Sometimes news scoops reveal more about the media outlet making the revelation than the world around it. So it was last month when the Toronto Star breathlessly disclosed to readers that certain publicly-traded firms in the province have been paying dividends to stockholders and salaries to executives for years.
“Three of the largest for-profit nursing home operators in Ontario…have together paid out more than $1.5 billion in dividends to shareholders over the last decade, the Star has found,” the exposé proclaimed. Further digging by the paper’s crack investigative team – and when they say “the Star has found” what they really mean is they downloaded publicly-available corporate filings from each firm’s website − revealed another $138 million in executive compensation and $20 million in stock buybacks dispensed over the same time. “That’s a total of more than $1.78 billion taken out of their business,” the paper stated darkly. Readers were meant to be scandalized.
Here’s another way of saying the same thing: three firms raised otherwise-unavailable capital to contribute much-needed capacity to a habitually underfunded but absolutely essential social service. In doing so, they made the entire sector more efficient. And then they paid the investors who made it all possible a market rate of return.
After being widely ignored by most politicians and the public for many years, the nursing home (or long-term care facility) sector has suddenly found itself caught in the unforgiving spotlight of a global pandemic. As we have all come to know, Covid-19 is highly contagious and particularly lethal for older patients with underlying chronic health impairments. These characteristics seem specifically engineered to wreak havoc on nursing homes. And that’s exactly what’s happened. Residents and staff of long-term care and retirement homes in Canada comprise approximately 30 percent of all reported Covid-19 cases and account for more than 80 percent of all deaths. According to some international comparisons, Canada has the highest Covid-19 nursing home fatality rate in the developed world. Attention must be paid.
And lately, much of that attention has focused on Canada’s significant for-profit nursing home sector. In addition to the Star’s scandalization over the habits of corporations to pay dividends and salaries, many unions, political leaders and sympathetic academics have seized the moment to repeat a common ideological trope that it’s somehow immoral to earn a profit delivering any form of necessary care.
“It is time that the federal government stepped in to end the travesty that is private for-profit residential care in Canada,” screamed an open letter from the National Union of Public and General Employees. Hassan Yussuff, president of the Canadian Labour Congress, has demanded that long-term care for the elderly be made part of the Canada Health Act, which would forbid private provision of core services and effectively nationalize the entire industry. Similarly, York University sociologist Pat Armstrong told a House of Commons committee in May that “We have to ensure that our public money goes to care, rather than to profit” in the nursing home sector. Other academics claim the mere presence of for-profit homes brings about “dehumanization.”
A recent report by the Canadian Armed Forces into appalling conditions at five nursing homes in Ontario where soldiers were deployed on an emergency basis, four of which are privately-owned, has spurred further criticism of the for-profit sector’s involvement. Even Ontario Premier Doug Ford has gotten into the act by scolding the corporate leadership of for-profit nursing homes in his province. “If they want to be greedy and make money, then get out of the business,” he said last week. “Go find something else to do. Don’t put people’s lives in jeopardy.”
The urge to discredit the for-profit sector and/or demand that all aspects of the care industry be brought under public (read: public-sector union) control is a familiar one among fans of perpetually bigger government. Current arguments about long-term care sound remarkably similar to the formulaic claims and criticisms previously made about child-care providers during earlier efforts to turn that business into an entirely publicly-funded, publicly-delivered effort as well: It’s unethical to make money looking after children…Only government employees can be trusted to provide proper care to vulnerable people ….Profits hurt kids…and so on.
But just as the pressing issues of practicality, fiscal prudence, quality, and consumer choice have repeatedly scuttled multi-billion-dollar plans to install universal public daycare across Canada, those same factors seem likely to protect and preserve private-sector provision of long-term care as well. The presence of the profit motive in the nursing home industry is not a flaw, but a necessary feature. Our seniors could scarcely survive without it.
Befitting the decentralized nature of Canadian federalism, the cross-country long-term care sector is a highly diverse affair. Medicare does not cover residential care for seniors (only their health care in whatever setting they may be living), and so it is up to each province to set its own standards, approaches and funding models. Some provinces run their own facilities; in other provinces municipalities and non-profit agencies, including in some cases religious organizations, are either mandated or contracted to provide this care. Note also that long-term care facilities are distinct from retirement homes, which cater to retirees who can mostly look after their own health-care needs and are entirely privately provided and funded.
Regardless of the particular operating model, the private, for-profit sector constitutes a major component of the long-term care system throughout Canada. Nationwide, privately-owned nursing homes operating on government contract are the dominant model, comprising an estimated 37 percent of all such facilities – more than either the non-profit (30 percent) or public sector (32 percent), according to the Canadian Institute for Health Information. Of the approximately 150,000 available beds (2014 figures), the for-profit sector in Ontario provides 58 percent; in Alberta, 43 percent; in B.C., one-third; in Quebec, about one-quarter.
This large footprint is nothing new, despite claims to the contrary from poorly-informed critics. Long before governments became involved in a big way, the for-profit delivery of residential seniors’ care in Canada was once dominated by many small independent operators – often stereotyped as “widowed nurses”. Since the 1970s these business have been increasingly consolidated by larger, publicly-traded corporations. According to a 2007 summary of the industry by Statistics Canada, “Private facilities for some of Canada’s more vulnerable citizens, such as the elderly…have existed for a very long time, and can be viewed as an integral part of the supply chain for this industry.”
For-profit long-term care is equally significant in other countries as well. In the United States, the private sector delivers nearly 70 percent of all beds, and in Great Britain over 85 percent. Most Scandinavian countries also embrace a significant share of private delivery in order to ensure competition with government-run facilities. According to a recent OECD survey on Sweden, where private operators comprise 20 percent of the sector, “Municipalities purchas[e] care from both public and private providers, and many long-term care recipients have the possibility of choosing across competing providers.”
As with much of the rest of the world, the private sector is thus a vital, legitimate and longstanding component of Canada’s long-term care system. And according to voices more thoughtful than the Toronto Star’s editorial board, there’s no reason to be alarmed by this. Michael Nicin, executive director of the National Institute on Ageing at Ryerson University in Toronto, disputes the notion that non-profit care is provably superior to for-profit delivery. “There isn’t enough information to support that position in Canada,” he says. He calls the current hysteria over ownership status “a red herring” that’s distracting from more pressing problems. “Some of the private homes are doing exceptionally well because they have deeper pockets and much better planning procedures” than non-profits, Nicin says. “It is not clear to me that one class of ownership structure is doing noticeably better than any others.”
Vlad Volodarski is CEO of Chartwell Retirement Residences, one of the three publicly-traded nursing home companies singled out by the Toronto Star’s “investigative team” for paying dividends to their shareholders and salaries to their executives. A real estate investment trust, Chartwell operates nearly 200 seniors’ homes with over 30,000 residents across the country; as of last week, there’d been 96 confirmed Covid-19 deaths at Chartwell nursing homes. “Each one of those deaths is one too many,” says Volodarski somberly in an interview. But he strongly disputes the notion he’s making a profit by short-changing seniors. Or that Chartwell’s services are inferior to those provided by other ownership models.
“There is no profit to be made off government funding for residents, period,” Volodarski explains. He notes that Ontario’s nursing home budget is delivered via four distinct envelopes allocated to personal care, programming, food and administration. The same funding is provided to all homes regardless of ownership status. The first three envelopes must be spent entirely on patients and are fully audited. Any surplus funding is automatically returned to the government.
Only the fourth envelope, covering managerial expenses, is available to be booked as profit if the firm is able to find efficiencies. This fact makes the Toronto Star’s claims of money being “taken” from needy seniors to be disingenuous, if not worse. Firms can also make money selling extra services to residents, such as haircuts or excursions. Volodarski points out that Chartwell’s retirement home business, which isn’t government-funded or so tightly regulated, is far more lucrative than the long-term care branch. Retirement homes constitute 90 percent of his firm’s total business and the vast bulk of those profits the Star finds so discreditable. “We actually accept a lower rate of return on our long-term care business,” Volodarski says.
According to Statistics Canada, the entire nursing home industry delivers a rather paltry 1.4 percent annual return, and with a 97 percent occupancy rate. Rather than “taking money out of their businesses”, Chartwell and other for-profit providers are in fact providing greater efficiency and much-needed capacity to the industry. The waiting list for nursing home beds in Ontario alone is estimated at 35,000, and 40,000 nationwide.
Central to most union and academic arguments against for-profit operations is evidence wages tend to be lower in the private sector than among unionized government staff. This was the key theme of a report this year from the British Columbia Seniors Advocate critical of the for-profit sector. It is an argument frequently heard in debates over child care provision as well. Lower wages paid by the private sector are considered prima facie evidence of a problem. While Volodarski doesn’t dispute that wages are lower in the for-profit sector, he must still compete for staff in a competitive labour market. And he rejects the assertion this makes a difference. “Any business person would say it’s not inputs, but outputs that matter,” he argues. “And if you look at the clinical outcomes in the nursing home industry, you will see that ownership doesn’t matter.”
Volodarski points to numerous quality assurance studies across the industry that contradict the notion high union wages necessarily deliver higher-quality care. Across six indicators tracked by the Ontario government, including such things as residents with pain, patient falls and use of antipsychotic drugs, he notes Chartwell currently scores better than average on all six, beating many competitors across the ownership spectrum. Similarly, the most recent survey by the Ontario Long Term Care Association found that “on average, there is no difference in quality of care between homes that are not-for-profit or privately owned.”
The same report notes, however, that municipally-run homes tend to score somewhat lower than private-sector homes. The same observation holds in other provinces. Surveys by the Health Quality Council of Alberta also reveal no difference between non-profit and for-profit nursing homes. “No one ownership type is better or worse that others across key measures of resident experience,” says one recent report. In some categories, including choice and services, private operators in Alberta actually score higher than government-operated facilities, although this difference is not considered statistically significant.
Curiously enough, while for-profit operations consistently deliver the same quality of care as non-profit and government-run operations, they often do so with less overall funding. Non-profits often fundraise for extra revenue and Ontario municipalities frequently subsidize their own nursing home budgets with additional taxpayer funds. Volodarski notes that in 2018 that category alone amounted to $300 million province-wide, or an extra $1,500 per municipally-delivered long-term care bed per month. For-profit operations benefit from neither of these extra sources of funding but consistently deliver the same level of care. They are, in other words, more efficient than their competitors. “Why as a society would we want to have our homes run in a less efficient manner?” Volodarski wonders.
No evaluation of nursing home outcomes in the midst of the coronavirus pandemic can ignore the ultimate measure of success or failure – the rate at which residents are dying from Covid-19. And on this standard many critics claim for-profit homes are failing their clientele. The Toronto Star investigation claims “for-profit nursing homes have had far worse Covid-19 outcomes than public facilities.” Recall that four of the five nursing homes at the centre of the Canadian Armed Forces report are for-profit, including three from the same company, Rykka Care Centre. Political heat over these facts likely spurred Ford to make his contentious claims about “greedy” for-profit long-term care owners.
Volodarski argues, however, that it is the homes themselves, rather than their ownership status, that explains the worst outbreaks. A crucial factor in the rapid spread of the coronavirus in nursing homes has been the presence of multi-bed wards with shared bathrooms, which make it nearly impossible to practice proper isolation techniques. This layout, called “Class C” in Ontario, was set by provincial regulations established in 1972 and was not updated by the government for more than 25 years.
Nearly half the province’s 79,000 long-term care beds are still Class C, and a preponderance of these are owned by the for-profit sector, a legacy of their long presence in the industry and a building boom in the 1980s and 1990s as demographic pressures intensified. Non-profits or municipalities operating similar older buildings have been equally hard hit by the coronavirus, including Seven Oaks, a municipally-run facility in Scarborough, Ontario that has suffered 41 deaths. Haphazard provincial attempts to upgrade these buildings to newer 1999 standards have been mostly unsuccessful due to insufficient funding.
According to the Globe and Mail, Ontario’s disastrous load-shedding requirement was only relaxed in mid-April when it became apparent there would be no massive wave of coronavirus cases heading for provincial hospitals. We now know that the death toll from the pandemic is mainly a nursing home phenomenon − aided and abetted by unfortunate, if not incompetent, government policy. Alberta has also suffered the large majority of its Covid-19 fatalities in its long-term care facilities. True, much media attention in that province has focused on the massive outbreak at the Cargill meat-packing plant in High River. It afflicted over 950 employees but, thankfully, resulted in only three fatalities (one of which was an elderly relative of a worker). In a toughly worded speech to the Alberta Legislature last Wednesday, Premier Kenney pointed out that the average age of those who have succumbed to the disease in the province is 83.
As grim as the situation in some provinces may be, however, the nursing home industry’s experience with the coronavirus has varied widely from coast to coast. And with no apparent pattern in terms of ownership. Quebec has less than half the share of for-profit nursing homes as Ontario, but has experienced twice as many Covid-19 deaths (3,552 vs. 1,820 at last count) among residents and staff. On a per capita basis, Quebec’s results look even worse. And while B.C.’s share of for-profit operators lies somewhere between that of Ontario and Quebec, it has experienced only a tiny fraction of the infections and deaths as the other big provinces. The share of nursing home deaths in B.C. among all coronavirus victims stands at 56 percent, with a total resident death toll of just 91.
“The magnitude of the crisis has been very different in B.C.,” says Daniel Fontaine, CEO of the B.C. Care Providers Association, an industry group representing both non-profit and for-profit nursing homes. Fontaine dutifully notes that, of course, “While the death rate has been lower here, many families have still been devastated by the disease.” (Since the interview, Fontaine has left his position to become CEO of Métis Nation British Columbia.) The relatively light impact in B.C. appears to be linked to the early adoption of policies that isolated nursing homes from the rest of the population and limited staff to working at only one site.
These were, importantly, suggestions that originated with the private sector. “We were the ones to call for a closure of facilities to visitors and we were the first advocate for a single-site directive,” Fontaine says. This fact was acknowledged by B.C. Health Minister Adrian Dix when he made the announcement in April. Cross-infection by workers who work at more than one nursing home has been identified as a serious issue in several provinces.
As in Ontario, B.C.’s private nursing home sector receives significantly less funding than government operations. Fontaine points out this funding gap can be as much as half an hour per patient per day. Despite the inequity in funding, however, quality outcome reports show no difference between different ownership modes. The reason, he says, is the inherent urge to innovate that comes from the private sector, pointing to numerous best practices guides created by his organization covering drug use, recreational therapy and assisted living supports. “These are innovations and ideas that have come about because our operators are committed to improving their sector,” says Fontaine. “This is a result of private investment that you would not get if everything was government-owned.” The existence of a for-profit sector thus provides vital competition both between firms and with government and non-profit operators.
As for calls that his industry should be entirely government-run, Fontaine snaps that “Covid does not care whether homes are for-profit or publicly-owned. There is no delineation with this disease, it just comes in. But these arguments are what happen when you let ideology trump practical and pragmatic issues.” He also notes that more than half the new bed capacity added in B.C.’s long-term care facilities over the past two decades has come from the for-profit sector. With a demographic wave of retired Boomers placing ever-greater strain on government resources, it is private investors who are providing a place for seniors to live in their final years.
Canada currently spends $22 billion per year on long-term and home care for seniors. The sheer weight of those aging Boomers is projected to push this bill to $71 billion by 2050. Yet such estimates don’t include the cost of any changes likely to arise from the current political attention being paid to the long-term care crisis, including higher staff wages and new regulations. Or eliminating existing waiting lists. Or the extra capacity that will have to be added when older four-bed wards are converted to single rooms. The annual bill will likely hit $71 billion long before 2050.
With an estimated $252 billion federal deficit plus at least another $64 billion in combined provincial deficits expected this year, and future budgets entirely uncertain, it seems naïve to the point of delusional to imagine that Canadian governments will have the fiscal capacity or political will to eliminate the entire for-profit long-term care sector simply to satisfy a union itch. Keep in mind that a complete nationalization as demanded by union leaders would require paying compensation to private owners for the loss of invested capital as well as their ongoing businesses – a figure that would presumably run to tens or even hundreds of billions of dollars.
“How are you going to replace nearly 60 percent of an entire system’s capacity?” asks the National Institute on Ageing’s executive director Nicin about Ontario. The same holds true for the rest of the country. “If the B.C. government had an extra billion dollars lying around for long-term care, do you think they would use it to purchase existing sites, without adding to current capacity?” asks Fontaine pointedly. “Or would they want to put it towards expanding the system and providing more care for our aging population? If there is money for long-term care, it should be spent on patients, not buying out private sector operators to meet the ideological needs of the Canadian Labour Congress.”
For a glimpse into what the long-term care world might look like if financial issues were not an insurmountable barrier and mere political concerns held sway, consider previous experience in the analogous child care industry. In provinces where private provision of daycare has been eliminated to further union objectives, service has been made demonstrably worse.
Saskatchewan, for example, has almost no for-profit child care due to policies of past NDP governments. Saskatchewan also has the lowest level of child care coverage in the country, with a full-time space available for just 13 percent of all children aged 0-5, less than half the national average. Deliberately scaring off entrepreneurs, who are better able to react to market demand than most bureaucrats, not only reduces overall capacity but also drives up costs. Saskatchewan actually spends more per regulated child care space ($4,433, 2016 figures) than does Quebec ($4,142), which operates an expensive universal daycare system but still allows limited private sector involvement to keep costs down. We can expect a complete government take-over of the long-term care industry to have a similarly devastating effect on innovation, efficiency, budgets and supply.
The coronavirus pandemic has clearly revealed some major weaknesses in the preparedness and design of nursing homes in several provinces. Canada’s shockingly high death toll, particularly by international standards, will demand plenty of political effort and probably greater funding in the future. But despite the best efforts of its many detractors, this crisis has not exposed any fatal flaws in the underlying concept or necessity of for-profit provision.
Without these businesses, Canada’s nursing home industry would be dramatically smaller, less efficient and less innovative. The presence of the profit motive and the willingness of investors to place their faith and funds into the industry have not put seniors at risk. Instead, they have delivered much-needed capacity, choice and competition. Would the country be better-served with a longer waiting list and more stultifying government control of the entire sector? It is hard to see how.
Finally, Canadians need to reconcile themselves to the notion that is not only legitimate, but entirely honourable, to make a profit providing a useful service to needy clients. “Some of our critics take exception to the fact we pay distributions to our unit holders,” says CEO Volodarski, responding to the Toronto Star smear. “But Chartwell is a very widely-held company and in many cases those investors are our own residents, who actually depend on that income to live. These people have put their money in our company with an expectation that they will get a return on their investment. And we use that money to add to the capacity of our province to care for its seniors. We’re fulfilling an important societal need. And we’re good at it.”
Peter Shawn Taylor is a contributing editor at Maclean’s magazine and senior features editor at C2C Journal. He lives in Waterloo, Ontario.
Sources for chart:
National Institute on Ageing Long Term Care COVID-19 Tracker, 2020 (Accessed at: https://ltc-covid19-tracker.ca/). Data current as of June 1, 2020.
Canadian Institute for Health Information “Residential Long-Term Care Financial Data Tables, 2013” (Accessed at: https://www.cihi.ca/en/access-data-and-reports)
Alberta data on for-profit long-term care facilities from Parkland Institute “Losing Ground,” 2016. (Accessed at: https://www.parklandinstitute.ca/losing_ground)
B.C. data on for-profit long-term care facilities from Office of the Seniors Advocate of British Columbia. “A Billion Reasons to Care,” 2020.(Accessed at https://www.seniorsadvocatebc.ca/a-billion-reasons-to-care/)
Ontario data on for-profit long-term care facilities from Ontario Long-Term Care Association. “This is Long-Term Care, 2019” (Accessed at: https://www.oltca.com/OLTCA/Documents/Reports/TILTC2019web.pdf)
Quebec data on for-profit long-term care facilities from Montreal Economic Institute “The Other Health Care System,” 2015. (Accessed at https://www.iedm.org/sites/default/files/pub_files/cahier0115_en.pdf)