For-profit nursing home chains make big payouts to shareholders, execs
Three large operators have distributed total of $1.5 billion in dividends over past decade
Three of the largest for-profit nursing home operators in Ontario, which have had disproportionately high numbers of COVID-19 cases and deaths, have together paid out more than $1.5 billion in dividends to shareholders over the last decade, the Star has found.
This massive sum does not include $138 million paid in executive compensation and $20 million in stock buybacks (a technique that can boost share prices), according to the financial reports of the province’s three biggest publicly traded long-term-care home companies, Extendicare, Sienna Senior Living and Chartwell Retirement Residences.
That’s a total of more than $1.7 billion taken out of their businesses.
“I think the money would be more appropriately spent on hiring permanent, full-time staff, paying higher wages and benefits, and improving overall quality of life for residents,” said Tamara Daly, professor of health policy and director of the York University Centre for Aging Research & Education.
Meanwhile, non-profit and publicly owned long-term-care homes, which are funded according to the same provincial formulas, have added hundreds of millions of dollars to their budgets over the same period through fundraising or, in the case of the city of Toronto, taxpayer money.
All long-term-care homes in the province derive a substantial portion of their funding from the government. Sienna, Extendicare and Chartwell also own and operate retirement homes for residents requiring less care and derive significant portions of their revenues from this side of their business, which is not government funded and is more profitable.
“No long-term-care operator in Ontario can make a profit from government funding for resident care and services,” said Sienna spokesperson Natalie Gokchenian. “Government funding is 100 per cent dedicated to resident care and programs.”
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Homes owned or managed by Extendicare, Chartwell and Sienna have suffered some of the highest numbers of deaths and infections of COVID-19 in the province, including Orchard Villa in Pickering, Camilla Care in Mississauga and Ballycliffe in Ajax.
Lawsuits launched over the last week claim that homes owned or managed by the three companies did not adequately plan and respond to the pandemic, lacked sufficient staff to look after residents, did not provide adequate personal protective equipment, and failed to communicate with residents’ family members, among other allegations. The claims have not been tested in a court of law.
Deaths in long-term-care homes account for an estimated 82 per cent of all COVID-19 deaths in Canada. That’s the highest proportion among 14 countries found by international researchers comparing fatalities in long-term-care settings.
In Ontario, 1,306 COVID-19 deaths have occurred in nursing homes, according to a Toronto Star tally.
A recent Star investigation revealed that for-profit longterm-care homes in the province have had far worse outcomes than non-profit and public facilities. In homes with a COVID-19 outbreak, residents in for-profit facilities are about twice as likely to catch the virus and die than residents in non-profits, and about four times as likely to become infected and die from the virus as those in a municipally owned home.
Chartwell and Sienna contest that ownership has anything to do with outcomes and say their COVID-19 outbreaks and deaths are because they have more older homes with shared bedrooms than non-profits and municipalities.
This week, the province invoked an emergency measure that would allow it to assume control of nursing homes overwhelmed by the coronavirus, while the Canadian Armed Forces have been called in to help at five GTA homes in recent weeks.
Extendicare, Chartwell and Sienna are among the biggest players in Ontario’s long-termcare industry, operating 140 long-term-care homes with more than 19,000 beds in the province.
Their homes have been hit disproportionately hard by COVID-19. While the three companies oversee just under a quarter of all long-term-care beds in the province, they have experienced more than a third of all cases and deaths in nursing homes.
Included in those totals are 41 homes that are owned by municipalities, non-profits and other for-profit companies but contracted out to Chartwell and Extendicare to manage, including West Park in Toronto and Orchard Villa in Pickering.
Testifying before the parliamentary health committee this week, Pat Armstrong, a sociology professor at York University, said: “The search for profit does not lead to better quality care, greater efficiency or more choice.”
“We have to ensure that our public money goes to care rather than to profit and to democratic decision making rather than shareholder decision making.”
Public funding There are just under 80,000 long-term-care beds in the province, housed in 647 facilities. The for-profit sector owns and operates just over half the beds, while non-profit and municipally owned homes split the remainder.
All long-term-care homes in Ontario receive provincial funding according to the same formula and these funds are doled out in four “envelopes”: nursing and personal care; programs and support services; food; and a fourth broad category called “other accommodation” that covers things like administration, housekeeping, renovations and building maintenance.
Unused money in the first three envelopes cannot be used for profit and must be returned to the province. Operators can keep surplus funding from the “other accommodation” envelope, as well as revenue generated from the semi-private and private room premiums.
Homes charge residents a fee for room and board capped by the government at $62.18 per day ($1,884/month) for a standard room. Homes can charge a premium for semi-private or private rooms, but must offer 40 per cent of their beds at the basic rate. Homes can also make money on providing non-regulated services, which are paid directly by the resident, such as hairdressing, outings and dry cleaning.
EXTENDICARE STATEMENT
The overall cost of long-term care in Ontario is about $5.9 billion annually — $1.6 billion from residents and $4.3 billion in provincial funding.
It is difficult, however, to determine exactly how public money is spent in each home, said York University’s Daly.
“A total of 7 per cent of our public health care dollars fund long-term care with little public transparency and accountability for how money is spent,” she said.
“Better public reporting on indicators such as each home’s yearly funding, number of beds by type of accommodation, staff pay rates, the number of permanent positions, hours worked by front-line and other staff, registered nurse staffing levels, and staff turnover rates would go a long way towards improving public oversight.”
Municipal and non-profit homes Between 2010 and 2019, the city of Toronto injected about $420 million of taxpayer money into its long-term-care homes over and above provincial funding and resident fees. In 2019, the $44 million of additional money the city put into its 10 homes, which collectively have 2,472 beds, amounted to17 per cent of their total expenses.
The additional costs facing Toronto homes are due to the city’s resident population, who have greater needs than the provincial average, and labour costs, which are higher than the sector average, according to Dana Tulk, a director with Seniors Services and Long-Term Care at the City of Toronto.
University of Toronto professor Walter Wodchis, who specializes in health economics, said most of the additional money spent by municipalities goes into staff wages and benefits.
“The benefit package in a municipal home is head and shoulders above a for-profit home, and (municipal) turnover rates are lower as a result of that,” he said. “Turnover is a substantial issue in for-profit homes because of the low wages that they pay and the lack of benefits.”
At Chartwell’s annual general meeting Thursday, CEO Vlad Volodarski spelled out the difference in funding between municipal and for-profit homes. Municipalities in Ontario invested $300 million into their long-term-care homes in 2018, or about $1,500 per resident per month.
“If the same funding was applied to private long-term care, it would have cost ... over $1.1 billion,” he said.
The Star surveyed several non-profit long-term-care home operators in Toronto and found that they all added funds to their operating budgets on top of government funding and residents’ fees. Typically raised by a charitable foundation affiliated with the home, the topups make up 2.5 to 11 per cent of their total budgets.
At Baycrest Apotex in North York, the largest nursing home in the province, foundation support and other charitable activities account for11per cent, or $5.3 million, of the home’s $47.7 million budget, according to a spokesperson.
The Salvation Army says it contributes $343,000 — or 2.5 per cent of the $13.6 million budget — to the Isabel and Arthur Meighen Manor, which has suffered the highest COVID-19 death toll among all non-profit homes.
William O’Neill, vice-president of residential and community services for Kensington
Health, which runs the 350-bed Kensington Gardens, said they usually make some profit from the government’s “other accommodations” envelope but always reinvest that amount into the nursing envelope, “which we don’t get enough funding for.”
O’Neill said additional funds raised by the Kensington Health Foundation typically make up about 3 to 5 per cent of the home’s $26 million annual operating budget and are used to supplement government funding for food, boost qualityof-life programming and make renovations to the building.
“I don’t know how we could do it without them,” he said.
For-profit homes The Star analyzed Extendicare, Chartwell and Sienna’s annual reports for the last 10 years to calculate the total amount paid to executives in salary and stock options, as well as funds distributed to shareholders as dividends and spent on stock buybacks, which can boost share price.
All of these expenditures are discretionary payments made out of the companies’ operating budgets and approved by their boards of directors.
In addition to their long-termcare operations, the companies also run retirement homes and other health-care and homecare services, which make up a significant portion of their revenues.
Last year, Chartwell made just 10 per cent of its net operating income (a measure of revenue minus operating expenses) from long-term-care operations, but both Extendicare and Sienna made more than half of their net operating income from long-term-care homes, at 58 per cent and 56 per cent respectively. While Southbridge Care Homes, Rykka Care Centres and Revera also run large numbers of for-profit nursing homes in Ontario, the Star was unable to include these companies in its analysis because they aren’t traded on the stock market and their finances are not public.
Extendicare With facilities in seven provinces, Extendicare says it is the largest operator of long-termcare homes in Canada. The company owns 37 long-termcare homes in Ontario and manages 38 others, some of which are municipally owned facilities, such as the Dearness Home in London and Manitoulin Centennial Manor in Little Current. Taken together, Extendicare oversees almost 10,000 beds, or 12 per cent of all long-term-care beds in the province.
Over the last decade, Extendicare has taken over half a billion dollars out of its business for the benefit of executives and shareholders. It spent $51.5 million on executive compensation, $440.5 million on dividends and $20.7 million on share buybacks.
“Extendicare is a publicly traded company, and as such we pay dividends to our investors,” the company wrote in an unsigned statement to the Star.
“Last year, the dividend paid to shareholders averaged a 5.7 per cent return on the share price — a modest and fair return,” the statement said. “During the last decade, we invested $502 million to build new homes and to upgrade existing ones, and paid $134 million in Canadian taxes.”
While the facilities that Extendicare owns outright have experienced low rates of COVID-19 infection and death, the facilities it manages have almost double the rate of cases and deaths than the provincial average, according to the Star’s database based on public records.
There have been 475 cases and 139 deaths in Extendicaremanaged homes, an infection rate of 10.6 cases per 100 beds and a fatality rate of 3.1 deaths per 100 beds. Province-wide, there has been an infection rate of 5.6 and a fatality rate of 1.5 in all long-term-care homes.
The company said it needs the ability to test its staff regularly to prevent asymptomatic carriers from exposing residents to the virus.
“Part of this tragedy is we didn’t know earlier that regular symptom screening was not sufficient to keep the virus out,” the statement reads. “Now that we do know, it is essential that we are able to test all of our staff on a regular basis to prevent further outbreaks.”
The statement said that the value the private sector brings to health care is access to capital and expertise.
“It’s one of the reasons we’re recognized among our peers as experts in operations, and why we are hired by municipalities, not-for-profits, hospitals and the provincial government to assist in managing their homes.” Extendicare manages Orchard Villa in Pickering, which has recorded 71 deaths — the most out of any nursing home in the province.
A lawsuit filed by the family of deceased resident Paul Parkes alleges that Orchard Villa “failed to protect the residents of the home” and that there were “inadequate preventive and responsive measures to the COVID-19 outbreak.” It specifically alleges that the home’s management did not “implement an adequate COVID-19 response plan” and did not provide visitors, residents and staff with “an adequate supply” of personal protective equipment.
Extendicare did not address the allegations in the lawsuit in its response to the Star.
Chartwell Chartwell Retirement Residences, which has former premier Mike Harris serving as chair of its board of directors, has taken more than $845 million out of its operations in the last decade, paying its executives $47.3 million and distrib