Carlyle: Fix ManorCare Now!

Background: The Carlyle Group’s takeover of HCR Manor Care
August, 2008

In July 2007, The Carlyle Group, one of the world’s largest private equity firms, announced its plans to purchase HCR Manor Care, one of the nation’s largest nursing home providers.  The $6.3 billion takeover was the largest ever in an industry where private equity ownership has become a national trend, with often painful consequences for patient care.  According to a September 23, 2007 New York Times expose, managers have cut registered nurse staffing levels at 60% of the nursing homes bought by large private equity groups between 2000 and 2006, and many of the homes purchased before 2006 scored worse than the national average on 12 of 14 indicators used to track resident ailments, such as bedsores and easily preventable infections.(1)

Between Carlyle’s July announcement of the deal and its completion of the takeover on December 21, 2007 – generating a reported windfall of as much as $254 million for top Manor Care executives and current or recently retired officers – quality care advocates came together to challenge Carlyle to commit to fixing ongoing care problems at Manor Care.  Regulators pressed Carlyle and Manor Care to address key questions, many of which remain unanswered:

• How does Carlyle intend to make a profit at Manor Care without cost cutting measures that could affect front-line care?
• Will Carlyle restructure the company to make it more difficult for residents and regulators to hold them accountable?
• Who will be ultimately responsible for the care provided after the buyout?

Questions over these issues as well as Manor Care’s existing track record of inadequate staffing levels and patient care problems generated a groundswell of concern from stakeholders across the country.  Patient care advocates joined with residents and their family members across many states to call upon regulators to scrutinize Carlyle’s application for facility licenses, and to take appropriate steps to ensure the takeover did not further erode the quality of care in Manor Care’s facilities.  The public outcry prompted elected officials and regulators in many states to take unprecedented steps: over just a six week period from November through mid-December, related public hearings were held in six states and in two Congressional committees.

In response to the campaign, Carlyle and Manor Care issued a “Quality Patient Care Pledge” that outlined general concepts of how they intend to deliver care.(2)  In the brief period following the buyout, numerous signs are already emerging that suggest Carlyle’s “Patients First” pledge is nothing more than a broken promise:

• On February 12, a Manor Care facility in Maryland landed on the CMS “Special Focus Facilities” watch list for nursing homes with a track record of patient care problems.(3)
• Less than five months after a resident at a Pennsylvania Manor Care facility died from critical injuries received in a fall, another resident at the same facility died from cardiac arrest after staff failed to call a physician right away when they noticed warning signs. In both instances, the Pennsylvania State Department of Public Welfare found the facility in violation of regulations that require timely and necessary care in case of an emergency.
• The Federal Labor Board has issued complaints against Manor Care for numerous violations of federal labor law, leading to trials in Pennsylvania and Michigan. The board has issued complaints charging, among other things, that Manor Care unlawfully interrogated an employee about support for the union and unlawfully threatened an employee with job loss or reprisal because of the employee's support for the union.
• The Federal Occupational Health and Safety and Health Administration has opened an investigation into conditions at the Manor Care facility in Palmer Township, Pennsylvania, after at least three workers reportedly experienced breathing or other problems related to a renovation project in the first floor rehabilitation wing of the facility.

Congress has recognized that additional regulation is needed to address problems like those raised in connection with this buyout by introducing the Nursing Home Transparency and Improvement Act, S.2641.  In addition, parallel efforts are underway in numerous states to strengthen nursing home transparency and accountability, including Maryland (which passed two nursing home reform laws this year), Michigan, Illinois, Connecticut, and Wisconsin.

(1) Duhigg, Charles, “More Profit and Less Nursing at Many Homes,” New York Times, September 23, 2007.
(2) Carlyle company press release, “The Carlyle Group issues ‘Patients First’ Pledge as Purchase of Nursing Home Company Manor Care Nears Completion,” October 22, 2007.
(3) CMS, Special Focus Facility Initiative, 2/12/08.