1555.

All inquiries are kept confidential and there is never a fee for a consultation. If we or one of our partners takes your case, there are generally no fees or costs unless we win your case and recover money for you.


Related topics: code violations (5) | financial investment (3) | neglect (68) | substandard care (67)

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