Long-Term Care Fiasco a Warning About Private Ownership

Please put me in a long-term-care home, said nobody ever.

Still, few probably expected that these homes would become horror houses of death, taking their place at the very epicentre of a raging pandemic and accounting for some 75 per cent of coronavirus deaths in Ontario.

An important aspect of this momentous tragedy is that the coronavirus death rate has been significantly higher in private, profit-making homes than in not-for-profit homes.

If that wasn't alarming enough, then came the news earlier this week that private equity -- known for ruthlessly squeezing every ounce of profit out of its businesses -- is keenly eying the long-term care industry in Ontario.

Indeed, the private equity firm Arch Venture Holdings is lining up investors as it gears up to become a major player in the industry, the Star reported.

All this should heighten concerns about the role of profit-making in long-term care homes (also known as nursing homes).

Privatization has become a kind of economic dogma in recent years, with business commentators and politicians routinely asserting that the private sector is more efficient and always does things better -- an assertion that is rarely accompanied by any evidence.

In fact, the crucial difference separating the private and public sectors is that the private sector is focused on profit-making. Indeed, this is the only real purpose of a business enterprise.

So, regardless of what industry spokespeople say, a private company in the nursing home business is focused on maximizing profits, as its board of directors demands.

And it will typically do this by scrimping on staff costs -- hiring fewer workers and paying them rock-bottom wages with no benefits. This generally results in high turnover and worse conditions for the residents, as well as the workers.

Certainly, Ontario's three big private nursing home chains, which receive government funding under the same formula as not-for-profit homes, have been good at maximizing profits.

Over the past decade, the three chains paid out $1.5 billion in dividends to shareholders and $138 million in executive pay, according to the Star investigation.

The chains insist these payouts come out of profits they earn selling private services to residents in these and other retirement homes, which are not funded by government.

In fact, it's hard to know exactly what's going on, since the government is notoriously lax in its regulations and oversight of the industry -- as the pandemic vividly illustrates.

This laxness appears to be traceable back to Mike Harris, the former Conservative premier whose government removed minimum staffing levels for nursing homes in the late 1990s and encouraged the involvement of private businesses.

After retiring from politics in 2002, Harris has profited handsomely from the lucrative private nursing home industry he helped create, serving as chairman of Chartwell Retirement Residences, one of the three big chains. (His annual salary for this part-time position is $229,500, and he has $4.4 million in Chartwell holdings.)

Meanwhile, in the 28 nursing homes Chartwell owns or operates in Ontario, the COVID-19 infection rate has been 47 per cent higher and the fatality rate 68 per cent higher than the provincial average, according to the Star investigation.

The nursing home market isn't the only area where Mike Harris' privatization policies still reverberate.

His 1999 privatization of Highway 407 has already cost Ontario drivers billions in higher tolls and will cost them many more billions before the privatization deal expires -- in 78 years.

Contrary to business mythology, the private sector doesn't always do things better. Rather, it always does things to make a profit, and that can leave the rest of us paying a high price -- in dollars and deaths.