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Published: Saturday, 3/27/2010

Post-buyout, ManorCare does job out of spotlight

BY JON CHAVEZ
BLADE BUSINESS WRITER

MORE THAN two years after it was taken over by a private equity firm, HCR ManorCare Inc. quietly operates its nursing homes and assisted living facilities nationwide.

The situation is much different from the uncomfortable limelight the Toledo company faced in 2007 when critics publicly protested the pending acquisition, contending it would result in slashed staffing and jeopardized patient care.

But there's little evidence the dire warnings proved true since the Carlyle Group of Washington made its $6.3 billion purchase of what had been Toledo's fourth-largest corporation.

Even the Service Employees International Union, which lobbied to block the deal on grounds that patient care would suffer, conceded last week that it hasn't kept an eye on the situation to know whether care worsened.

“The catastrophe that SEIU and others had predicted certainly has not happened, from our perspective,” said Vincent Mor, a professor of community health at Brown University.

He is chairman of an independent advisory panel established by ManorCare in 2008 to provide advice and recommendations to the company on ways to measure, maintain, and improve patient care. The panel meets quarterly.

“We get to choose where we go, and we look at a lot of data, a lot of data. In fact, we're data nerds,” Mr. Mor said. “We've seen places that had been in trouble and places that are doing extremely well.

“From my perspective, it doesn't look like they're running away from providing care to the population or that they're going broke or reducing staffing. That's my sense of it.”

Regulators and government records indicate conditions in the ManorCare nursing homes and other facilities to be, in general, no worse than they were before the acquisition.

The Service Employees International Union marched in front of company headquarters in 2007 to question what patient care might be after the buyout. A union spokesman acknowledges that the labor group has not monitored the issue since the company was taken over. The Service Employees International Union marched in front of company headquarters in 2007 to question what patient care might be after the buyout. A union spokesman acknowledges that the labor group has not monitored the issue since the company was taken over.
JEREMY WADSWORTH Enlarge

HCR ManorCare, which has 550 nursing homes and other facilities nationwide, declined to comment for this story about its quality of care. Carlyle, an $87 billion firm, said last week only that its Toledo acquisition has been performing well, with resources invested in staff training, technology, and capital improvements.

The once-local company, with its headquarters still in a 16-story downtown building at 333 North Summit St., employs 60,000 and operates its facilities under the Heartland, ManorCare Health Services, and Arden Courts names. It has 280 nursing homes, 65 assisted-living facilities, 110 hospice and home-care operations, and 70 outpatient facilities in 32 states.

Its size is about what it was before the Carlyle takeover in late 2007, although its financial information is no longer disclosed. At that time, what was then Manor Care Inc. had an annual profit of $167 million and revenues of $3.6 billion. It had about 700 employees in Toledo, and its chief executive officer was Paul Ormond. It employment and CEO remain the same.

The company, considered by industry analysts in 2007 to be one of the better nursing home operators in terms of public stock performance, came under fire by SEIU, some lawmakers, and others once the Carlyle deal was announced.

The claims ranged from concerns that a private-equity firm would care only about profits and would reduce staffing in the facilities and cut back on quality care for patients. The deal was to be Carlyle's entry into such a large health-care business.

Compensation question

One example cited by critics was the amount of money top Manor Care executives stood to make by cashing out their company stock and stock options — up to $186 million for Mr. Ormond alone. Critics said the money should be spent on improving patient care.

The union, which Carlyle executives thought would try to unionize more Manor Care workers, held protests on the streets of Toledo and elsewhere, pointed out serious care-quality and regulatory problems at Manor Care facilities, and bluntly challenged Mr. Ormond during a shareholders' meeting held to discuss and vote on the deal.

“We've done nothing since those 2007 issues were raised,” SEIU spokesman Kawana Lloyd said last week. “We've just been monitoring Carlyle to see whether they're trying to buy any more care sites.”

SEIU official Stephen Lerner said two years ago that Carlyle “must act now to fix Manor Care and protect its fragile residents.” The union represented about 1,000 of Manor Care's employees.

Regulators' records more than two years after the acquisition show no evidence that conditions warned of in 2007 have materialized.

ManorCare has 43 nursing homes in Ohio, and none has been cited for incidents in which patients were put in “immediate jeopardy” since the Carlyle deal, but four facilities had such a citation by the state Department of Health in the months prior to the acquisition, state records show.

Records show 19 ManorCare nursing homes had total citations higher than their peer average in 2009, the most recent inspection year.

Of the state's latest survey of families of nursing home residents, it found two ManorCare facilities were above the state average in family satisfaction and 14 were below average. The rest had insufficient responses.

Prior to the Carlyle purchase, 11 facilities were above the state average in family satisfaction, and six were worse. The rest had insufficient responses.

Patient survey

In the state's latest patient survey, 18 ManorCare facilities rated above the state average and 25 were below it, virtually the same results as in a 2007 survey.

Beverly Laubert, the state's long-term-care ombudsman at the Ohio Office of Aging, said the number of complaints filed against ManorCare facilities in 2009 was comparable to the number in 2008.

Some regulatory records were not immediately available in Michigan, where ManorCare has 28 nursing homes. In 2007, the state received few complaints against the facilities.

Sarah Slocum, Michigan's long-term-care ombudsman, said ManorCare facilities continue to operate as they had. “Their facilities are not on the troubled list,” she said. But, “I have not seen a big improvement in any ManorCare facilities,” she added.

Her office was concerned two years ago that Manor Care facilities were too focused on short-term stays — which generate revenues and boost profits because they are covered under the better-paying Medicare systems — and less interested in longer-term stays, part of which are covered by Medicaid, which has lower reimbursement rates.

“In some ManorCare facilities they have cut back on staffing in order to focus on Medicare short-term stays,” she said.

“People who need to convert to Medicaid and stay longer have had a difficult time doing that. … If there's not a Medicaid bed left in that facility for them to stay in, then that's a problem,” Ms. Slocum said.

Another large market for ManorCare is Florida, where the company has 29 nursing homes. In 2001, ManorCare was sued regularly in Florida until tort reform reduced some lawsuits.

Florida's Agency for Health Care Administration uses a star system to evaluate performance. ManorCare's nursing homes averaged 2.8 stars out of 5 in 2009.

Watch list

Over the last two years, five ManorCare facilities were put on the agency's watch list for violations that met or exceeded its “actual harm” threshold. But of those violations, only one, which occurred in October, put a patient in harm's way — a case in which the wrong medicine was prescribed mistakenly and the patient had to be transferred to a local hospital.

The other four problems related to food handling, fire codes, housekeeping, and other problems.

A Medicare rating system, which evaluates nursing home performance nationwide, showed no signs of widespread problems with ManorCare facilities.

Medicare also uses a five-star rating system. In Ohio, ManorCare's homes averaged 2.1 stars, in Michigan 2.6, and in Florida 2.6.

Ms. Slocum, the Michigan ombudsman, said the Medicare ratings are useful, but it is important to note that half of the information that goes into the ratings — data about facility staffing and reports on patient care — is self-reported by the facility. Health inspections and fire safety inspections also are used to determine the ratings.

Contact Jon Chavez at:jchavez@theblade.comor 419-724-6128.



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