We've seen this before - a private investment firm snaps up a struggling company, raids the pension fund, reduces quality/service/equity and fires workers. Then sells it off piece by piece making a tidy profit on the transaction. It seems now that private equity firms - with nursing facilities - have found a way to reverse the process and still make a tidy profit. Instead of buying one struggling company, they've set their sites on a whole industry, and instead of breaking it up, have consolidated several small nursing facilities into giants - and found other ways to reduce quality/service/equity, fire workers (namely health care professionals like RN's) and make a tidy profit.
According to this New York times article
, private equity firms like The Carlyle Group
(who own Dunkin' Donuts and who just agreed to sell a $1.35 billion 7.5% stake to Mubadala Development Company, the Abu Dhabi government's investment arm) are creating such a complicated shell game of companies, that lawyers can't even find someone to sue when grandma dies from neglect. In many cases, the staffing at facilities owned by these investment firms is below legal minimums -essentially thumbing their noses at the law.
The end result of equity firm investment is usually an inferior product, massive layoffs and bankruptcy (read about the recent private equity investment in Chrysler
). By the time the market reacts with its wallet by shunning shoddy products, the equity firm is long gone - having made profits all along the way. But in this case, the "product" is your aging mother, and the result is lost lives.
Private equity firms are "banking" on the fact that they can hide behind a corporate structure so complicated that in the short term, they can outrun the law. And what it looks like now is just more of the same - buy an industry, make it look profitable at any expense and sell it off - and with the coming age boom, there will be no shortage of eager buyers. But legitimate public companies will find that they can not operate profitably inside the law, and the cost and quality of nursing care will decline again. Add the fact that there is a critical shortage of RN's and you have a recipe for disaster.
I don't have a solution, but you can bet there will be more (ineffective) government regulation, more nursing home horror stories and more profits for shady equity firms who's profits will be going increasingly to Middle Eastern firms investing oil money in the USA.
Until we quit wasting precious natural resources (oil AND grandma) we're going to be held hostage by our own greed.
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