Yves here. This description of a senior housing fund play lets mere mortals get a taste of what private equity would like to do to you down the road, provided you live long enough for them to target you for rent extraction.
By Jane Dough, who grew up in the suburbs of an industrial city, went to college, worked a few years, inherited a buttload of money, and retired. This is what it’s like to be closeted, conflicted, unheroic, and rich. Originally published at McSweeney’s Internet Tendency
“A lot of the buffalo have been shot and you’ve got to get really creative out there to get opportunities. Memory care is a fantastic opportunity… It’s low-hanging fruit.”
— Senior Housing News1
In early November I received a pitch document offering me the opportunity to invest in a private equity fund in the area of “senior housing.” I also got a 300-plus-page legal document, called an “investor kit” so that I could act fast on this tremendous investment opportunity! I can’t actually quote from these documents or refer to the buyout firm or senior housing fund by name or someone will come and take me away in the night. All names are fictional.
– – –
To: David Smith, CEO
Buyout Investment Group
The Conundrum Fund
Dear Mr. Smith:
Thank you for the information about your “senior housing” private equity fund. I’m leaning towards taking a pass. If I may, I’d like to explore with you why that might be.
First, a disclaimer: In your pitch booklet you call me a “sophisticated investor,”2 but in fact I’m pretty clueless about private equity. I had to read numerous articles just to be able to write you this letter, and even then I’m on shaky ground.
Having said that …
You have grandmothers, right? Older parents? Elderly relations in general?
What do we know about this segment of the population? A few things: They tend to go to bed on the early side. If one were to generalize, one might say they frequently have a hard time operating the remote control. They have actual memories of things we only read about in history books. They’ve been known to guilt trip a person for not visiting more often. It’s fair to say they often enjoy a sensible shoe.
Allow me to put forth another thought: The way we treat the old folks of this nation is a metric of our own humanity. They’re a vulnerable segment of the population. They deserve our compassion for enduring the physical trials of pain and loss of mobility. Then there’s the loneliness factor, caused by small things like all your friends dying or watching your spouse melt away with a dementing illness. Less obvious are the existential challenges: Imminent nonexistence is something more of a threat than being de-friended on Facebook. It’s kind of amazing when you think about it. These people have every right to cut in line at buffets, steal golf carts, hoard pats of butter, anything. How they get up in the morning knowing they’re careening toward that “undiscovered country from whose bourn no traveler returns”3 is beyond me.
The point is, if you’re to interest me in the profit motive vis-à-vis the purchase, fat-trimming, and subsequent sale of nursing homes, dementia units, and hospice facilities, you must understand, as any sociopath does, that you must at least pretend to care about old folks. It’s vital to your pitch.4
Mr. Smith—may I call you Dave? Dave, here’s what I’m trying to say.
It’s not enough that you offer me “robust returns.”5 It’s not enough that you display wave graphs of the rising tsunami of baby boomers soon to suffer from Alzheimer’s and dementia.6 Alas, even your impressive list of bought and liquidated7 nursing homes, and the amount of profit harvested8 from same, fails to persuade me to pull up a stool next to you and milk this cash cow. You have roused me, Dave, by omission.
I read your whole pitch and investor agreement thingy, I really did, and I listened in on your conference call as well. I heard your calm, positive, tastefully non-ebullient projections of success. Tone-wise, your pitch reminded of an NFL quarterback’s humble post-victory interview, “We just went out there and kept our focus on scoring more points than the opposing team.” Similarly, you say, “Our goal is to generate good returns for our investors.” But until now the companies “rescued,” “made more efficient,” and “exited” by PE firms have concerned themselves with things like rental cars, pop music, and donuts. In this case it just happens to be the housing of our nation’s elderly, infirm, and dying.
I’d be lying to say I really want to help you, Dave. But let’s see this thing through, shall we?
Here’s a thought: If you want to attract investors who (a) have a conscience and (b) have heard about the phenomenon of death, why not have your pitch-book writers brush up on some rhetoric? Phrases like “low-hanging fruit” and “at the end of the day” or “the bottom line” and are okay when you’re only talking about laying off a few thousand factory workers. It’s another thing when it’s the nurses and staff caring for Nana and Paw-paw.
Have your people take a look at a play called Julius Caesar by William Shakespeare10 and get them to study the difference in the eulogies by Brutus and Antony. See, Brutus is like you, Dave. He’s like the quarterback, most Democratic politicians, and the pre-Horta Mr. Spock. Antony appeals to the emotions of his audience, like Republicans or Captain Kirk.11 Or how about reading Richard III, a play also penned by The Shakespeare Group and staged by its subsidiary, The Chamberlain’s Men, LLP? This Richard is so good he seduces a woman over the corpse of her husband after admitting he slew the poor bastard. That would be a good one for your team.
My problem with your pitch as it stands now is that it doesn’t give enough lip service to the welfare of senior housing residents.
To be fair, I see from Buyout Investment Group’s website that your firm has a page-full of charity logos, with the exception of those that might have a conflict of interest.12 Here and there your pitch book also mentions your intent to improve the facilities you flip.13 Such conscience-driven proclamations are a bit harder to spot in your 300-page, legally binding investor kit.
To be perfectly honest, Dave, when I found articles on the relationship between nursing home buyouts, decreased staffing, and incidence of bedsores, I wept.14 You may say this is a low blow, that those studies are unverified. You may say that the very fact of my emotion was proof that I can’t be trusted. And it’s true. I will be honest with you, Dave: I practically jumped at the opportunity to blame you. I fantasized about getting a law degree and an MBA and an MSW all at once, making it my life’s cause to protect the aged and dying. I whispered Rilke’s words, “You must change your life.” I was done burying my head in the sand. A frisson of ego? Yes.
Confession: I’m not disinterested. You and I will likely end our days in hospitals, nursing homes, and hospices. We’ll spend more time than is right waiting for dialysis, CT scans, blood tests, or someone to come pick us up off the floor. No amount of wealth will spare us, Dave. I’ve seen it with my own eyes, in the very best nursing homes money can buy. For the past eight years I’ve spent a good deal of time in that most fecund of senior housing’s low-hanging fruit, a “memory-care facility” where I visit an elderly relation.15 I’ve gotten to know residents, nurses, aides, freelance talent, volunteers, and administrators.
The thing is, the residents of a “memory-care facility” are entirely dependent on aides and nurses for their wellbeing. I can’t stress this enough, Dave. Entirely. So, while my tears may be suspect, to say nothing of inconsistent with past and future performance, I have personal reasons for caring.
But take heart, Dave.
I rose the next morning, Nov. 5, made breakfast and poured myself a cup of coffee. There was something I was supposed to remember. I checked my calendar. Nothing. What the heck was it? I hate when that happens. So annoying. I settled in with my coffee and started reading the New York Times. Dang, what was that thing I was supposed to remember? It feels like it was important. This really bothered me, Dave. I needed to tune out. I clicked over to one of my guilty pleasures and caught sight of something in the sidebar. It was a headline from America’s Finest News Source©: LIFE CHANGING EPIPHANY WEARS OFF ON THE RIDE HOME.16
It was then that I realized what was nagging at me: that whole nursing-home business. From the night before.
I went about my day in a state of preoccupation. My epiphany was that the yin of “You must change your life” could coexist with the yang of being full of shit. Now, that might not sound like a major revelation to you, Dave, but it had an odd effect on me. It vitiated an internal argument that insinuated, “Because you have never cared about this issue before and because you barely know the difference between a stock and a bond, you have no right to the simple, uncomplicated conviction that you felt from the start.”
Dave, at the end of the day, as you guys like to say, there are some places in our society that shouldn’t be “low-hanging fruit” for profit. A hospice shouldn’t have to fear that a private equity firm will come in, cut staff, siphon cash flow, pay itself big fees, and walk away from the smoking corpse. Even if a nursing home chain is on the brink of collapse and cries out for “rescue” as you claim, let there be some way to save it without recourse to people who are, at the end of the day, interested primarily in the bottom line.
Forget rhetoric, here’s a math quiz for you, Dave.
1) When a private equity firm threatens to fire a nursing-home-franchise manager if massive staff reductions aren’t made while promising said manager a fat bonus to lay off 300 people, how many managers will resign in protest?
2) If the guy who comes on Tuesdays to play Sinatra tunes on his Casio is no longer paid carfare to a memory-care facility in Fort Lauderdale, will Mrs. Rosenzweig ever hear “New York, New York” again?
3) If the aide who daily dresses Mrs. Hightower in spiffy velour loungewear no longer has time to do it, what percentage of Mrs. Hightower’s projected remaining life expectancy will she spend in pajamas?17
You may say it’s unfair of me to play the “care” card. Day by day, nurses and aides, not I, care for my mother. They wake her. They dress her. They wash her hair, feed her, put her to bed. For that an entry-level aide in a Florida nursing home might make $24,000 a year. That’s less than I’d pay in a single capital call to The Conundrum Fund.
I can’t do it. I’m out, Dave.
At the end of the day, it’s wrong.
1 Gerace, A. 3/18/13, Senior Housing News quoting Scott Stewart, Managing Partner at Capitol Seniors Housing at a National Investment Center for Seniors Housing and Care Industry panel, “Tapping Into Private Equity.”
2 Rich person. The average cost of investing in one of these funds is $250,000.
3 Start Trek VI.
4 Actually, no it isn’t. Many funds are vastly oversubscribed.
5 Although whether these funds do better than the S&P is debatable, since so many fees are hidden. Search: SEC Bowden private equity.
6 Graphs that are both horrifying and tempting, because, my god, if they’re right, then there really is a massive amount of money to be made. In my childlike understanding of reality, I want to imagine that “low-hanging fruit” means profit accrued from inventing a gadget that makes life better for these souls, a medicine to relieve pain, a design for age-friendly residences. Heck, low-hanging fruit might be any actual product or service for these people. But there is no product. There is no service.
7 Your word.
8 Your word.
9 Even if some of them and their fathers had worked for the company all their lives and had personally ingested prototypes for something called a “cruller” lovingly developed by the company’s own president.
10 Dramatist whose 37 plays yield a tragicomic baseline for a global audience.
12 Alz.org, deathwithdignity.org.
13 Or drive into bankruptcy. University of Chicago-sponsored academic papers refuting this slander of an industry can be sent to me c/o the McSweeney’s headquarters in Duluth, Minnesota.
14 Indignant brandishers of studies refuting this claim can be sent to me c/o the McSweeney’s satellite office in the Grand Cayman Islands.
15 My mother.
16 The Onion, 11/5/14.
17 Minus the number of days management knows in advance her son will be visiting.
That’s quite a pseudonym. Someone has a sense of humor.
Thank you for this. It’s one of the very best commentaries on the predatory nature of late-stage capitalism I’ve ever read. There is absolutely nothing like wicked and barbed humor for exposing and eviscerating carefully veiled evil.
BINGO! I suspect that the same toxic pollution that creates so many soulless psychopaths in Corporate America also drives the urge to murder-suicide as a national pastime. By the time we bite the dust, no one will care.
This one gave me a good laugh. I believe there should be more people writing similar letters, and not just to hedge funds but also to banks, loan companies etc. Old people face more and more people connected with lack of finances these days. They often fail to pay their mortgage, or lack money to maintain their rented property. All sorts of different problems make their life difficult. That´s what capitalism has left for them.
If you ever wonder what pure evil is like, try working in a for-profit nursing home for awhile. Once you’ve had a good look inside that particular sausage factory, you won’t ever want to let anyone you care about get stuck in one of them. It’s dreadful: an entire life–all your experiences, all your knowledge, all your emotions and relationships–reduced to a chore for some under-paid, overworked nurse’s aid. It’s like being a chunk or ore: somebody is going to grind you up and discard you in order to get that little bit of gold you’re secreting away. The executive salaries and profit margins in these places are pure soylent green–made from processed people.
Oh, come on! Wait, no. That doesn’t really exist, does it?
Next you’ll tell me that they’re doing the same thing in elementary schools and prisons….
May the author of that letter live to be 90 wirh minimal discomfort and most of her mental facilities intact, and then die peacefully in her sleep dreaming of playing with kittens and puppies in a field of wild flowers.
Thanks for that.
Dave: “William” who?
“10” : [Anachr.] Dramatist whose 37 plays once yielded a tragicomic baseline for an English-speaking audience.
The FT some months back had an article on the Private Equitization in Sweden, mostly about schools but also a bit about nursing homes.
It cited an example where aides in a nursing home were required to weigh diapers of residents to determine whether they needed to be changed or not.
Low hanging fruit, indeed! Unlocking hidden value!
My wife’s grandmother was in a place that had a 99% rating from NY DOH*. The place always smelled like piss and shit. Grandma could walk before she was “put there” by her kids, In 2 months she could no longer walk and was dead from pneumonia in under a year. I don’t think I ever saw an aide assisting a resident to walk to the dining or common areas.
* can you imagine how much money changed hands for a 99% rating? Or perhaps the inspector now works for the corporation owning the home as a QA director or VP.
Priceless. Thanks for the laugh !
Great article! I’m laughing and I’m pretty depressed at the same time…
I am not very far from death myself and I have thought about what I saw when my husband’s mother was in a nursing home (see nursing home experiences in article) and my own mother had to deal with her “belligerent” second family who made her last months of life very stressful. I hope that I have enough brain power to walk off into the woods before either of these things happen to me. I didn’t think anything could be worse than my two experiences of death above, but the PE story proves me wrong.
Actually I saw this first hand.
From late 2003 to spring 2008 had my brother (disabled vet -1st Iraq war) and my mother (multiple health issues) in a Miami area non-profit nursing home. Starting in 2006, things started going down hill, multiple staff changes, and then I noticed that everyone in uniform (aides, housekeeping, kitchen) had different corporate names in their nametags/uniforms (example – joe smith – united environmentals corp / jane smith – global health staffing).
It took an article in the sunday New York times of late September 2007, talking about how Warburg Pincus had bought hundreds of Florida non-profit nursing homes, restructured them just creating a shell non-profit that contracts everything out to multiple interlocking Warburg Pincus owned companies that milked the non-profit dry, while at the same time ensuring that no legal liability was passed to those companies and kept Medicare’s enforcement eye from them. It helped a lot that the at that time Gov. Jeb Bush made sure the Florida state government did not intefere.
OMG, this is brilliant. She’s spot on. I worked for 2 years as a dementia-care certified nursing assistant in the memory care unit of a for-profit home. It was hell. I loved the work, but hated the job.
At the interview, I was told they practiced Gentle Care. I was told I’d get in trouble for not dwelling with my residents. I was told there was adequate staffing.
It didn’t take long to see through the bs. We were understaffed on purpose. People brutalized by crapitalism end up brutalizing others rather than let their kids or themselves starve or go homeless. Absenteeism further reduced staff. You haven’t worked until you’re the only aide for 20+ elders with dementia, and it’s your job to get them up from their piss-drenched beds, remove their crap-filled Depends, shower, toilet, and dress them, and then rush them down to breakfast and back before lunch, at which time it all begins again.
Did I mention it was hell? On the plus side, nothing I’ve done since has even come close, so it’s made everything seem like child’s play.
I was the go-to guy for difficult residents. I used to spend an hour every morning with a retired civil engineer, who had reverted to his native German, trying to convince him that yes, indeed, he did want to shower and dress before going to breakfast. I don’t speak German, so I resorted to a phrase book. As a sitcom, it would’ve been hilarious. As health care? Not so much.
During that time other aides would
care forprocess several residents, making it look on paper like I was slacking. To my everlasting shame, I tried for a while to do as I saw being done. But then I couldn’t sleep at night, despite being absolutely exhausted.
So I determined to actually care for these people, like their were my own flesh and blood (which, of course, they are). One day, after seeing an aide, who normally gave great care, treating stroke victims like sacks of potatoes, I took her elbow and asked, what’s wrong? She blew me off. The next day, the nursing director called me in to her office to explain why I had assaulted my co-worker. Not to ask my side of the story, mind you. That was the last straw. I couldn’t take it anymore. I quit rather than be fired. In hindsight, I see that I could’ve done things differently. Chronic exhaustion will do that for you.
If you have someone in such a place, you must visit daily. That’s the only way aides will have an excuse to give your loved one the care you’re paying for, if not the care they actually deserve.
Harrowing tale. Here’s an antidote to the madness:
The Sense of an Ending ~New Yorker
Dementia care can be done compassionately and well…just not when your bottom line is profit.
Thanks, diptherio. You’re right, it can. This passage rings a bell:
this is too depressing. what about all the state mental institutions where otherwise sane people who just see the world a bit “differently” die chained to the wall drooling on themselves after being beaten by psychotics who work there?
can’t we have posts that lift us up emotionally and make us realize all the good that private equity can do? Sort of like a Sunday sermon? Sort of like a vision of the afterlife? Something that brings heaven down to earth and dimensionally merges them into an eschatologically raptureous wonderland of nirvana? Something where the evildoers are piled up like boards in a hole and then torched with a fire that reaches the justice of God?
Isn’t there somekind of an equation that can do that? How about PE1 + C + P = PE2? where C = company and P = Population
what about that old movie One Flew Over the Cuckoos’s Nest with Jack Nicholson and Nurse Ratchet? faaaak that was bad sh*t. it no wonder they wanted to fly out of there.
Holy Smokes. It’s not private equity per se, although it can certainly be an agent, it’s a larger issue that people won’t see or can’t see. Are you your brother’s keeper? some times your brother doesn’t want you as a keeper? especially when they not your brother. sometimes you don’t want to be your brother’s keeper. it’s not easy is it? everybody failed the test of consciousness last week, big time. that’s why there’s homework every day on this earth. Thjus Sayeth the Lord.
Ware housing ended long before capitalism recreated it. It was not till the taxpayer started investing in this area did capitalism see low hanging fruit.
Why does it seem that the people with the Big Money, the “smart money” crowd that laughs at the rest of us as nothing more than “muppets” and “dumb money,” the guys with the high-speed links to the Market computers who do that HST thing, the dudes who own the legislature and the executive and its agencies and increasingly the courts as they purloin and pervert the “legitimacy” that we muppets still believe constitutes “democracy,” why do those folks seem to display the most contempt for their “brothers?” And the strong inclination not only to not “keep” their fellow humans, but to treat them as nothing but that wonderful Yiddish concept, “freiers?” This version, “Thou Shalt Not Be A Freier,” http://www.haaretz.com/print-edition/opinion/thou-shalt-not-be-a-freier-1.211247, contrasted with this take on the term? http://markrfreier.com/2010/08/17/are-you-a-%E2%80%9Cfreier%E2%80%9D-really-that%E2%80%99s-a-legitimate-question/
Kind of hard to find even a few people in the “financial industry” that manage to squeeze even a few drops of rancid “milk of human kindness” out of their bulging bellies and wallets…
Not to overstate it, BUT THAT MIGHT BE THE BEST THING I EVER READ. I’m such a perverse old coot it made me happy. Wondering who Jane Dough really is, she/he deserves a Pulitzer. Anyway it was cathartic. I no longer feel like driving around town just to flip the bird.
I agree that this was great. And it’s good that it was printed here: “Dave” (his secretary, actually) only reads mail far enough to see if it’s a Yes or No. And Dave wouldn’t get the jokes anyway.
HOWEVER I doubt that any regular readers of NC should be shocked or even surprised. What’s the name of Yves’ blog? It isn’t “res ipsa loquitur,” but she could change it to that.
Confusion to our enemies.
Many thanks for this letter.
When hospice reverts to the lowest common denominator and leaders obsess about metrics, it’s time to speak. Self-inflated leaders assume clinicians give until their backs break, given no raises for years. A clinical ladder is a rainbow’s pot of gold. Others have a sorrier job and must be motivated by money. Abysmal leaders dangle extrinsic rewards for admission, hiring and EDBITA targets. “Sign on” bonuses entice people into a poor work environment. Employees’ voice equals their raise, zero.
Lots of information about profits over people in the hospice world at Generic Hospice Blog.
Dear Ms. Dough:
Thank you for your kind missive. Low hanging fruit is supposed to be self-deprecating humor, since we all diverged from the bonobos back there awhile. Aw shucks, rationalizing the geriatric population infrastructure and trying to make an honest buck is the American dream, right? We envision CAFO like structures for the elderly, you will step in disinfectant to visit your relative. We are partnering with firms like FEDEX to transport consumers to right to die states, so that trusts and codicils can be exercised in a timely manner.
All in all we envision repurposing tilt-ups and abandoned mall locations as concentration camps for the consumers. The question is, what do we do when all the dollars are wrung out? The purpose of our fund is to realize excellent returns and exit the market prior to collapse.
Yes, brilliant, a truly superb piece of sarcasm. “Jane Dough” missed her calling. More, I hope.
What a wonderful letter – I laughed and cried at the same time. I’m taking care of my nearly 99 year old mother who is still living in her own apartment, thank goodness. She has some dementia, and it’s difficult at times to carry on a conversation, but she knows who I am and her memories of growing up in the Midwest are something I will never forget. I do her grocery shopping, pay her bills, and make sure she wants for nothing. Yes, it’s difficult, but I would never put her in a “home.” Even the so-called “nice” ones in San Francisco are nothing more than warehouses with pretty lobbies.
Thanks, Yves, for reminding me I’m doing the right thing.
OMG LOL! Fabulous post. Pretty well sums up the private equity (and Wall Street) philosophy…Never miss an opportunity to make a buck, regardless of the moral, ethical, or legal implications.
Thank you for this! A Million Thanks!
Sarcasm was NEVER put to better use!
Add to this privatization trend the desire to shrink Social Security and Medicare – and you have truly hit the .01% jackpot!
Abominations like this deserve the imprecations of Prophets of old. For example, Isaiah:
“The earth mourns and withers,
the world languishes and withers;
the heavens languish together with the earth.
The earth lies polluted
under its inhabitants;
for they have transgressed the laws,
violated the statutes,
broken the everlasting covenant.
Therefore a curse devours the earth,
and it’s inhabitants suffer for their guilt…
Terror and the pit and the snare are upon you, O inhabitant of the earth!”
Wonderful article – even if it does make me sick.
Hey, as we progress toward the future of consumptive capitalism as portrayed so brightly in “Soylent Green,” let us not overlook the last best rentier opportunities: privatized suicide parlors, and the “recycling” of our wasted carcasses for meat and metal! The MSM has been flagging a lot of situations where people have chosen to kill themselves “medically,” and more states and nations are making it ever easier to off yourself in drugged comfort in the midst of your friends and family, and at least in 2009, the “Right” was appalled, I tell you, simply appalled! “The No Longer Shocking Assisted Suicide Scene from Soylent Green,” http://www.nationalreview.com/human-exceptionalism/326709/no-longer-shocking-assisted-suicide-scene-soylent-green.
Could it be that “investors” would miss this last best opportunity? Those “investors” that plan to profit from the horrors of climate-change degradation? ” Cashing in on apocalypse: Meet the people making a killing on climate change –The individuals most to blame for global warming are also the most likely to profit,” http://www.salon.com/2014/02/01/cashing_in_on_apocalypse_meet_the_people_making_a_killing_on_climate_change/ That “investor” class of pathogens that seeks only after its own individualized pleasures and knows those important truths, captured by those famous aphorisms like “I’ll be gone, you’ll be gone!”, http://glynholton.com/2007/01/ill-be-gone-youll-be-gone/, and its ancient roots, “Then let them eat cake!” which precipitated the “deluge” that came “apres leurs” in 1789, http://tradicionclasica.blogspot.com/2006/01/expression-aprs-moi-le-dluge-and-its.html ? Renting death, and giving your withered body to the big algae vats: True Patriotism to the Fin d’Espèce Empire…
Hospice owners-investors include Kohlberg & company, Clearview Capital, Wellspring Capital Management, Pouschine Cook Capital Management, KKR, Fulcrum Equity Partners, GTCR, Sentinel Capital Partners, Summit Partners, GE Capital and Cressey & company. The Wall Street Journal reported:
Investments in home health and hospice services have been going through a phase of consolidation that saw the merging of operators and closing of branches that have lower profitability.
Law and lobbying firm McGuire Woods wrote in a white paper…
“a phase of consolidation.” Great. I’m sure oligopolies of home health care are the answer. Like, totally.