Why for-profit nursing home operators will likely leave the sector of their own accord

Posted on June 9, 2020 in Health Policy Context

Source: — Authors:

TheStar.com – Business/Opinion

A consensus is emerging that for-profit nursing homes are at the heart of the crisis in long-term care (LTC).

The LTC crisis, in turn, is the epicentre of Canada’s COVID-19 pandemic, accounting for an estimated 82 per cent of COVID-19-related deaths.

To be sure, above-average rates of COVID-19 infections and fatalitieshave been reported at for-profit LTC facilities, which account for almost 60 per cent of Ontario’s more than 600 nursing homes.

The need to remove for-profit operators from LTC is widely agreed on by experts in health economics, advocacy groups for the elderly, and union leaders representing LTC workers.

That does not, however, make removing for-profit homes from the sector the quick fix it can appear to be.

To be sure, the for-profit business model of extreme cost control has been catastrophic. But that model was long ago adopted by the entire, cash-strapped sector, including non-profits and municipally owned homes.

It’s that model that’s got to go, not the for-profit operators, though they are likely to eventually quit the sector of their own volition, for reasons described below.

The for-profit model of nickel-and-diming LTC care and caregivers accounts for the severe staff shortages and lack of adequately trained staff that made the LTC sector dysfunctional long before the pandemic.

And that model’s widespread application explains why horrific pandemic fatality counts have been reported at the GTA’s non-profit and municipal homes — as well as the for-profits — including one operated by the Salvation Army and another by the City of Toronto.

All nursing homes in Ontario are funded almost entirely by the province, which caps the amount it pays per resident. Nursing home managers, for-profit and otherwise, have to operate within that government funding “envelope.”

Which means that all homes have to keep expenses to an absolute minimum, which compromises the care and safety of LTC residents and staff.

Non-profits and municipal homes in both Canada and the U.S. use fundraising drives, philanthropic donations and municipal grants to improve care beyond what senior-government funding allows.

Those sources of funding are not available to the for-profits. They rely on the capital markets for funding, markets that long ago soured on the profit-challenged LTC sector as an investment.

Some nursing-home operators generate much of their profit from retirement homes, home health care services and other seniors’ services.

While the focus of nursing-home concern has understandably been on staffing, the shoddy physical layout of older homes merits equal attention.

It’s the older homes that still place two or four residents in a room, sharing one bathroom, and separating residents with a mere curtain. That prehistoric layout makes controlling the spread of disease extremely difficult.

And it is the for-profit firms that own or operate the largest portion of the province’s oldest homes.

Research of the pandemic to date shows that for-profit homes have been no more likely to experience a COVID-19 outbreak than other homes.

But as a Star investigative analysis has shown, outbreaks at for-profit homes have tended to be deadlier than those at non-profit and municipal homes.

A recent research paper, by a team of experts headed by Nathan M. Stall, a geriatrics specialist at Toronto’s Mount Sinai Hospital, backs up the Star report.

The paper is titled “For-profit nursing homes and the risk of COVID-19 outbreaks and resident deaths in Ontario, Canada.”

The paper’s analysis of all of the more than 600 nursing homes in Ontario concludes that infection and fatality rates are higher at for-profit nursing homes “with older design standards.”

The most important point in that report, one that is largely overlooked by LTC reformers, is that, “Newer design standards provide for larger and more private room accommodation, as well as less crowded and more self-contained common spaces, which, beyond promoting quality of life, are designed to promote infection-prevention and -control.”

“Differences between profit and non-profit homes are largely explained by older design standards, which should be a focus of infection control efforts and future policy.”

So, properly understood, the LTC crisis is one of poor staffing andobsolete buildings.

Removing for-profit operators from the system won’t solve those two core problems. It’s difficult to see what will other than significantly increased government investment in LTC.

It’s also difficult to see for-profit operators remaining in the nursing home sector.

After all, LTC in Ontario is one of the smallest of economic sectors. In the money spent each year to run it, mostly paid by government, the LTC sector in Ontario is a $5.9-billion operation (including $1.6 billion from residents who pay for some of their accommodation).

The Royal Bank of Canada alone generates that much revenue in a month.

Looking at the profit and stock performance of Ontario’s three largest publicly traded LTC firms would give most investors a headache.

The shares of those firms — Extendicare Inc., Sienna Senior Living Inc. and Chartwell Retirement Residences — have lost an average of 41 per cent of their value so far this year.

That’s to be expected, perhaps.

What’s revealing is that the long-term profit performance of those firms has been abysmal.

On average, the pre-pandemic 2019 profit at the three firms above was almost 70 per cent below their peak annual profit.

The for-profit nursing home industry cannot consistently generate a decent return on invested capital.

Which means it can’t be a player in the costly, urgently needed reinvention of the LTC sector.

Reinventing LTC means a restoration of the minimum staffing levels scrapped by the Mike Harris government in the 1990s.

It means replacing or retrofitting nursing homes according to 21st century design standards.

It means “in-sourcing” housekeeping, cooking and other services that have been outsourced to part-time and casual workers and contractors, the use of which impairs teamwork and continuity of care.

“Continuity” is treatment of a resident by the same team of personal support workers (PSWs) and nurses long enough for it to understand the nuances of a resident.

That essential aspect of care is impossible with a workforce of high-turnover temps.

There’s more, but you get the idea.

A mere overhaul of LTC sector won’t suffice, given its role in potentially endangering everyone’s health.

What’s required is a multibillion-dollar megaproject.

The risk in demonizing for-profit operators is that it distracts from the real problem, which is a succession of Ontario governments of all parties that, with their neglect and false economies, have driven LTC into mediocrity and worse.

In this season of public protests and demonstrations, give some thought to joining friends in hoisting placards at Queen’s Park, the real Ground Zero of the LTC crisis.

Be well. And remember that social distancing and masks are now de rigueur at demos.

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