by James C. Sherlock
Sometimes, when you are winning big in a table stakes poker game, it can be time to put some money in your pocket. That is part of the game many nursing home chains are playing these days.
Everybody wins but the nursing facility residents, Medicare, and Medicaid.
The enterprise architecture of many less ethical chains is familiar to regular readers. In this example, a chain has sold six of its property LLCs to a real estate investment trust (REIT) and kept six.
The business model is as profitable as it is complicated, and for the same reasons. Notice all the places where Medicare and Medicaid money go each day in this example. Not much is left for staff and patient care.
Compared with other states, Virginia’s nursing home sector has been sparsely penetrated by REITs. We can view this as the owners of the chain-controlled operating companies and property companies that dominate in Virginia being very happy with their profits, the COPN-driven lack of competition, and Virginia’s history of non-enforcement of regulatory violations. We give them few reasons to sell their property companies.
But some do. We’ll look at the players, the deals, and the implications.
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