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An analysis of the material relating to Beverly reveals the vast gulf between two worlds. On the one hand a very impressive and successful national corporation. It is admired and respected in the marketplace. It has close political links. Staff who have worked for Beverly are given responsible government positions. Beverly itself has no doubts about itself or of its place in the scheme of things.
Others see Beverly as the ultimate evil empire. A company which deliberately understaffs and neglects frail and vulnerable people to fuel its corporate success. It indulges in fraud and the public purse is the victim of this fraud. It is ruthless in the pursuit of its critics and opponents. Its labour relations are vindictive. It uses the law for its own purposes and appeals when ever an attempt is made to penalise it or restrain its excesses.
There is much to suggest that the second is a real world of human suffering and compassion. The first world has all the hallmarks of a social abstraction which has lost its grasp of reality.
When the beliefs and practices of the first world are analysed it is clear that the misery, suffering, filth and injustice experienced in the second world is largely a consequence of the activity of the first.
The first world is deaf and blind to the
second. It refuses to see any relationship between its activities and
what is happening there. I argue that they are not deliberately evil.
We are looking at certain types of people responding to situations in
which they find themselves. The market based health system selects
for people like this because their characteristics allow them to be
successful. I have called them successful sociopaths and the adverse
consequences for society successful sociopathy. There have been
multiple examples of similar processes during the 20th century.
The Early History:- Beverly's was founded in 1963. It went on a frantic buying spree in the 1970's, buying up not for profit and Mom and Pop nursing homes. By the end of the 1970's it owned 1000 homes and was dangerously overextended. It was forced to sell homes to pay its debts.
At this time it moved to Arkansas where it became involved with Stephens Inc. and the Clinton state government. There were few buyers for its homes. The deals it made involved access to government funds, the Clinton's law firm, a shelf company and Stephens Inc. They were described as profiteering and "unconscionable". Clinton backed out and weathered the scandal which followed.
At some stage before or during this period David Banks, a former typewriter salesman and Stephens Inc. executive became chairman of Beverly. Beverly was left with about 600 homes after the sales.
The 1980's and 1990's:- Beverly has continued to expand diversifying its activities so that it could provide all the services its residents needed and charge Medicare for them - an integrated money making system. It bought a pharmacy business in 1995. It has expanded internationally, most recently into Japan.
During the late 1980's and 1990's Beverly concentrated on exploiting the opportunities offered by Medicare and on reducing costs by cutting staff. The review I have of this period suggests that its homes were plagued with allegations of substandard care. By 1997 when the exploitation of Medicare was stopped by the new federal Medicare laws Beverly had been able to reduce its debts. It was not as highly leveraged as its competitors and so able to survive.
Beverly was not part of the 1990's buying frenzy. Upstarts like Genesis, Sun, Horizon, IHS and Vencor mushroomed and ran themselves into debt. They had to acquire others or else be taken over by their competitors. Beverly owned its nursing homes, did not have large debts and did not invest its future as heavily in the Medicare system, although it profited by it. It was not forced to gamble with its future in the same way as the newer chains.
Beverly was no different:- Beverly's business decisions seem to be wise. In fact it has behaved no differently to its competitors. Ten to 15 years ago it got itself into the same mess. Had the Medicare cuts been as severe as in 1997 it may well have been in the same position as its competitors are now. Like its competitors today it was forced to sell into a buyers market. It recovered by entering into tortuous deals described as profiteering and "unconscionable".
That Beverly is little different to its competitors is revealed by what happened in 1995-6, when it also made a large purchase and then cut costs to increase profits. In 1995 analysts were worried as to how Beverly would return a profit after buying a large pharmacy business. It quickly showed that it could. In 1996 it brought in the highest profits in years. During this period the number of Beverly homes cited for harming or endangering patients in Florida doubled from 13 to 27."
Concerns about Beverly's business practices:- The concerns about Beverly are about staffing, care and fraud. Its competitors can claim that they were under extreme pressure when they indulged in unacceptable conduct in the 1990's. If they had not done so they would have been taken over. Beverly's only excuse is that these were normal practices in the health and aged care industry - not an explanation it can use publicly.
While Beverly maintained its Medicaid
patients it also targeted Medicare and pleaded guilty to Medicare
fraud. That it worked the system is suggested by a shareholder suit
which alleges that Beverly "consistently inflated its Medicare
Nursing Costs," and so "was able to artificially increase the amount
of overhead it recouped from Medicare"
Kenneth Connor is an attorney for Wilkes & McHugh of Tampa, a firm that serves on the governor's task force for long-term care reform. He said Beverly repeatedly violates the rights of nursing home patients.
"Beverly is one of the most chronic offenders with some of the most egregious violations,"Home will lose funding Nov. 30; Emerald Oaks hopes to regain Medicare and Medicaid by Dec. 30 -- Sarasota Herald-Tribune November 21, 2000
Different worlds - different views:- To Wall Street Beverly represents stability in a crumbling aged care market. It presents itself as the company that has behaved most responsibly and protected the interests of its shareholders. That image is slightly tarnished by a small hiccup - the largest fraud ever involving nursing homes - but that seldom bothers the market for long. Shareholders have commenced an action claiming that they have suffered because of Beverly's deceptive conduct but Beverly can afford to pay them out.
To the nurses, to groups in the community and to regulators Beverly is the ultimate evil empire preying on the frail and helpless. There are these two separate worlds and there is no doubt about the real world the nurses and their patients live in - it is rooted in the misery they see around them. Beverly's opulent and impressive boardroom world copes with this other world by pretending that it does not really exist.
Standards of care:- There are large numbers of reports describing truly dreadful conditions in Beverly's nursing homes. Running as a constant theme through all of this material is the problem of under staffing and the pressures for profit.
Beverly's alleged failures in staffing and care go back into the 1980's. Its homes have been cited repeatedly and numbers of homes have been closed down. Washington state at one time refused to allow Beverly to expand further because of its poor record of patient care. California put the chain on probation as a result of widespread reports of neglect in its facilities.
Beverly has been one of the prime offenders
identified in the citizen's revolt against what is happening to their
parents and grandparents in corporate nursing homes. It features
prominently in the many investigations that have taken place since
1997. It has many homes in Florida and citizens there have targeted
it with lawsuits.
"This decision is an important victory for the Board. We were able to show that Beverly was continuing its unlawful conduct on a large scale and at a corporate level. CIRCUIT COURT APPROVES NLRB CORPORATE-WIDE ORDER AGAINST NURSING HOME CHAIN (BEVERLY) FOR IMMEDIATE RELEASE (R-2405) Friday, September 15, 2000 www.nlrb.gov
Beverly's has cut costs aggressively. It boasts of this in the marketplace. Care is its Achilles heel and its aggressive response to nurses who complained about care is a reflection of its vulnerability.
Nurses have allegedly been told to suppress information relating to poor care and the abuse of the elderly. They were victimised when they spoke out. Their notes were destroyed or altered. One nurse whistleblower became so desperate she committed suicide.
Nurses were required to participate in Beverly's fraud. Their working reports were done in pencil and then doctored by management.
Not surprisingly the nurses sought refuge by joining unions which could act in their interests. Beverly did everything in its power to impede the unionisation of its work force. It then fought a bitter war of attrition with the unions. The unions tried to expose deficiencies in care, and improve staffing and working conditions. Beverly's working environment was associated with the highest incidence of work related injuries in the USA.
Beverly responded aggressively to claims for
better working conditions, more staff and better care. As a
consequence Beverly was recently served with a corporation wide
"cease and desist" order. It was indicted with 240 violations of
labour laws in eighteen states, including threats, coercion and
surveillance of employees'.
Arkansas:- Beverly escaped unscathed from a 1989 scandal in Arkansas. This related to a tortuous scheme to sell some of its nursing homes. It involved government money.
Medicare Fraud:- Beverly exploited the commercial opportunities offered by Medicare to pay off its debts. But for a whistle blower who lodged a Qui Tam court action it would have continued to do so unscathed. This action claimed that Beverly had defrauded Medicare of US $460 million. The justice department joined the action and investigated further.
The fraud:- Medicare reimbursed nursing homes for the care given by nurses. This was a matter of trust. The nurses kept a log of the time spent with Medicare patients. Beverly totaled these and then claimed. Beverly ordered its nurses to fill in the forms in pencil. They then decided how much to charge Medicare for nursing services and rewrote the forms accordingly, profiting in the process.
The consequence of this was not only that Medicare was defrauded but that the nursing care which Beverly claimed it was giving to Medicare patients was not given. It is little wonder that the federal government agencies that received the Medicare figures (Medicaid was a state run system) did not believe the claims that Beverly was understaffing. These fraudulent actions have to be seen in the context of the allegations of severe understaffing and substandard care in Beverly facilities.
The terms of the settlement:- Far more interesting is the way in which the fraud was settled. Serious fraud actions are normally prosecuted with both a criminal action and a civil action. The civil action claims both the amount defrauded and triple this amount as a deterrent. The sum claimed from Vencor in this way amounted to US $1.4 billion. The criminal conviction carries a smaller monetary penalty and depending on the offence a goal sentence for the individuals involved. Anyone convicted of a criminal offence is barred from Medicare and Medicaid payments by law. This effectively puts them out of the health care business.
Beverly negotiated a settlement for US $175 million, less than half the claimed US $460 million fraud. This company which owns 500 facilities which it could sell will pay $30 million only. The rest will be paid over 8 years and will be subtracted from its annual Medicare payments. One wonders if they could borrow money to buy homes so cheaply!
The criminal conviction will fine them US $5 million. This conviction will be made in the name of a subsidiary consisting of 10 hospitals. Beverly was able to choose which 10 hospitals would make up the subsidiary. They will be barred from Medicare and Medicaid payments. What this probably means is that Beverly will have to sell these homes and the new owner will rename and reapply for Medicare and Medicaid funding.
The deal is even more interesting when the clauses are examined. The available information suggests that the fraud extended to senior staff. In a settlement clause federal prosecutors undertook not to charge individuals.
US justice response:- The prosecutors are clearly embarrassed by the settlement. Perhaps they found they had overstated the case and were forced to back off and settle for less. It does not sound like this. Inevitably one wonders whether there were pressures in the system we do not know about.
The government's response has been mixed. First a rather shamefaced explanation that it settled for less than half the alleged loss to taxpayers to avoid causing "financial hardship" for the company. The company has 500 nursing homes it could sell to not for profit groups who have less difficulty attracting staff and also provide better services more economically. Government also claimed that by not stressing the company it was not endangering patients. Beverly's track record gives no grounds for this excuse. If its homes were sold patients would get better care.
The second response has been bravado, claiming that US $175 million is 5 years profits - holding the settlement up as the largest ever against a nursing home - evidence of government's determination to track down and punish fraud - a deterrent to others. This is obvious nonsense. Health care fraud is estimated at between 10 and 20 billion a year. Only about US $1 billion is recovered. Beverly's case shows that the system is ineffective for whatever reason. It is simply a cost of doing business.
Beverly's response:- One would expect Beverly to behave graciously and not rub salt into the wound. Instead it claims that it only settled to "avoid the cost of litigation". It acknowledges that something happened but whatever it was "it didn't warrant (individuals) being prosecuted criminally, and that says a great deal about the government's case." It blamed renegade employees and denied the involvement of senior management.
Being suspicious:- It may be wild conspiracy theory. I have just read a couple of hundred articles about Beverly. I cannot help but think about all the investigations, not only into Clinton's sexual activities but the various financial deals involving the Clintons, Clinton staff and various groups in Arkansas. As I recall one of Clinton's Arkansas appointees even committed suicide. I have not followed the US press reports but titillating bits appeared in the Australian press.
I understand that Clinton negotiated a settlement with US Prosecutor Stark's successor and will not be prosecuted now that he is no longer president. This involved the public acknowledgment of his affair with Lewinsky. Clinton's final act also drew criticism. He pardoned a number of criminals with some of whom he had links.
Beverly was closely associated with some at least of the disturbing deals in Arkansas. I cannot help wondering whether any other matters were negotiated in Beverly's fraud settlement. Could this all be part of a decision by the US establishment to put a whole series of disturbing matters behind them. I gain the impression from the reports that fraud prosecutors are not pleased with the outcome.
Shareholders actions:- A number of class actions have been commenced against Beverly's senior staff claiming that they looked after their bonuses rather than the interests of shareholders when they indulged in fraud. These actions sometimes reveal more about the fraud than official announcements. Unlike the justice departments negotiations their allegations are tabled in court and are public.
Another fraud investigation:- Less
than a year after the settlement the Department of Justice raided
Beverly La Cumbre nursing home and seized hundreds of documents and
electronic files. The press report suggests a grim determination in
this new fraud investigation.
Citizens and lawyers in Florida have been incensed by the provision of poor care and the failure of state authorities to act. They have picked out poor nursing homes and chased them through the courts. They have been awarded large punitive damages. Beverly is a prime target. Insurers will no longer provide cover for facilities with poor records of care.
Beverly leads an industry lobby pressing for
legislation to limit the rights of citizens to sue and obtain
redress. They claim that the large payments are devastating their
income and that as a consequence they can no longer afford to provide
Like other corporate chains, marketing, lobbying, political donations and staff appointed to government are important components of Beverly's business activities. Significant sums, which might otherwise be devoted to providing care are spent in this way. Beverly's headquarters are in Arkansas and it had support from the state government when Clinton was governor.
It belongs to industry associations, which actively lobby for nursing homes and hospitals. It also makes large contributions independently and employs people to lobby on its behalf.
There is a crisis in Florida. Beverly has led a public relations campaign pressing legislators to pass laws that would prevent relatives of mistreated patients suing and obtaining punitive damages. It employs a lobbyist to press its case. The Tampa Tribune claims corporate lobbyists "have the collective power to open almost any door in Tallahassee".
Federally it successfully engaged in a lobbying war with IHS over provisions in proposed Medical legislation which would have favoured IHS rather than Beverly. IHS is now in Chapter 11 bankruptcy.
Beverly has been among the most active in
pushing for a revision of the 1997 Medicare funding system. Large
sums have been spent employing lobbyists.
It seems that Beverly is seldom if ever at fault. It consistently denies or explains away problems. It rejects lawsuits or won't comment. It rejects the findings of regulators or calls them minor. It claims the systems of assessment are subjective and not valid. It considers that it has been victimised.
When the nurses make claims of understaffing and poor care Beverly calls this self-serving and a negotiating tactic. When it is accused of fraud it settles to "avoid the cost of litigation" and is uncomplimentary about the case against it.
Beverly tends to deny every finding. It challenges every restriction, every fine, and every nursing home closure. It appeals each up the judicial system to the highest level, spending large amounts of everyone's time and money in the process.
Beverly fought a bitter war with the nursing
unions. It tried to sue union members for defamation. It repeatedly
breached labour laws and was served with a "cease and desist" order.
One can only draw conclusions from the comments of nurses and patients, from regulatory findings, from corporate statements to the market, and from explanations by the company. The latter are usually made by Dan Springer, vice president of public relations. It is clear that Banks is the mind behind the company and that the explanations offered are sanctioned by Beverly's senior management. Banks is not however an inspired charismatic leader like Turner (Sun healthcare) or Elkins (IHS). Beverly has a market culture and Banks is the person who represents that culture. He is responsible for maintaining it.
We find two worlds. On one side we have the world of the confident and successful business corporation, which has no doubt about the suitability of its actions and the propriety of the way it provides care. Its accusers are always at fault.
On the other we have groups for whom Beverly is the ultimate evil empire and the information they provide is very convincing.
I have suggested that what we are looking at a culture which has many of the features of what I have called "successful sociopathy". These people have drive and ambition. They identify only with a single point of view and ignore everything that conflicts with this. Their statements are crafted to their needs in a particular situation rather than their accuracy. Here are three examples.
In January 2001 William Floyd took over from Banks and ran the company. It is clear that Beverly was in far worse condition than I realised. Floyd was faced with the recent US $175 fraud settlement and guilty plea. The company had been hit hard by the Medicare funding changes. It was the subject, not only of large numbers of individual patient care law suits but of investigations, fines and law suits relating to quality of care across multiple states in the USA. It was heavily fined. There were vast numbers of reports of failures in care due to failures in staffing.
Floyd like Rainwater and Scott in Columbia/HCA believed that aged care was very similar to selling fast food (like selling taco's!) and he set out running the company like that. He sold large numbers of facilities including all the homes in Florida, fired staff and claimed to be concentrating on quality of care. He is trying to change corporate culture and diversifying into more profitable areas. The number of law suits suggests little has changed but much of this dates from before his appointment. It remains to be seen.
The company lost money in 2002 and the share price was down to US $1.66. It seems to be making a profit in 2003.
Beset by lawsuits from patients, allegations of Medicate fraud, poor profits and a hostile takeover attempt Beverly put itself up for auction in 2005. It was bought by a financial group and taken private. There was a great deal of controversy around the sale. Beverly's new name is "Golden Ventures". Hopefully I will find the time to update this page properly soon.
In analysing Beverly in greater depth I have once again taken extracts from published material and allowed them to tell the story. I have simply written a short introduction and a few comments to give perspective and explain the context of some extracts.
The extracts on these pages are from copyright material. They are reproduced here for educational purposes and to stimulate public debate about the provision of health care. I consider this to be "fair use" and in the public interest. They should not be reproduced for commercial purposes.
Disclaimer: - The material in these pages is selective and not all-inclusive. The extracts do not necessarily reflect the full perspective of the original. Corporate denials and explanations have not been included. No claim is made that all of the matters referred to are true. The intention is to give the flavour of the material and an idea of the extent of the allegations.
Because of the volume I have divided them
into rough subject areas in separate web pages.
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