The SeniorCare Investor: War of the Words, And Other Alien Attacks

Without sounding too paranoid, although we were asked recently whether our phones were tapped by the SEC, one has to wonder if there is a conspiracy by the mainstream news media to discredit the "assisted living" industry. How else to explain a three-part series in USA Today and a four-part series in The Washington Post both appearing during the last week of May, coincidentally about the same time that the General Accounting Office released its report to Congress (delayed, we might add) on states’ efforts to improve quality of care?

These all followed a report by the lesser-known Newsday on quality troubles in New York, mostly Long Island, at some assisted living facilities. The only one who may be pleased by this media scrutiny, or at least breathing a sigh of relief, is the nursing home sector, famous for being the usual brunt of media horror stories on how we take care of the elderly.

When corporate assisted living burst onto the scene in the 1990s, it was hailed as one solution, or alternative, to institutional care in nursing facilities. As Abe Gosman used to joke every time he opened a speech touting the merits of assisted living, there were two places that were always full but where no one wanted to be: nursing homes and prisons. Unfortunately, only the latter remain full today, and the recent news articles are now portraying an "assisted living" industry as losing its direction in terms of quality of care, with families wondering what they missed when placing a family member in one of these facilities. By the way, the quotes around "assisted living" are there for a purpose, which we will get to later on.

We are not sure if the Post reporter contacted many industry sources, but anyone who was interviewed by the USA Today reporter (more than once at this publication) over the past 18 months or so knew that the story was not going to be one full of praise and glory for assisted living facilities and their owners. The line of questioning was so obviously negative that some interviewees cut the conversation short. The newspaper was looking for dirt, and they slung a little mud.

The reality is that it could have been much worse, and the USA Today series was the more balanced of the two. But anyone who spends more than a year looking for cases of poor quality of care is going to find them, whether in hospitals, nursing or assisted living facilities, home health agencies or any other setting. Human error, sloppiness, improper training and even laziness and greed are facts of life, but the senior care industry can really have an impact on only one of them.

So why the interest in slinging mud at the "assisted living" industry, especially now when it is on the rebound from a very distressing period? First of all, few people want to read stories about loving caregivers and happy seniors in their new Victorian-style homes. Sap does not sell, but bed sores, beatings and rapes do, especially when the victims are relatively helpless. The second problem is that assisted living (no quotes here) is basically a private pay setting, with rates ranging from $2,000 to $5,000 per month, that is not financially feasible for many of the elderly (although ElderLife Financial is working on that).

It is also an industry that has yet to be regulated by the federal government, with state regulations varying considerably. If one makes the case that there is an ever so slight liberal bias in the media, one could argue that the media attention to some problems in assisted living facilities, for which there is no excuse, is because the new assisted living is geared more for the wealthy, and there are certain people who would like to see more regulations and government funding of assisted living so that nursing facilities do not simply become the bastion of the poor (Medicaid) or the really sick (Medicare). Whether intended or not, the Post and USA Today series have certainly resulted in a lot of chatter among the governing class, but no one knows what the ultimate impact will be, if any.

For starters, the Post series was one of the most one-sided, biased and misleading pieces we have seen on the industry. The reason for the quotations around assisted living above is because the reporter repeatedly referred to the "assisted living" industry when he wrote about insufficient staffing at an eight-bed board and care home, or medication mismanagement and physical abuse at a 200-plus bed MR/MI facility populated by young adults, psychotics, substance abusers and sexual predators, together with the little old lady from Roanoke.

The real obscenity is that the reporter claims that Virginia’s decision to close many state- run mental hospitals and other institutions and place patients in smaller, home-like settings triggered the demand for "a new industry—eventually known as assisted living—that sprang up in various settings, including forgotten roadside motels, old boardinghouses and abandoned hospitals." What ever happened to the purpose-built assisted living facilities of the 1990s that sprang up as an alternative to skilled nursing facilities or living at home, but not to mental hospitals? To combine them all under the "assisted living" roof is ridiculous, but it was also the only way he could blast the "assisted living" industry for poor quality of care.

In fact, although we are now in 2004, he had to drag out an unfortunate accident occurring three years ago when a Sunrise Senior Living (NYSE: SRZ) facility van backed over a resident in the parking lot of an IHOP. It was a careless accident, but an accident nonetheless, and in all his research on "assisted living" this was the best he could do? If so, the real assisted living industry must have looked pretty good.

So, it is easy to conclude that the Post series was not about assisted living, but about board and care homes, MR/MI facilities, subsidized hotels for the mentally incapacitated indigent and others. Although many of these facilities are a disgrace, the reporter, despite all the evidence pointing in his direction, failed to lay blame where it belongs. He states that the cost to the Virginia state budget for a patient in a state mental hospital was $460 per day, compared with the state subsidy of $28 per day for "assisted living." It doesn’t take rocket science to understand that if it costs the state $460 per day for a patient in a mental hospital, $28 per day for that same patient is not going to get you much of anything beyond a roadside motel roof over your head, a little bit of apple sauce and a retired hamburger flipper populating the limited and untrained staff.

The blame should have been placed on the government bureaucrats and legislators who wanted to save money by placing patients in inappropriate settings without the funds to care for them, as well as on the taxpayers who are unwilling to pay for appropriate care for these at-risk residents with higher taxes. But the reporter let that one go. He also had the opportunity to blast the Virginia Association of Community Services Boards, when the executive director defended the need to withhold some patient medical information from the board and care facility, prior to a patient being placed there, because to release the information "would be an invasion of privacy." Hello, how is that board and care facility supposed to treat and take care of that resident if it is not informed of all the issues (violence, substance abuse, suicidal tendencies, etc.)?

But that’s the point, isn’t it, that no one expects the owners to treat them because no one is willing to pay for it ($28 per day is just above what our local kennels charge). The reporter had his opportunity to take the agency, and state, to task for this dirty little secret that was thrown in his face. Unfortunately, that was not what the story was about, and all we read about was untrained and clueless staff unable to maintain order in filthy facilities. Oh, did we mention the articles were about "assisted living"?