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Post: Brett Arends’s ROI: Don’t ignore these 2 things when you’re choosing a nursing home

Now here’s some useful information.

Nursing home residents were 11% less likely to die from Covid over the past two years…if they were living in a home where the staff were unionized.

So reports a new study in the latest edition of Health Affairs (a journal covering health and health policy). It adds, not coincidentally, that unionized nursing homes weren’t just more likely to keep your loved one safe over the past two years: They were also more likely to keep the staff safe, too.

Death rates in unionized nursing homes were 10.8% lower than in nonunionized homes, the study found. And infection rates among staff were 6.8% lower.

This was true after allowing for all the other likely factors that played a role, such as where the home was, what type of operator owned it and how old the residents were on average. The study covered 13,350 nursing homes, across the Lower 48 states, reporting Covid-related resident deaths in 2020-21. In about 2,200 homes, or just under 17%, at least some of the staff were unionized.

Interestingly, the raw data showed an even bigger gap. Before accounting for all these other factors, the death rate in unionized homes was 29% lower.

This is especially fascinating as the catastrophe of Covid deaths in our country’s nursing homes is a massive scandal of epic proportions sitting in plain sight.

Health Affairs notes that 150,000 residents died with Covid in U.S. nursing homes, out of 1 million.

The study was conducted by Adam Dean, a politics professor at George Washington University, Jamie McCallum, a professor of sociology at Middlebury College, Dr. Simeon Kimmel, a professor of medicine at Boston University, and Dr. Atheendar Venkataramani, a professor of medical ethics and health policy at the University of Pennsylvania.

We can usefully put these new findings alongside several studies that have come out in the past couple of years—such as this one and this one—which find that, in general, residents seem to die much more quickly in nursing homes owned by a private-equity fund.

The logical conclusion, naturally, is that when it comes time to put someone you love in a home, you might want to look for homes that are not owned by a private-equity fund, and where the staff are in a union.

These findings shouldn’t really be a surprise.

Let’s start with PE firms. They can produce massive returns on equity, and the managers have enormous incentives to do so. And one of the ways they do it is by leveraging up companies with a lot of debt and then “sweating the assets,” as they say—meaning, running the companies as efficiently as they can. There is, in the main, nothing wrong with this. But in nursing homes, the “customers” are basically vulnerable and powerless. If you run a nursing home so lean that 90-year old residents with Alzheimer’s are sitting unattended for 6 hours, those residents can’t exercise market power by standing up, saying “this place sucks,” and marching down the road to another nursing home with better service. So, inevitably, when hard-nosed young money managers chasing $100 million incentives come into conflict with the very elderly and vulnerable, you don’t need to be a cynic or a socialist to see how it may end.

This does not mean all private-equity firms are bad, or even that all private-equity firms do a bad job running nursing homes. Just that the potential is there, and the incentives create clear pressures. And as the great Charlie Munger says, “show me the incentives and I will show you the outcome.”

The government is looking into the issue. President Biden has recently promised steps including regulations to protect nursing home residents better.

Now let’s talk about unionization.

I am not a naive union cheerleader. I lived in Britain in the late 1970s, when the unions abused their power so badly that even former organizers will admit it after a few drinks.

But there are several ways that unions may have played a big role in keeping nursing home residents safer during the pandemic, and may do so in the future. They include the obvious things like forcing management to spend more money on health and safety equipment and measures. Unions can force management to provide paid sick leave. Astonishing but true: Many nursing homes didn’t have this, with the result that people with Covid symptoms had to soldier in anyway.

Imagine our shock when this led to more infections, and deaths.

Here’s a much simpler way unions can do good: They can also force management just to listen to the front line staff.

One of the most common mistakes people in the C-Suites make—and they do so again and again—is listening to everybody but the people on the shop or factory floor. They seem to be allergic to it. Maybe it’s snobbery, or fear, or just stupidity. Who knows?

If nursing home executives wanted to know in a hurry two years ago where the Covid vulnerabilities were, they just had to ask the people who worked there every day. And not just the nurses. The lowest paid workers as well.

Apparently, those running unionized homes did. They probably didn’t have much of a choice. The unions spoke up.

Back when I was a management consultant, I realized that many executives were so uncomfortable listening to their own staff that they would hire Ivy League MBAs to do it for them. At a ridiculous cost, I might add.

And it’s fascinating watching big companies now trying to stop their workers forming unions. Memo to the CEOs: If you just listen to your staff more, and more often, they might not want to.

Meanwhile, the data show that your loved one is more likely to be OK in a home where staff are in a union, and which isn’t owned by an industry designed for ruthless returns on equity. Useful information.

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