“I don’t know where these investor groups can see savings without cutting back on the level of quality,” Grabowski said.

Part of the problem is that to boost profits, many for-profit operators set up a network of related companies to provide fee-based services such as management, physical therapy, and staffing. They also may sell a nursing home’s real estate to a sister company, which then charges high rent. These payments cut into the available operating funds to provide adequate staffing and quality care.

Last year, New York Attorney General Letitia James sued the for-profit owners of four nursing homes for financial fraud and resident neglect, alleging that they used more than $83 million in public funds to enrich themselves through a complex network of related companies while providing horrendous care.

“When nonprofits are sold, you start to see a precipitous decline in quality,” said Sam Brooks, director of public policy for National Consumer Voice for Quality Long-Term Care. “Nonprofits generally staff well above for-profits. When churches and nonprofits divest these homes, for-profits move in, and the care gets really bad.”

The leaders of not-for-profits that have sold facilities to for-profit operators cite a variety of reasons for exiting or downsizing. Those reasons include state Medicaid payment rates that are too low to cover operating costs and a shortage of nursing and other staffers that makes it hard to maintain quality care. In addition, they say their facilities have seen fewer admissions, at least partly because Medicare Advantage plans have tightened coverage policies for rehabilitation care in nursing homes.

Susan McCrary, chief executive of St. Ignatius Community Services in Philadelphia, said her organization sold its nursing home because it was losing money. She said low state Medicaid rates forced their hand, even after the state bolstered its Medicaid payments by 17.5% in January 2023.

McCrary said the St. Ignatius board worried the losses would jeopardize the organization’s ability to continue its mission of serving low-income seniors, for whom it also operates three independent-living and assisted living buildings.

At the same time, “our board definitely had concerns about selling to a for-profit because we’re aware of the research that shows the quality of care is not the same as with a nonprofit,” McCrary said. “But we knew we needed to move forward with this process to continue our services in West Philadelphia.”

Nate Schema, CEO of the Evangelical Lutheran Good Samaritan Society, said his organization decided to sell some of its long-term care facilities to Continuum Healthcare, a New Jersey-based corporation, and a second company, Idaho-based Cascadia Healthcare, as part of its strategy to better serve its communities. Good Samaritan now operates in seven Midwestern states, down from 22 states. Consolidating markets better enables his organization to launch programs for nursing home residents in conjunction with Sanford’s hospitals and clinics.

“We’ve been very intentional about finding quality partners to carry on our mission,” Schema said. “Unfortunately, we haven’t seen a lot of nonprofit providers coming to us.”

Continuum, which took over Scandia Village nursing home in January, will address staffing shortages by improving wages, benefits, and career opportunities, said Tim Hodges, the corporation’s communications director. Continuum, which is owned by private investors and commercial lenders, owns eight nursing homes in four states.

Similarly, Steve LaForte, Cascadia’s executive vice president, said his company has revived the finances of the nine Good Samaritan nursing homes it took over in the Pacific Northwest partly by attracting more patient referrals and strengthening relationships with state policymakers, in the hope it “leads to more realistic Medicaid rates.” He said Cascadia has also focused on workplace culture — such as by not using workers from staffing agencies — and on empowering those who run the individual facilities to select vendors for pharmacy, rehabilitation, and other services.

Cascadia, he said, does not use tactics like contracting with sister vendors to boost its profits. “That type of organization gives the whole industry a bad name,” LaForte said.

The overall perception of for-profit corporations is unfair, said Zach Shamberg, CEO of the Pennsylvania Health Care Association, because all nursing homes are struggling under inadequate Medicaid rates and high labor costs due to a shortage in workers.

He said he hopes that Pennsylvania’s Medicaid rate increase — plus a new minimum staffing requirement and a mandate that 70% of total costs be dedicated to resident care — will address the financial and quality issues. Nursing homes in Pennsylvania and across the country are also lobbying state lawmakers and the federal government to offer extra payments tied to quality outcomes for residents.

“If there aren’t for-profit entities to buy these facilities, these facilities are closing, which would exacerbate the existing access to care crisis as the population gets older,” Shamberg said.

©2024 KFF Health News. Distributed by Tribune Content Agency, LLC.