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Unsanitized: The COVID-19 Report for Nov. 10, 2020

Nursing Homes Want to Save Their Bank Accounts, Not Their Patients

Plus, ending the Fed money cannon?

 

A makeshift memorial to seniors who died of coronavirus in nursing homes
in New York. (Yuki Iwamura/AP Photo)

First Response

Last month, as part of our Universal Family Care issue, we had Moe
Tkacik do a great report on the corporatization of nursing homes
.
It was a rich history of an industry led by a tiny coterie of
Mafia-style dons, and how their modern progeny use financial engineering
and assorted tricks to fleece their residents while also consigning them
to misery through short-staffing and lack of care. It also showed how
the industry was completely unprepared for the additional care that
would be needed during the pandemic.

Nursing home deaths have been an astounding percentage of overall deaths
in the U.S. (around 40 percent), and the incidence of cases has tracked
increases in the general population. With case rates out of control
right now-we had over 100,000 cases
on each of the two lowest-reporting days of the week, and
hospitalizations over 59,000
,
nearing a new peak-you can expect another epic spike. The data

from the American Health Care Association and the National Center for
Assisted Living only extend to the week of October 18, but it shows
confirmed cases at nursing homes at the highest level since August.
It's probably over that by now. Almost all of the increase is coming
from the Midwest.

Deaths have begun to creep up too, though not at the horrific level from
the spring. There have been at least some safety measures installed to
protect residents from the virus and save their lives if they contract
it. But the real prophylactic measures have been reserved for corporate
finances.

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The Wall Street Journal is out with a story

about Genesis Healthcare, the largest U.S. nursing home chain and one of
the stars of Tkacik's story. Their business model has been to
relentlessly cut labor costs, and low quality has been typical
,
especially during the pandemic. "More than 70 percent of Genesis
nursing homes now had either a one- or two-star rating on the
five-star" Medicare star ratings system, Tkacik reported.

One of the key preoccupations has been the manipulation of debt and real
estate assets. Genesis uses an "OpCo/PropCo" model, where it splits
off the real estate of the facilities it purchases, forcing them to pay
rent on properties they once owned outright. Genesis grows through debt
financing, siphons out value to the PropCo and its parent company, a
private equity firm called Formation, and cuts staff when it can no
longer borrow.

Now the reckoning is coming due, as people naturally don't want to put
their loved ones into what has been revealed as a chamber of horrors. So
what's Genesis doing? Ensuring better quality to attract customers?
Making safety their top priority? No, they're restructuring debt and
seeking a bailout, of course.

With a net loss in the third quarter of 2020 at $62.8 million, even with
an infusion of state and federal support of over $64 million, this
doesn't look like a going concern. In reality, the pandemic is
probably saving Genesis a bit with the public dollars, since the debt
load and leasing costs were already breaking it. But it has now entered
into conversations with "select capital partners to analyze a number
of restructuring alternatives." More to the point, Genesis CEO George
Hager told analysts, "There is no question Genesis will need ongoing
support from the federal government and our capital partners to sustain
operations." So a bailout, then, is on the wish list.

There's nothing particularly unusual about Genesis, which is as
dysfunctional as the rest of the nursing home sector. A bailout would be
untenable; but a series of closures, which we're already starting to
see, will further stress the commercial real estate sector, which
affects everything from construction

to municipal tax bases. More critically, it affects the lives of
hundreds of thousands of families and how they will manage their loved
ones in the future. The sector needs a complete overhaul; it needs to
bar the private equity structures that allow substandard care and
financial maneuvering. As Tkacik says, we need to commandeer these bad
facilities with an FDIC-style conservatorship, to protect the residents
and reverse the enormous sums flowing out to financiers. Because
otherwise, firms like Genesis are going to take care of their bottom
lines while patients sit and rot.

We Can't Do This Without You

Biden Gets to Work

I'm a little late to this, but Sen. Pat Toomey (R-PA), the Senate
Republican representative on the Congressional Oversight Commission,
wants out of his job. Specifically, he wants the Federal Reserve credit
facilities, which is the sum total of what he oversees on that
commission, to expire at the end of the year. The Fed would have a bunch
of outstanding loans, so this wouldn't be the end of the process, but
it would cease to make new loans through the facilities, under the
Toomey plan.

Toomey says that he's worried that the Fed programs could become a
substitute for fiscal policy. He maybe should have thought of that when
he voted to institute the Fed programs, punting fiscal policy over to
the central bank. The subtext here is that a new administration,
particularly with the Fed's partner in administering the credit
programs at Treasury turning over to a Democrat, could want to actually
put the money cannon toward something useful, like saving municipal
governments
.
And Sen. Toomey just can't stomach that.

Toomey's poised to become head of the Senate Banking Committee, so
he'll have some say. But let me offer a compromise. We could wind down
the money cannon for corporate bonds: that money was just positioned to
inflate asset prices, and now the market seems to be able to stand on
its own, especially as good vaccine news rolls in. And then we can take
all the remaining dollars in the credit facilities, all $4 trillion of
it, and move them to the state and local government side of the ledger,
while committing to make short-term, endlessly-rolled-over loans to
prevent offsetting austerity. Sounds like a plan!

Support Independent, Fact-Checked Journalism

Look at Me

Thanks to Our Revolution Arlington (VA) for having me out last night to
discuss the election, the pandemic, and my book Monopolized. You can
watch the discussion here
.

Days Without a Bailout Oversight Chair

228
.

It's A Good Time To Donate!

Today I Learned

* Masks don't just save lives, they boost economies
.
(Washington University/St. Louis)

* The lead on the Trump election lawsuits, a guy who's not a lawyer,
contracts COVID
.
(Bloomberg)

* Eli Lilly gets FDA authorization
for
its antibody treatment. (Financial Times)

* There has been a ramp-up in testing, and that's pulled supply stocks
away

from other forms of critical testing. (Wall Street Journal)

* The vaccine is on a collision course with social media disinformation
.
(ReCode)

* Trump administration freezes wages

for essential farmworkers. (HuffPost)

* Zoom, which lost ground in the markets yesterday, was fined $0.00 by
the FTC for deceiving customers about its privacy features. Here's
Rohit Chopra's dissent
.
(Federal Trade Commission)

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