How vulture capitalism endangers America's elderly

By Ken Connor

GOP presidential hopefuls — most notably Newt Gingrich and Rick Perry — have been attempting to derail Golden Boy Mitt Romney's campaign momentum by attacking his background as a venture capitalist, deriding as "vulture capitalism" the practice of acquiring businesses through leveraged buyouts and attempting to increase their value through cutting costs, laying off workers and stripping out assets. For many staunch, laissez-faire loving Republicans these criticisms have been deemed an attack on capitalism itself. The free market is all about competition, after all, and when a company ceases to be effectively competitive the choice is to either shut the doors and call it quits or do what needs to be done to right the ship. For a self-professed economic conservative to smear a man's professional reputation by painting him as an unscrupulous "vulture" is at best a political cheap shot, at worse an act of ideological blasphemy.

Or is it?

Though few people are aware of it, the nursing home industry is a classic example of a sector where "vulture capitalism" is destroying lives. With the graying of America, Wall Street is finding the nursing home sector to be increasingly attractive. Private equity firms are displacing public corporations and mom-and-pop operators and moving into the ownership and operation of nursing homes. This trend has proven disastrous for nursing home residents, resulting in poorer quality care and increased violations of health and safety regulations.

These private equity investors cum "health care providers" seek to improve profitability by cutting costs, most notably labor costs. And since nursing staff represents the biggest expense in a nursing home's budget, that's where most of the cuts come from. The obvious problem with this tactic is that the nursing home industry is a service intensive industry. You can't turn and reposition immobile residents without staff, and if you don't turn and reposition these folks every two hours they develop festering bed sores. You can't feed or provide fluids to dependent residents without adequate staff, and when you don't they become malnourished and dehydrated. You can't provide incontinence care without staff, and when you don't residents develop painful and embarrassing infections. The evidence shows an increase in all of these problems with the advent of private equity capital in the nursing home industry.

There is nothing wrong with making a profit of course, and there's nothing inherently wrong about trying to make a profit in the eldercare industry. But it is wrong to secure those profits at the expense of the clientele. Part of being a responsible corporate citizen, after all, is following through on your professional commitments in a conscientious and ethical manner. This is particularly important when your "business" consists of providing an environment of care, comfort, and dignity for men and women in the twilight of life.

The irony is that few people have been enablers of these practices more than Gingrich and Perry, who under the guise of "tort reform," have fostered policies that ensure that corporate predators are not required to fully account for their wrongdoing. Governor Perry's Texas is home to some of the nation's more draconian tort reform measures and Gingrich has long been a champion of similar policies, though recently he's attempted to distance himself from this position.

But principle doesn't seem to stand in the way of these fellows. That was then and this is now. Given the bitter attitude that most Americans feel for Wall Street and Big Business in the wake of the financial meltdown and subsequent recession, their calculus seems to be that there is more political advantage to be gained by demonizing their former benefactors. That Wall Street has clearly cast its lot with Romney at this point might also play a role in their decision to play the populist card despite their Blue Blood roots.

As for those who are quick to label as heretics those conservatives with the nerve to question the ethics of "vulture capitalism" it is important to understand that merely calling into question unethical business practices does not equate to an attack on the merits of capitalism. Business is no less subject to the rule of law and ethical scrutiny than any other aspect of life. To suggest that capitalism is not subject to either law or ethics invites predatory and destructive practices. Wasn't the Wall Street meltdown, fueled by the unscrupulous practices of enterprises like Fannie Mae, Freddie Mac, Lehman Brothers, and others all the evidence we need of the destruction wrought by practitioners of "vulture capitalism?" How quickly we forget.

Meanwhile, the practices of predatory capitalists in the nursing home arena continue to harm our institutionalized elderly. Who will speak up for them?

© Ken Connor