Genesis business philosophy:- Genesis Health Ventures based its business strategy on gaining market control and then supplying a cheap eldercare and post-acute service to managed care companies. At the same time it believed that it could provide a different and better form of "eldercare" at less cost. These objectives were mutually exclusive and the measures of success were economic. That Genesis business executives had little knowledge of what actually happened in nursing homes as they pursued their objectives is clear from their public statements.
A flawed philosophy:- Care is provided directly and primarily by nurses. They are the major cost. There have never been enough nurses to provide the sort of perfect care we would all like. Technology plays only a minor part. The only way to effectively cut costs is to cut nurses and this means cutting care.
Impressively confident executives in their US boardrooms had decided that care was provided inefficiently and that the same care could be provided with fewer nurses by improving efficiency.
This belief was most explicitly expressed by Andrew Turner (chairman Sun Healthcare) in his revealing "Cutting the fat" interview in 1996. Genesis' chairman, Michael Walker expressed exactly the same sentiments but less forcefully.
Genesis Health Ventures pursued its corporate vision with a single mindedness, which caused it to behave in an irrational way, and ignore any information that it did not like. When confronted it attacked its critics.
Blowing the whistle:- The whistle was blown by the Service Employees International Union. This group has consistently opposed the excesses of corporations and fought a bitter battle on behalf of their nursing members and the patients they serve. They were the first to go public about Sun Healthcare and have been consistently objective and accurate in their assessments.
The SEIU challenged Genesis by researching the care it provided and setting it against Genesis business policies. They demonstrated Genesis' failure to provide good eldercare and then showed how both Genesis failure to provide care as well as its ultimate financial collapse was a direct consequence of its business philosophy and practices, both unchallengeable "givens" in the marketplace.
The SEIU has written three reviews of Genesis conduct "A House of Cards", "Bad Deal", and " Rolling The Dice". They describe Genesis business practices and its record of care. I have placed most of the extracts from these reports which describe Genesis history and its business policies in Genesis Market Page.
On this page I deal primarily with the problems in care identified by the SEIU. I examine each report by first quoting key or revealing extracts. This is followed by a brief description of the report with some comments.
Disclaimer:- I have not read the
references quoted by the SEIU nor have I examined the state
inspection reports. My belief that the three reviews of Genesis
performance are accurate are based on the SEIU's past performance and
because what they describe is what any sensible person with any
knowledge of health and aged care would predict as the likely
consequences of Genesis policies.
COMMENT:- "House of Cards" describes what happened to care and staffing when Genesis bought 10 facilities in New Hampshire from the McKerley Healthcare, a family group who had started with one home and then grown it to 10. McKerley was service oriented providing services to Medicaid patients.
Comment by Genesis Chairman
"..they (McKerley facilities in New Hampshire) were overstaffed, not at the corporate structure but at the facility level; they didnt have subacute units ; they didnt have distinct part units; they just basically provided intermediate care. We changed that, and we reduced staffing and we got greater productivity. There were a few complaints, but overall the transaction has been successful and weve moved ahead."
-Genesis CEO Michael Walker, Wall Street Transcript Corporation, Company Report - August 18, 1997
Quote from Nursing Home Inspection
"The facility has failed to provide staff who are aware of the residents needs. Over 50 percent of CNAs delivering care were agency staff who had not received orientation to the facility or residents needs." On one day of the survey, eight of 10 staff members were agency staff. Nursing home residents told inspectors: "staff are overwhelmed and exhausted" " we ring and they do not come because they are busy " "when they do come sometimes it is too late" "not having enough staff is frustrating and it makes for a debilitating atmosphere " " there are a lot of agency staff and they do not know what we need" "staffing is always short and we know about what we speak"
Quote from another Nursing Home
Group and family interviews revealed: "Residents were not ambulated as determined in their care plans due to a shortage of staff." " . . . not giving care as they used to" " Cant find an aide to cut up meat." " . . . shortages of staff especially in an emergency."
" Pool people dont know residents." " . . . nobody to ask questions of " " T hey are not toileting mother every two hours as they are supposed to." "Mother has been found with a soaked brief that disintegrated in the morning, as it had not been changed in a timely fashion."
Applying Genesis policies:- "A House of Cards," explores the effect of the consolidation of the nursing home industry on the care given to patients. It examines the consequences of the purchase of 10 New Hampshire facilities from McKerley Health care, previously the largest group in the state. It was a family business providing primarily nursing care. Genesis was a strong proponent of consolidation. It sought to dominate the markets where it operated.
After the purchase Genesis immediately targeted the more complex, but higher paying Medicare cases. These sicker patients need much more care, which is why Medicare pays more. Money could be generated by providing therapies. The percentage of Medicare cases increased from 0.5% to 10% within 2 years of the purchase. This was a time when Genesis was widely admired in the business community. It was making large profits.
At the same time Genesis decreased staffing levels so that the average time spent by nursing staff with each patient decreased by 9%. By 1996 New Hampshire residents in Genesis facilities in the state would have received less than 2 hours and 42 minutes of direct nursing care. The New Hampshire average in 1996 was 3 hours and 6 minutes. Other facilities in the state did not specifically target Medicare patients so had fewer seriously ill patients to nurse.
In addition the percentage of temporary agency staffed increased up to 50% in some homes. The quality of care given to residents is related, not only to staff levels and to staff skills, but to the number of permanent staff who know the patients and their requirements.
Standards of care:- The number of patient care violations in the 10 homes purchased jumped from 7 in 1994 to 60 in 1997. Seven of the 10 were cited for failing to provide adequate supervision to prevent accidents and two were repeat offenders. Four homes were cited for substandard patient care
The Department of Health in Rhode Island was also concerned about standards of care in Genesis homes. It gave only conditional approval to Genesis to operate in Rhode Island citing, among other factors, patient care problems in Genesis facilities in other states.
To make the point that the violations are not
trivial this report quotes a large number of instances where serious
problems were documented by inspectors.
COMMENT:- In 1997 Genesis bought Multicare and in doing so doubled its size and created a huge debt. This 1999 report examines the consequences for care in Multicare facilities in Pennsylvania. Ask yourself whether Walker is making changes in Multicare facilities to improve care or to increase profits from Medicare.
"Genesis is acquiring a really high-quality operator in the Multicare acquisition." - Genesis Health Ventures CEO Mike Walker.
(Wall Street Transcript Corporation, Company Report, Aug .18, 1997)
Genesis Health Ventures CEO Mike Walker spoke about the companys strategy to increase Medicare revenues at the Multicare facilities, as well. " Well, theyre certainly not at the level we would like them at. If you look at the Multicare specialty medical revenues per patient day, theyre at $33 per day. The number that the Genesis assets generate, pre the 1996 acquisitions, is $45, so there is a $12 gap. That $12 gap will generate approximately $60 million of incremental specialty medical revenues if we effectively just bring them up to the level that weve been able to achieve in our historical core of assets."
(Wall Street Transcript Corporation, Company Report, Aug .18, 1997)
"They were the ones that got us into trouble," says an administrator at a not-for-profit facility. "A lot of them jumped into high acuity and high ancillaries strictly on a cost and profit driven basis, and pretty much came out and told their investors they were working the system."
("Contemporary Long Term Care PPS Update," May 1999.)
The new "prospective payment system" (PPS) reverses the incentives by reimbursing nursing homes using a per diem rate based on the acuity, or sickness, of each resident. This " managed care" system was introduced to put a check on the soaring costs of Medicare.
No amount of specialty medical services or specialized care plans can compensate for a lack of adequate staff to address basic daily needs.
Quote from Executive Summary of Bad
--------examines the consolidation of the nursing home industry and its impact on patient care through a case study of the October 1997 leveraged buyout of the Multicare Companies engineered by Genesis Health Ventures (GHV). This acquisition made GHV the nations fifth largest nursing home chain (measured by the number of owned or managed homes) and the largest nursing home operator in Pennsylvania. Our examination of inspection reports at 16 Pennsylvania Multicare nursing homes before and after the take over reveals that the average number of patient care violations at these homes rose even while average patient care violations for the state as a whole declined. The terms of the leveraged buyout also left GHV with significant financial obligations to its partners and banks.
GHVs deteriorating patient care record in Pennsylvania raises serious questions about the companys ability to deliver quality care to residents while facing simultaneous pressing financial obligations imposed by the terms of the leveraged buyout and an uncertain revenue stream resulting from the new Medicare reimbursement system.
Buying Multicare:- This report describes the purchase of Multicare by Genesis for US $1.4 billion and the deal whereby it agreed to buy out US $1 billion invested by its partners within 5 years. This was in addition to servicing the large debt to its lenders and paying to lease facilities from its REIT, Eldercare. It is clear that that Genesis had a grossly inflated idea of the amount of money that could be squeezed from the care of the elderly.
Violations before the purchase:- In the year prior to the purchase the average performance of the Multicare facilities in providing care was similar if fractionally worse than other nursing homes in the state - 3.81 patient care violations per facility compared with an average 3.2. Multicare's performance was better than average in the management and incidence of pressure sores. More homes (25%) than average were violation free.
Violations after the purchase:- After the purchase the incidence of patient care violations increased to 6.15, 119% above the state average which had fallen to 3.0 and 134% greater than before the purchase. Only one of the Multicare homes was now violation free.
Pressure sores are a critical indicator of the quality and quantity of nursing care. The incidence of violations relating to the treatment and prevention of pressure sores climbed from 13% in 1997 to 54% in 1998 after the purchase.
Violations in other Genesis homes:- Genesis had owned other facilities in Pennsylvania prior to the purchase of Multicare. The patient care violations (6.79 per facility) in these homes was very similar to those in the new Multicare facilities after the purchase (6.15 per facility). The average for all nursing homes in Pennsylvania was only 3 per facility.
Nursing care:- Patients in Multicare facilities had on average 22% less nursing time (51 minutes less) than those in other facilities. When all Genesis nursing homes are included the figure came to 16% less. Genesis aimed for 20% Medicare income, double the national average. These are sicker patients requiring more nursing.
Nursing home closure:- The only Pennsylvania nursing home closed because of serious, uncorrected patient care problems in 1998 (the first in 4 years) was one of 9 run by Genesis for the Presbyterian Foundation for Philadelphia. The foundation promptly terminated its management agreement. Although there had been some problems in this home in the past, these had been addressed. The facility had been well rated by "The Inside Guide to America's Best Nursing Homes" based on data from 1993-6, Genesis took over management in 1996 and serious problems were detected in January 1998.
Where do the problems lie? These figures show quite clearly that the problems are not related to the care provided by individual facilities but are consequent on the management approach adopted by Genesis itself.
When these figures are set against the overwhelming evidence of similar problems and similar comparisons between corporate market listed companies and not for profit facilities then it is clear that the prime problem is the marketplace itself - patterns of thought and management practices. Genesis is simply representative.
Behind all this dysfunction lie the competitive marketplace and its ruthless demand for profit. Yet health and aged care, more than any other human activity require cooperation and empathic care - the sacrifice of self interest for the welfare of others. The two are as incompatible as Michael Walker's belief that by reducing nursing staff you can improve care - but then we are describing the market - not talking about common sense.
The report expresses the fears, which pervade community groups, nurses and regulators as the Genesis marketplace house of cards collapses. These groups advocate for laws specifying minimum staffing levels - a move strongly resisted by the powerful lobby groups and the politicians who receive support from the nursing home corporations.
In the labor-intensive nursing home industry, salaries and benefits account for about 60 percent of total operating expenses. These costs are easier to cut than other operating costs such as capital, real estate, equipment, or medical supplies. A financial squeeze could create pressure to cut staffing at Genesis ElderCare facilities where nursing staff levels are already below the Pennsylvania average. Given the well -established links between adequate staffing and quality of care in nursing homes, such a cost-cutting strategy could lead to more patient care problems.
An Appendix to "Bad Deal" indicates that when Genesis attempted to take over three Rhode Island facilities, authorities reviewed New England inspection reports from 1996/7, a time when Genesis was thriving.
" In these facilities, Rhode Island investigators found a pattern of repeated violations and inconsistent quality."
Vermont, New Hampshire, Massachusetts, Pennsylvania, West Virginia, Ohio, Illinois, Wisconsin, Florida, Boston, Springfield, Worcester, Philadelphia, New Jersey, West Virginia, Baltimore, Connecticut, North Carolina, Virginia, Rhode Island and Delaware.
COMMENT:- After the exposure of the deteriorating situation in New Hampshire in 1998, the SEIU broadened its lens and examined care across a wide sector of Genesis operations.
Genesis view of care
" We seek to empower elders by working with them to create Full Life Plans that support their goals and to help them bring together the support services they need to stay independent." -Genesis brochure,
"True eldercare means respecting the individual, helping each person define realistic goals and then providing the support to achieve those goals. Everything we do through the Genesis ElderCare Network is focused on empowering older people to live full lives socially, physically, and emotionally
Our brand of eldercare meets the particular and unique needs of each person. Certainly this is a much different strategy than one used by a typical long-term care company - but were not a long-term care company. Were an eldercare company.
Our goal is not just to admit elders to a
center but to enroll them in a plan that addresses the broad spectrum
of health care and life needs that people have as they age."
("Excerpts from an interview with Michael R. Walker, chairman and CEO of Genesis Health Ventures, Inc. conducted by the Extended Care Product News, Genesis website as of June 30, 1998.)
Concerns about what is happening
Thirty-eight million Medicare beneficiaries will soon be forced to make choices from new and unfamiliar health insurance options. According to John C. Rother, director of legislation and public policy for the American Association of Retired Persons (AARP), "Most beneficiaries will have a hard time sorting through the new choices because of their complexity, and because the Medicare population has very little experience with managed care. Its not what they had when they were working. We can anticipate a high level of confusion."
(The New York Times, June 10, 1998, section A, p.1.)
According to a recent survey by the AARP,
nearly one-third of all Medicare beneficiaries know almost nothing
about HMOs and half of all senior citizens who know virtually nothing
about HMOs are enrolled in them already.
("Retirees Ill-Informed About New Medicare Options, Survey Finds, "The Washington Post, June 19,)
In its marketing materials, Genesis promises "personalized, proactive and comprehensive" care to managed care consumers and potential residents. However, our study of Genesis facilities found the quality of resident care to be unpredictable and inconsistent. Consumers in managed care plans with exclusive agreements with Genesis should be concerned about Genesis ability to deliver consistently high-quality Care
Genesis market face
"The near-term strategy is to take my knowledge to the managed care companies in this country, especially in my markets, and say I can bring your medical loss ratio down to 75 percent or 65 percent; I want you to share those savings when I do that. And they will do that."
(Mike Walkers quote is drawn from "Genesis Health Ventures Company Report," Wall Street Transcript Corporation, Aug. 18, 1997.)
According to Walker, "Basically, in Baltimore, well cover the whole state. These net-works are so pervasive and so substantive that we will capture the managed care marketplace because there will be no place else to go." ("Genesis Health Ventures Inc. Company Report," Aug. 18, 1997, Wall Street Transcript Corporation.)
Concerns about care
"Department of Health officials have raised a cautionary flag about the Rhode Island end of the deal, saying that the purchasing company has a poor record for quality care in New England homes it already runs."
("Money & Medicine," The Providence Journal-Bulletin, Sept. 25, 1997)
Imposing an independent monitor on Genesis was an unprecedented action, but necessary according to Rhode Island State Health Director Dr. Patricia A. Nolan, "to help ensure there is no diminishment in the quality of care" at the Rhode Island facilities.
("Report of the Committee of the Health Services Council on the Application of Genesis ElderCare Corp. for a Change in Effective Control of Kent Nursing and Rehabilitation Center, Grand Islander Health Care Center and Grandview Nursing and Rehabilitation Center," Sept. 30, 1997, p.2.)
In these facilities, Rhode Island investigators found a pattern of repeated violations and inconsistent quality.
Some facilities in the Genesis network were cited by state inspectors for the same deficiencies year after year, undermining the companys claim that residents can expect a consistently high level of quality care.
For example, Genesis facilities received 59 citations for failing to ensure that residents received adequate supervision and assistance to prevent accidents. Eleven facilities were cited for this failure during more than one inspection. One facility was cited for this same failure in four different inspections. The plan of correction most frequently offered by Genesis facilities for this particular problem was to "monitor residents more frequently." Some examples from repeat offender facilities include:
(For more details of the inspection reports and descriptions of the facilities that had repeated deficiencies, see Appendix 1. of the SEIU report)
"Looking at Aging as a Process " Resident care problems in Genesis homes result in real injuries to real people. Despite Genesis ElderCare Networks claims of empowering residents to live "full lives," there is ample evidence of repeated problems and inconsistent quality across the ElderCare Network.
Business policies:- This investigation starts with an explanation of the nursing home marketplace and the way managed care was being introduced into the post-acute and nursing home care marketplace. At the time Medicare patients were being offered a managed care alternative to their fee for service system. Government encouraged them to sign up with HMO's. HMO's were going to be large purchasers of nursing home services for Medicare patients. (There have since been major problems with this).
Nursing home chains were rapidly
consolidating and securing dominance in the regions where they
operated. This would allow them to corner the HMO contracts in these
regions as there would be no competitors. Genesis led the way in
this, greedily buying control regardless of the consequences.
(Note - There is more about this Genesis Business philosophy on the Genesis Market Page.)
Policies and common sense:- Cost was a critical consideration for HMO's and corporations were cutting costs. Genesis had to borrow to gain control of its markets, cut costs to secure contracts, and still make enough profits to pay interest on its loans. The only possible way to do this was to cut their major expense - staff. They disregarded reason and evidence in order to develop patterns of thought, that made this not only acceptable but highly desirable. The creation of desired but unreal abstractions in the face of reason is a feature of what I have called sociopathic behaviour.
Managed Care:- Despite the readily available surveillance material quoted by the SEIU, Blue Cross and Blue Shield of Maryland made Genesis its "preferred provider" for 1.4 million ordinary members in December 1997. It contracted another 7000 members in its Medicare managed care program to Genesis. Genesis was also contracted by a firm "MediCare First" in Maryland, and by Crozer-Keystone Health System, the largest HMO in Delaware, Pennsylvania. At the time of this investigation other HMO's were negotiating with Genesis.
While government regulators in Rhode Island had strong reservations about Genesis, the HMO's who had assumed responsibility for the welfare of millions of members had no qualms in contracting with Genesis. This is not surprising as there is now abundant information which shows that HMO's decisions are based on financial considerations and not the welfare of the members for whom they are responsible.
One might expect these HMO's to hold extensive databases including all surveillance material and constantly evaluate them before making decisions in the interest of their members. It is now abundantly clear that HMO's are no different to other corporate healthcare chains. They all make decisions in the interests of their shareholders, to whom they are primarily responsible - and who must approve their bonuses! It is not in the financial interests of managed care groups to consider patient care documentation objectively.
There are numerous reports showing how regulators have tried to penalise and close facilities. Many more reveal how citizens have taken to the courts, and whistle blowers have spoken out.
I am not aware of any material describing how HMO's cancel contracts because of inferior care or of HMO's taking legal action against corporate nursing home chains for not providing the care which they were contracted to provide. When legal action has been taken it has followed government investigation and action. It has been directed to financial fraud and not to failures in care. (e.g. Tenet/NME, SmithKline Beecham)
The meat in the sandwich:- The consequence of all this corporate dealing and the marketplace rationalising was that citizens no longer had choice. Citizens who enrolled in HMO's plans would have little choice but to use the facilities in the HMO network - those with which the HMO had contracts. If not then they would have to pay large additional costs. They would not know what happened in nursing homes, nor would they understand the implications.
The SEIU report for instance claims that " Genesis - - - has been hailed as a model for companies in the post-acute and long-term care industry". HMO's, anxious to enroll members would present Genesis to potential members in this way.
The evidence:- The SEIU supported its discussion of these issues by examining the care provided by 140 Genesis facilities in 12 states between 1994 and 1998. These facilities were cited a total of 1,652 times for failure to meet minimum federal resident care requirements for nursing homes.
Between August 1995 and Jan 1998, 51 facilities of these facilities were inspected at least once a year without any failures, but 42 facilities had 118 deficiencies severe enough to place the facilities in the "substandard" range -- one third of facilities were substandard at some time.
In the most recent inspections 47% of Genesis
New Jersey facilities were found to be substandard - and 41% in
Florida. Standards it seemed were variable and unpredictable. There
was no uniformity and Genesis vision of being a provider of eldercare
and not long-term care was just a vision. That it was actually
providing what it had set out to provide was an illusion.
GHV Releases Statement on Union Claims
PR Newswire May 27, 1999
Genesis Health Ventures (NYSE: GHV) Chairman and Chief Executive Officer Michael Walker released the following statement in response to allegations made by the SEIU yesterday: We have not seen the SEIU "study" but can tell you their news release fits the pattern of SEIU's playing fast and loose with statistics in order to paint a false impression of the care given by our dedicated employees.
Genesis has been under attack by the SEIU for over a year now. This new release is part of a corporate smear campaign. Labor unions have been largely unsuccessful in getting employees to vote for representation over the past 10 years or so. In an effort to boost membership/dues, the unions have developed another tactic -- the corporate campaign. Rather than going after single locations -- in our case nursing facilities -- and trying to get them to go union one by one, they now wage a no-holds-barred attack on the reputation of the owner of the facilities.
It is the union's intention to cause so much pain by way of damaged reputation and stock volatility that the company will unilaterally allow the SEIU to unionize all our facilities unopposed. Genesis will never do that. We strongly believe that each facility and each employee has the right to vote whether or not they want to belong to a union.
As for the allegations made about staffing -- Genesis facilities consistently meet and/or exceed staffing levels set by each state in which we provide care. The union president's statement that we had a staff cost- cutting strategy in place at all our nursing facilities is ludicrous. Even with recent cuts in Medicare funding dictated by the new prospective payment system, we have consciously reduced our corporate overhead costs while keeping staffing levels at skilled nursing centers virtually unchanged.
Here are some links to material from the SEIU
LIST OF GENESIS REFERENCE WEB PAGES
(Click to go to)