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.

Ken Connor

Ken Connor is Chairman of the Center for a Just Society in Washington, DC.