Private Equity As An Alternative Reality For Our Island Home

To the editor: To truly appreciate how special and unique OIH truly is, you have to compare it to its opposite — the nursing home owned by a private equity firm. Beginning in the 1980’s, private equity (PE) firms like Carlyle started buying nursing homes. They were seen as cash cows because of a regular stream of Medicare payments and also the valuable land that many were located on. The PE firm typically had no interest in the nursing home business but rather saw it as a way to reap enormous profits, which it did.

OIH could be seen as a particularly rich target because of the land it sits on. PE, once it acquired OIH, would sell the land to a real estate investment firm. By selling the land and also assessing transaction and management fees, PE would then recoup the money that was initially paid for OIH.

OIH, however, would be stuck with lease payments. Yes, it would have to pay for the use of property it once owned. And, because the money to buy OIH would have been mostly borrowed, OIH would be made to pay back that money.

With such a financial burden, would OIH have survived as a PE-owned nursing home? Most likely not.

If this sounds familiar, this was the playbook used for the acquisition of Steward Hospitals by Cerberus Capital Management.

In order to lower the cost of running the facility, PE sheds staff. There are then fewer nurses at all levels. Of course, in Massachusetts, there are rules for staffing a nursing home adequately. In other states, with weaker regulatory structures, staff is let go and resident care suffers as a result.

Contrast this scenario with what you know about OIH. First, OIH is not a for-profit business, let alone one owned by piratical PE. Rather, OIH is the last municipally owned nursing home in Massachusetts. This earned it a front-page article in the Wall Street Journal.

This meant that OIH got to keep its land rent free, and the beautiful view that accompanies it. This will be a memory if the new OIH is built at Sherburne but the senior center is slated to inherit the view when it is built there.

No one has moved to slash nurse staffing. Of course, as noted, state regulations forbid that. As a rural facility, OIH has had challenges recruiting RNs but no one would think to remove RNs as a way to reduce costs and increase profits for PE.

During the Covid pandemic, OIH did an extraordinary job keeping residents safe. Not so PEowned nursing homes. Their record was extremely poor, often having the largest outbreaks in several states when compared with nonprofit, for-profit (non-PE), and public facilities.

Of course, OIH is not perfect but, compared to the PE-owned facility, it stands as a bright, shining example of how a nursing home should be. The approach of PE is pure greed. Morally what it has done is reprehensible. It should in fact be outlawed.

As the Nantucket community decides the fate of OIH, money—how much to spend, how much to save—may be the dominant consideration. But remember, whereas a nursing home cannot be thought of first as a money-making machine, as PE would have it; by the same token, the care a community shows for some of its most vulnerable members cannot be reduced to a financial calculation alone.

Maureen Searle