CEO’s exorbitant salaries hinder proper staffing

I was sent this great editorial regarding how much staff could be hired if CEOs were compensated reasonably instead of exorbitantly like Manor Care’s CEO Paul Ormond.

SNF CEO’S WINDFALL COULD HAVE PROVIDED MORE STAFF AND SERVICES

To the Editor:

Reports that Manor Care’s CEO Paul Ormond would personally realize between $118 and $186 million when his company, the largest nursing home chain in the United States, is acquired later this year by a private equity group got us thinking about staffing in nursing homes. Knowing that the federal government has reported that more than 90% of nursing homes do not have enough staff to take care of their residents, we wondered how many nurses and nurse aides could be hired for a year at Manor Care’s nursing facilities with that same money.

Using federal wage estimates for nursing home workers, we calculated that Manor Care’s 278 nursing homes could hire an additional 5346 certified nurse aides or an additional 2198 registered nurses if $118,000,000 were spent on staff (19.2 aides or 7.9 RNs at each Manor Care nursing home). If Mr. Ormond’s $186,000,000 windfall were spent on staff, Manor Care could hire an additional 8427 certified nurse aides or an additional 3464 RNs (30.3 CNAs or 12.5 RNs at each Manor Care nursing home).

Like all nursing home chains, most of Manor Care’s revenues come from public programs, Medicare and Medicaid. How should our public health care dollars be spent? One man’s windfall or certified nurse assistants and registered nurses in nursing homes?

Sincerely,

Toby S. Edelman
Center for Medicare Advocacy
California Advocates for Nursing Home Reform
The John A. Hartford Institute for Geriatric Nursing
National Conference of Geriatric Nurse Practitioners

Documentation supporting statements made in the letter-to-the-editor:

Two weeks ago, Manor Care, the largest nursing home chain in the United States, announced that it had agreed to be purchased by the Carlyle Group. Early reports indicate that Manor Care’s CEO Paul Ormond will personally realize between $118 and $186 million when he exercises his stock options at the time of the sale.[1] The Center for Medicare Advocacy wondered how many nurses and nurse aides could be hired for a year at Manor Care’s nursing facilities with that money.

Referring to the Bureau of Labor Statistics’ wage estimates for nursing home workers, (the average nursing home nurse aide earned $22,070 and the average registered nurse, $53,690 in May 2006)[2] and to the 278 facilities operated by Manor Care as of December 1, 2006,[3] the Center did some calculations. Here are the results:

Documentation about staffing: The nurse staffing study submitted to Congress by the Centers for Medicare & Medicaid Services in 2001 documented that more than 91% of facilities fail to have sufficient staff to prevent avoidable harm and that 97% of facilities do not have sufficient staff to meet the comprehensive requirements of the Reform Law. CMS, Appropriateness of Minimum Nurse Staffing Ratios in Nursing Homes, Phase II Final Report, pages 1-6, 1-7 (Dec. 2001), http://www.cms.hhs.gov/CertificationandComplianc/12_NHs.asp (scroll down to Phase II report).

Solutions: In testimony before the Senate Aging Committee on May 2, 2007 on the 20th anniversary of the federal Nursing Home Reform Law, Professor Charlene Harrington of the University of California, San Francisco, discussed, as one of her key points, the issue of financial accountability for public funds. She described the ability of nursing facilities, under current law, to spend their Medicare reimbursement, once they get it, as they choose, not necessarily as Congress intended. Professor Harrington’s solution is prohibiting nursing facilities from shifting costs across cost centers. Her testimony is at http://aging.senate.gov/events/hr172ch.pdf, pages 9-11.

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[1] Homer Brickey, “Manor Care sale would enrich execs; Toledo firm’s officials may receive more than $200 million for stock,” The Toledo Blade (July 6, 2007), http://toledoblade.com/apps/pbcs.dll/article?AID=/20070706/BUSINESS03/707060449/-1/BUSINESS.

[2] Bureau of Labor Statistics, Department of Labor, 2006 National Industry-Specific Occupational and Employment Wage Estimates, NAIC 623100, Nursing Care Facilities, http://www.bls.gov/oes/current/naics4_623100.htm#b00-0000.

[3] Meg LaPorte, “Top 50 Nursing Home Chains; Manor Care Soars Above The Pack By 18,000 Beds,” Provider 37 (June 2007), http://www.providermagazine.com/pdf/2007/survey_top50_2007.pdf.