THE SCREWING OF THE AVERAGE MAN Where It All Ends
Mendelson, Mary A.
The Screwing of the Average ManWhere It All Ends by Mary Adelaide Mendelson & David Hapgood Life is rough for the average man. For 40 years he fights a rear-guard battle with the highwaymen...
...Once he kidnapped an old man from a rooming house, and put him in his nursing home, where he eventually bilked him of close to $30,000...
...He gets, say, $14 a day for each patient...
...Run properly, nursing homes need not be purely a do-good operation...
...HEW seemed to have lost a round in early 1972 when Hal Schechter, a reporter for Hospital Practice, won a suit granting him access to inspection reports on homes licensed for Medicare...
...Then, when the stock began to fade, the officers bailed out by selling their own shares through secret accounts at the brokerage house...
...The old-fashioned swindler is usually someone who grew up in the industry and is working with little capital...
...he may however spot an aide wearing a nurse’s cap if an inspector happens to be in the home...
...It further ruled that the extracts could not be obtained at the nursing homes or by telephone or mail, but only from the regional Social Security office or the local welfare office...
...The government is not alone in lamenting the operators’ unrestrained passion for the third mortgage and the high interest rate...
...Slick Operators Government’s role as the nursing home industry’s third-party friend dates mainly from 1965, when Medicaid and Medicare were moving into action...
...or bigger, newer and, usually, within the law...
...What the average man as investor failed to see was that, while there was no way for the promoters to lose, there was ample opportunity for the investor to lose his shirt: he thought he was being invited to get in on the take, but the fine print said it was an invitation to a screwing-his own...
...were indicted on charges of defrauding the investors...
...The average patient will not necessarily enter a nursing home solely because he needs “skilled nursing care...
...and as the prices went up, fewer and fewer patients could afford to pay their own way, so that yesterday’s private patient today is on Medicaid...
...Cohen was earning two for one on his investment...
...Yet they retain enough of the two-bit-hustler flavor and are clear enough in their illegality to be considered disreputable...
...That death was officially certified when the federal government decided that the children’s resources should not be a factor in determining whether an aged patient is eligible for Medicaid...
...Later in 1972, Congress adopted legislation requiring HEW to make public both Medicare and Medicaid inspections...
...A retired nursing home operator once described how tranquility is maintained: A layman doesn’t know what to look for in a nursing home...
...A nursing home, to begin with, is the best customer a drug store could hope for...
...broken plumbing, peeling plaster, inadequate food...
...One of the pillars of the industry, Dr...
...If he takes the patient out, it means trouble with the operator and other patients asking to be moved...
...As for the investor, he could reflect that Clark was putting in one month for each $50 million that the stockholders lost on Four Seasons...
...he charged for 960 visits in a three-month period...
...Apart from the financial exploitation of the patients (about which more later), some nursing home operators step in to directly manipulate their patients’ conduct and behavior...
...And the nurse tells him: “This is ,John...
...and a brokerage firm (Walston and Co...
...The company’s accountants obligingly certified the figures...
...Like the AMA, the operators believe in self-regulation...
...Woods pulled off some even more exotic hustles...
...But he can cut what comes out of the patient’s hide: food and service...
...Who suffered...
...Frequently, the home will give all its business to one pharmacist...
...stand the modern world far better than the small-timers ever did...
...The government pays a doctor to treat him, but often the patient catches only a glimpse as the doctor flashes past in that Medicaid phenomenon known as the “gang visit”-the doctor gallops through the nursing home, glancing briefly at the most urgent cases, and then bills Medicaid for a personal call on each patient...
...The taxpayer, the patient-all in all not ,a bad list of victims for an industry supposedly devoted to providing loving care...
...By now, government provides some threequarters of the industry’s annual $3.5-billion revenue, and Medicaid alone supports more than half the one million people in nursing homes...
...The nursing home patient is the victim of private greed and government indifference, and his presence there is yet another sign of the death of the family...
...John is one of our best patients...
...Once inside the home, the patient is entirely dependent on the people who run it...
...In the previous decade enough new money, both public and private, came into the nursing homes and attracted some smart pioneers, who today are among the industry’s most eminent hustlers...
...The flood of third-party government money aroused innovative greed in all sectors of the health industry, but the larger proportion of major swindles in the industry is to be found in the nursing homes...
...When the national recession and a host of other factors made the boom bum itself out by 1971 , the average investor found that the stock he bought when it was headed for the moon was now permanently attached to the ground...
...In their eagerness a few of the new breed crossed the line, and a couple have even been caught...
...The patients, who got less care...
...At times these old-fashioned hustles reach a volume that can no longer be called small...
...They saw that the nursing home plus government money offered a springboard for largescale financial hustles that had the virtue of being legal-most of the time, anyway...
...That left the average investor holding an empty bag...
...Certainly it had avoided the obvious action: collecting the reports into a nursing home guide for the public, or posting the reports at the entrance to the home...
...Thorazine-that’s a tranquilizer they use...
...His home was not closed down despite 50 recent violations, and an inspector’s report that found the “overall picture of the third floor to be in deplorable condition...
...They never have to spend anything to rehabilitate him...
...The drug store kickback is another classic ploy of the old-fashioned nursing home...
...But what got Cook into trouble was not that the eggs were banned for human consumption, which they were, but that he obtained them illegally...
...Medicare, and in some states Medicaid as well, pays nursing homes their costs plus a reasonable profit...
...He walks in and sees a patient is nice and quiet and he thinks this guy is happy...
...But the more imaginative of the operators saw that the list was not complete...
...In some homes that do business with Kosow, mortgage payments have eaten up one quarter of their revenue...
...First offered at $1 1 a share, it shot up to a peak of $181.50, then shot down just as fast, and was worth 50 cents a share when trading was suspended...
...This became evident when the former president of Four Seasons, Jack L. Clark of Oklahoma, came up for sentencing...
...It interpreted the court order to mean only that Schechter himself could have access to the eight reports on which he based his suit, not that the general public could see Medicare reports...
...He sits here and watches television...
...main a dark place that few want to look into...
...The wealthy can pay for this assistance, and therefore stay out of the institution...
...Business as Usur-a1 Some business leaders realized that the nursing home, with its guaranteed government revenue, provided an excellent base for usury...
...Two officers of the nursing home chain bearing the strange name of Convalariums of America were among those who pushed this game a bit too far before they got caught...
...HEW gave ground inch-by-inch...
...Some could get along at home, if they had a certain amount of personal assistance...
...The record of the nursing home industry is the best argument for the revival of a sense of community that would make it intolerable for us to allow the old to live theii last years in the cold hands of an indifferent bureaucracy...
...This is the kind of operator who pilfers the small amount-usually $5 to $10 a month-that patients are supposed to get out of the Medicaid check for their personal use...
...Caseworkers are essential to the steady flow of patients on which an operator’s prosperity is based, and often the operator rewards the cooperative caseworker with, say, an expensive Christmas gift, or, as happened in one city, a bounty on new patients of $100 a head...
...Most people with relatives in nursing homes would rather think of practically anything else...
...Moneylenders load the homes with mortgages-the interest will be paid by the governmentand use the resulting capital for other enterprises...
...Clark was said to have made $10 million as his share of the hustle...
...Another way the operator can increase his net is to cut expenses...
...The Missing Link Even though no locked door prevents him from leaving, the patient has little chance of escaping such a concentration camp...
...Instead, he extracts a kickback, the taxpayer pays the full bill, and operator and pharmacist split the difference...
...Other than word of mouth, there is little to guide us in trying to pick the rare good home out of innumerable mediocre ones and the occasional Auschwitz...
...Stennis the Menace Government, which licenses and inspects the homes, might at least be expected to enlighten us about nursing home conditions even if it’s impossible to regulate them...
...It just isn’t worth it when the patient probably doesn’t have long to live anyway...
...Similar cases have been fought in state courts over Medicaid, which is administered by the states...
...The patient, on the other hand, can’t give the caseworker anything for moving him to a better home, but even if he could, the caseworker would probably prefer to leave him there...
...The really unlucky patient will land in a home where the patients are not only neglected but actively abused...
...According to the charges, the officers showed the public phony figures about Four Seasons’ performance in order to run up the price of the stock...
...The loss to the stockholders of $200 million was said to be a record for a stock-fraud indictmenta remarkable tribute to the ability of the new breed of nursing home operators, for after all they were in an industry that had not even been on Wall Street a few years earlier...
...Doped up, the patient is less likely to complain about what is done to him, or not done for him...
...The patient’s luck has run out entirely if he finds himself in the hands of a Benjamin Cohen or a Daniel Slader...
...It’s a brown pill...
...Herbert Cook of California belongs to the small-time variety of operators...
...If the outcome of these contests is rather one-sided, at Ieast he feels physically up to the struggle...
...He knows all about that home, the stench, the lousy food, the early deaths, but he has sent old people there for years, and he will go on sending them there for any of several reasons...
...of Barron’s wrote that a “. . . kind of frenzy seems to grip the stock market at the merest mention of those magic words ‘convalescent care,’ ‘extended care,’ ‘continued care.’ All euphemisms for the services provided by nursing homes, they stand for the hottest investment around today...
...Often the patients suffer as well, when the interest payments rise so high that “fat” must be cut from the rest of the home’s budget...
...If they were not exactly eager to be fleeced, they were at least willing to put their money into the nursing home industry when it incorporated and went on the market...
...Gormly was convicted and required to give back $1.2 million...
...But the nursing home operator doesn’t openly ask for a ‘discount, which would be passed along to the taxpayers who ultimately pay the bill...
...Typically he is working against a flat-rate Medicaid payment system...
...The old-fashioned swindler on a somewhat larger scale was Eugene Woods, former operator of a home in Cleveland...
...One enthusiastic advocate of the virtues of self-regulation was Donald W. Gormly, who in the late sixties was president of the California Nursing Home Association and treasurer of the national association...
...Cohen owned and operated the Kenmore Nursing Home in Chicago where, according to an undercover investigator, in 197 1 he fed each of his patients on 78 cents a day...
...There once was a time when the elderly could depend on their family for care, and when the children would have decided whether or not their relatives needed to be sent to an institution...
...In 1971 Gormly was proved right...
...Many of the other drugs get siphoned off in swindles and never reach the patients, but that 40 per cent usually hits its target...
...He may have no choice: the other homes in the area are either just as bad or else they are full...
...Government inspectors’ reports are the best, in fact virtually the only, outside information about the quality of a nursing home...
...They set up six dummy corporations which r e n d e r e d phony invoices to Convalariums at inflated prices...
...There was, said one analyst, “no way” to lose money in this business...
...One million Americans now end their days in these institutions...
...Millions of investors were ready, out there in the heartland...
...There have been reports of physical force used to this end, but drugs are the preferred technique...
...Once they have chosen a home, relatives can expect, if the patient is on Medicaid, to have to bribe the operator with something extra under the table to obtain even minimal care for the patient...
...Old Daniel Drew, the inventor of watered stock, must have smiled down appreciatively from hustlers’ heaven . Of course, the Four Seasons operators got caught, which is bad form, but the size of the fraud guaranteed them against substantial retribution...
...But as he starts to slow down a little and his health begins to go, looming on the horizon is the nursing home, where more and more people 'are receiving their final and most ignominious screwing...
...The new operators come from establishment backgroundsmany are lawyers or business school graduates-and they under...
...They build or buy a nursing home and then lease it to themselves at an outlandish rental, which then becomes a “cost” reimbursable by the government...
...as more people came, the industry raised its prices...
...The chain went bankrupt...
...Another doctor racked up 90 calls on one day and 86 on another, making 487 calls in 16 days...
...The great contribution of the new breed of nursing home operators, those who came in during the 1960s, was to rise above these tawdry origins and make swindling respectable...
...Assuming he can still move around on that 58-cent-aday diet, he nonetheless has little hope of getting out because the nursing home operator has a Dickensian hold on his money...
...Strong opposition from the American Nursing Home Association lobby and pressure from inspectors themselves make it unlikely that such enlightenment will come...
...Or they set up separate corporations to sell goods and services at unreasonable prices to their own nursing homes...
...In one case a doctor billed Medicaid for 71 patient visits on one day and 56 on another...
...Take, for example, the California operator who zaps each incoming patient with a tranquilizer to “make him feel at home...
...In one such case, rent and mortgage payments consumed almost a third of the budget, consequently the payroll was pared to a fraction of its level in normal homes...
...Meanwhile both of these doctors were also carrying on their usual non-Medicaid practices...
...The patients were paying off the money lender...
...If they can keep John a vegetable, then they don’t have to bother with him...
...Government agencies, led by the Department of Health, Education and Welfare (HEW), seem determined to keep us in the dark...
...The judge (Thomas P. Griesa) sentenced him to one year, meaning parole in four months, and imposed no fine at all...
...Until that day comes, the average man seems doomed to paying out extra taxes to support the industry’s hustles and excess profits, while heeding, if he can, this advice: don’t get caught alive in a nursing home...
...At this writing, HEW is engaged in a stubborn rear-guard action designed to keep its inspectors’ reports from the public eye...
...Michael Miller of White Plains, N.Y., was charged by state auditors with requiring relatives to make donations and to pay for counseling fees...
...Even the small monthly allowance which Medicare provides for personal expenses is likely to have been intercepted by the operator...
...The missing element in the patient’s protection is the government...
...Half the people in nursing homes have no immediate family, and, of the rest, half have no relatives who take an interest in their plight...
...John is so full of thorazine that it’s coming out his ears...
...Nursing home swindlers belong to one of two categories: small-time, old-fashioned, and illegal...
...It’s unlikely that the caseworker will be of any help, however...
...Both operators were getting rich on their underfed patients...
...The new operators quickly devised ways to pad costs and make their profits unreasonable...
...If Clark can be considered to be earning his swindle with his jail time, he is getting paid at the rate of $2.5 million a month...
...Customers who bring that kind of business are normajly entitled to demand a discount...
...Woods intercepted social security checks addressed to his patients, then endorsed and cashed them himself...
...Unseasonable Weather None did worse than those caught with shares in Four Seasons Nursing Centers of America...
...Some $200 million in Medicare funds alone goes each year for drugs in nursing homes, and 40 per cent of that is spent on tranquilizers and sedatives...
...Now the average man’s closest relative is often the government, and the place where he will end his life may be chosen by a caseworker whom he may never even see...
...He had bought the home for $40,000 cash, and in one year he had a net profit of $50,292, plus another $31,000 in depreciation (in effect, tax-free income), plus another $14,000 in salaries for his wife and himself...
...He and his wife and accountant were indicted on a charge of padding the bills paid by the state and federal governments for patients in one of their nursing homes...
...The newcomers excel in the costplus situation...
...Parent and child alike, we’re all on our own...
...Every good con man knows that greed is the downfall, and the lure of big money drew hordes of small investors into the industry in the late sixties...
...Still HEW hung on grimly, interpreting the law to mean that the public could see, not the entire report, but an “extract” from it, and that not even certified by Senator Stennis...
...It is a sad way to go, and a grim reflection of the way we treat the old among us, and for this reason these homes reMary Adelaide Mendelson's book on nursing homes, Tender Loving Greed, will be published in March by Alfred A. KnopJ David Hapgood is a contributing editor of The WashingtoncMonthly...
...For 40 years he fights a rear-guard battle with the highwaymen of the modern world-the tax collector, the insurance salesman, the loan officer at the local bank...
...Slader, who was treasurer of the Metropolitan Chicago Nursing Home Association, was even thriftier, feeding his patients on 58 cents a day...
...HEW succeeded, within the limits of the new law, in making it as hard as possible for a person considering a nursing home to find out what the last inspector had written about the place...
...As for Slader, he and his associates were said to have made $1 85,000 in one year on their investment of $40,000...
...They do it for the money...
...But you take a look at John’s pupils and you’ll see what condition John is in...
...One Joseph Kosow of Boston, for example, has grown rich by placing second and third mortgages on nursing homes at rates of interest running up to 40 per cent a year...
...But in general their swindles are both far bigger and far safer than the nickel-and-diming of the small-timers (who are still in business also...
...Medical investigators have estimated that between 30 and 90 per cent of people in nursing homes are healthy enough to be somewhere else...
...Convalariums paid these invoices, the dummy corporations paid the actual suppliers, and the two executives pocketed the difference...
...In 1972 eight officers of Four Seasons, its accountants (Arthur Andersen and Co...
...Most of us would be willing to put in a little time in jail at that salary...
...Some of the nursing home operators merit the trust patients must necessarily place in them, but too many do not, especially those lured into the business by the flood of government money that has washed over nursing homes in the last few years...
...He can’t do anything with fixed costs such as rent and taxes...
...If the relatives don’t like that, or if they complain about the conditions in the home, they are typically told, “If you don’t like it here, take your father someplace else...
...Although state and federal government foot the largest share of the nursing home bill, they have often swallowed the operators’ argument that no outsiders should look too closely at the way the public money is being spent...
...But when the average person finds that he can no longer function completely on his own, he may have no choice but to sign on for complete institutional care...
...As the money poured in, more people went to nursing homes...
...The stench permeated the area...
...It looks like an M&M candy...
...When Woods skipped town, among his papers was found a list of the items in a coin collection owned by a patient, with the most valuable coins marked by asterisks...
...Many of us have had the experience of looking into the world of the nursing home, often with considerable guilt, because someone in the family can no longer make it on the outside...
...In 1969, the brightest of these stars were known as the “fevered fifty” of Wall Street, and J. Richard Elliott, Jr...
...Or he may have an understanding with the’operator...
...He could, if he is on Medicaid, call the caseworker who put him there in the first place and ask to be transferred...
...The nursing home where I worked kept at least 90 per cent of the patients on thorazine all the time...
...It happens that the amount paid the nursing home by Medicaid is determined by subtracting the patient’s social security payment from the nursing home’s monthly rate, so that by intercepting the checks (the patients had no reason to care, since they wouldn’t have gotten the money in any case) Woods managed to understate the amount of social security the patients were paying him and thereby collect correspondingly more from Medicaid...
...When he calls for a nurse, he may find there is none on duty because this saves the nursing home operator money...
...But that was only a trickle compared to what happened after 1965, when the taxpayer joined the patient as a victim of the nursing home industry...
...If he’s lucky, he will merely be neglected...
...His monthly social security checks are cashed by the operator, and the patient has no idea whether he could ever pry the checks loose if he left the home...
...He was caught buying substandard eggs, known as “checks and dirties...
Vol. 5 • January 1974 • No. 11
