Vindication for Ontario’s for-profit nursing homes

Ontario’s for-profit nursing homes were due some good news. Throughout the first year of the COVID-19 pandemic, the performance of the entire long-term care sector has been a catastrophe. Despite accounting for a mere 0.5 per cent of the province’s total population, Ontario’s nursing homes comprised 20 per cent of cases and nearly two-thirds of all fatalities, including 3,881 residents and 11 staff.

And according to an insistent chorus of activists, unions, politicians and media outlets, it is the private sector alone that’s the villain of this tragedy. The Toronto Star, shrillest of these voices, recently declared: “It’s time to shut down for-profit homes for good.” The Ontario and federal NDP have both vowed to eliminate all private-sector nursing homes by fiat. The goal is a wholly-unionized, Medicare-style nursing home utopia in which entrepreneurs are treated like bed sores.

No doubt these critics were counting on the release of Ontario’s Long-term Care COVID-19 Commission to sanctify their hostility towards the private sector. The commission, headed by former Ontario Superior Court judge Frank Marrocco, was given wide latitude to investigate what went wrong in the province’s nursing homes and heard from over 700 witnesses, many of whom expressed great outrage at the co-mingling of profits and care.

Yet the commission’s final report, released at the end of April, delivers an entirely different message. Rather than recommending a ban, it declares the continued presence of the private sector in all aspects of the nursing-home business to be both necessary and desirable. Consider this good news for markets — and seniors.“the characterization of homes based on their tax status is not helpful,” the commission’s final report states bluntly. “Ensuring consistent, high-quality care across all homes for all residents must be the prevailing goal for this crucial government health care program.” It’s not how a nursing home is owned that matters, but whether the owner does a good job caring for residents. Marrocco calls this being “mission driven.” Whatever you call it, satisfying customers has always been the mark of a successful business.

Statistical evidence presented to the commission reveals that the crucial factor in determining outbreaks and death is the age and design of individual nursing homes, rather than ownership mode. If some for-profit homes experienced poor outcomes, it’s generally because they had four-bed wards, as was permitted under government regulations when they were built. The report also rubbishes complaints the private sector earns profits by shortchanging residents. This is technically impossible since provincial funding is provided equally to all homes via four separate “envelopes” covering food, nursing care, programming and administration. Only the amount designated for administration can be booked as profit. All other amounts are closely audited and unspent surpluses must be returned to the government.

Where funding disparities do occur, it’s often the result of municipalities giving “topup” subsidies to homes they operate. This is “clearly an inequity between homes” the report observes: it is manifestly unfair to use taxpayer funds to disadvantage local residents who choose to live in for-profit nursing homes in favour of a municipality’s own clientele.

Marrocco does criticize one aspect of the for-profit sector: the Real Estate Investment Trust (REIT) model that sees publicly-traded REITS own nursing-home buildings, but contract out care to third-party providers. This arrangement ” not create the right incentives,” the report observes, since it obscures responsibility for residents’ well-being.

But the non-profit sector has its own flaws. Most importantly, it is incapable of meeting growing demand. With the province requiring a projected 55,000 new long-term care beds by 2033, Marrocco’s report declares this a task far beyond the ability of the non-profit sector. “It is not easy to see how the multi-billion-dollar need for tens of thousands of new and redeveloped beds can be satisfied without private capital funding,” the report states. Banning profit from the entire sector, as the Toronto Star and NDP demand, means dooming the province to a perpetual waiting list far longer than the current 37,000 names.

The commission’s solution to the twin problems of delivering better care and increasing capacity is to split the long-term care industry in two. The development of new spaces would be left entirely to the private sector, which has the talent and experience necessary to bring large projects to completion. As for the care of residents, “after construction, managing the long-term care home would fall to not-forprofit operators or private operators,” the report states. Again, there’s no need to draw arbitrary distinctions about a home’s ownership status. What matters is that they offer high-quality care. And the report offers ample evidence of innovative, “mission-driven” private operators doing just that.

Ontario’s Long-term Care COVID-19 Commission correctly dispenses with the pointless Manichean debate of for-profit vs. non-profit. The scale of the tragedy in the province’s nursing homes demands pragmatism, not ideology. When it comes to creating much-needed capacity, the non-profit sector is clearly incapable and the private sector must take on this challenge. As for the care of residents, both for-profit and non-profit operators have important roles to play. The presence of profit remains vital to the best interests of seniors and the long-term care sector.

IT’S NOT HOW A NURSING HOME IS OWNED THAT MATTERS.