Out-of-province corporations are investing in funded long-term care in New Brunswick. In particular, two corporations, Shannex RLC of Nova Scotia and Hillcore Group of Ontario, are playing a significant role in the nursing home and special care home sectors respectively.
Just as links are drawn between the entrance of Killam of Nova Scotia, which now owns 4,000 of the 35,000 rental housing units in the province, and the rise in rents, evictions and lack of affordable housing, links can be drawn between the corporatization of funded long-term care in the province and the increased cost of and reduced access to such care.
However, the case of long-term care is more complicated than rental housing because long-term care is government-funded and because of the differences between the way the two long-term sectors–nursing homes and special care homes–are funded. The main difference is that there is a cap on what nursing homes can charge whereas for special care homes, there is not.
There is the question of why corporations would come to the funded long-term sector in New Brunswick. The reason must be for profits since profits are the raison d’être of corporations. However, the conventional wisdom about funded long-term care in New Brunswick is that there are not any profits to be made. For the nursing home, the rates they can charge are capped and they are funded with per diems that just cover their costs. The fact that not-for-profit nursing homes are having financial struggles is often highlighted. For the special care home, the rates are not capped but traditionally have been forced to stay low because of high vacancies. As well, the per diems for special care homes are low. Further it is argued, that like the not-for-profit nursing homes, the traditional small and local special care homes seem to be struggling to keep going.
Why is it different for corporations? A study in BC done by the Seniors Advocate, “A Billion Reasons to Care: A Funding Review of Contracted Long-term Care in BC,” was able to document that the corporate for-profits there were able to make profits in funded care not found by their not-for-profit counterparts. This will be discussed further with reference to the cases in New Brunswick.
Shannex RLC is a Nova Scotia-based corporation with retirement “campuses” throughout Nova Scotia and New Brunswick, as well as a few homes in Ontario. Shannex has built and operates all of the new nursing homes, ten in all, that have been built in New Brunswick since 2008. Shannex has done so by being awarded tender-based contracts for providing care with the Department of Social Development. Up to 2008, we had only not-for-profit community-based nursing homes in New Brunswick. We still have these but all of the new ones are Shannex corporate for-profit ones. There are 70 nursing homes in all.
The government provides per diem funding to nursing homes for almost all of the cost of providing care. For example, I was told that the per diem funding for one Shannex nursing home was $270 per day per resident. In 2020, the total funding to Shannex amounted to $35,804,233. Since 2008, the total amount to Shannex has been $197,910,835 (figures from New Brunswick’s Public Accounts). The rate charged to the resident per day is $113. This is a maximum rate (cap) set by the government, fully charged to private pay (non-subsidized) residents and subsidized for lower income residents. It is the same in all nursing homes.
Yet the Shannex nursing homes increase costs and reduce access while making profits for the corporation. They increase costs by making the path to entering the nursing home much more costly coming as it normally does from renting first in the expensive, unfunded independent living part of the Shannex “campus.” The increased cost, in turn, reduces the supposedly open access to the nursing home. In this way, Shannex can make profits by using the nursing home as a loss leader for the rest of the campus. The other way is by squeezing profits out of the nursing home funding.
Presumably, the funding received is only supposed to cover the cost of the provision of care. There should be no surplus or profit involved. In BC, some of the ways that for-profit homes were able to make profits not made by not-for-profits were by spreading administrative costs to cover non-funded care, by spending less than not-for-profits on direct care staffing and by claiming more on capital costs than non-profits. Unfortunately, it is not possible to see if there is any surplus/profit in the case of Shannex because of the lack of transparency in our system. This became clear when Fredericton MLA David Coon was unsuccessful, in 2018, in getting unredacted copies of the contracts with Shannex through right-to-information legislation and the courts.
In 2018, Hillcore Group, a diversified investment corporation with managed assets of $4.5 billion ($8.5 billion including acquisitions), paid $70 million for an investment portfolio with three properties in Moncton: Auberge du Soleil, Résidence Moncton and Résidence Oasis. These properties currently house five special care homes (360 beds) and two memory care homes (36 beds).
Hillcore Group received $5,091,378 in 2020 from the government for its special care and memory care homes. In addition, Hillcore Group was awarded a contract for a pilot project to provide 14 beds for Alternate Level of Care (ALC) patients. These are the patients waiting in the hospital for a nursing home bed, the so-called “bed-blockers.” Located at Auberge du Soleil, these beds are totally funded by the government.
Hillcore Retirement Living is one of thirteen groups of the Hillcore investment group. Hillcore Retirement Living, one of the groups, has investments in homes in Ontario and New Brunswick. In Ontario, the investment is in Omni Ltd. with seventeen homes; in New Brunswick, it is in Atlantic Retirement Living which consists of the seven Moncton special care and memory care homes. In one of the Omni care homes, Almonte County Haven near Peterborough, there were 30 deaths during the first wave of COVID-19.
How could a corporation like Hillcore make profits in the special care sector?
There are some 400 special care homes in the province. Special care homes have always been in the for-profit sector in New Brunswick but they have been small and local. Shannex would be an exception with three special care homes on each of its its main campuses.
In contrast to nursing homes which have long waiting lists, there are vacancies in special care homes. Because they traditionally provide a lower level of care than nursing homes (level 2 as contrasted to levels 3 and 4), special care homes get a per diem of only $88.30 per day per resident (also referred to as the “maximum subsidized rate”) from the government in contrast to the approximately $270 per diem and $113 per day maximum subsidized rate that nursing homes get. However, special care homes are not restricted to charging the maximum subsidized rate of $88.30 unlike the $113 maximum that nursing homes can charge. They can charge private pay (non-subsidized) residents whatever they want and, for subsidized residents, there can be what is referred to as an “upcharge,” an amount added to the maximum subsidized rate.
The memory care home is a newer type of special care home first introduced in 2012 to take some of the pressure off the waiting lists for nursing homes. Memory care homes are for residents with a diagnosis of moderate to severe dementia. Because these homes offer a higher level of care than traditional special care homes (level 3B as contrasted to level 2), they are getting as of 2018, a per diem or maximum subsidized rate of $150 per day per resident. But as in the case of the regular special care homes, this is not a maximum that can be charged for either private pay or subsidized residents. An upcharge can be added. One operator described the difference between the $150 and the $88.30 that level 2 beds get as a special “contribution” to the memory care home. The “contribution” is the difference between the $150 and the $88.30 that level 2 beds get. The home can pass on this “contribution” to the resident or not.
In the past, this “upcharge” was not used very much- presumably because of vacancies in the sector. However, in a recent survey that I did of special care and memory care homes in the Fredericton region, almost all of them did have an upcharge, which in some cases was a considerable amount. Perhaps it is this possibility of using the upcharge, as well as the unlimited private pay rate and the recently increased per diem rates for memory care beds, which has attracted investors such as Hillcore into the special care home sector.
The way that some of the bigger special care homes, e.g. Shannex and Eden’s Retirement Villa, determine- and justify- their upcharges is by charging different amounts for different sizes of rooms/suites and for the range of amenities offered in the facility. This seems to be the classic “price discrimination” model put into practice.
The upcharge causes serious problems for access to special care and memory care homes. Those without savings cannot go to the special care homes or memory care homes with an upcharge. For example, those without savings could not go to a Shannex special care home. Similarly, Hillcore has an upcharge of $506 per month beyond the maximum subsidized rate for memory care in their Résidence Moncton facility. This means that those requiring memory care might have to go instead on the waiting list for a nursing home where no upcharges are allowed. This could also well be the case for those on private pay. They might not be able to afford the private pay memory care rate ($4935/month at Résidence Moncton, for example) and have to wait for the more reasonably priced nursing home bed ($3437/month).One fears that long-term care in New Brunswick is going to be taken over by corporate interests. Shannex is well on its way to such a take-over in the nursing home sector while the door has been opened to such take-overs in the special care home sector.
The increase of corporate ownership in New Brunswick funded long-term care is an alarming trend. The cost and access implications for older persons are alarming enough but are just part of the story. The other part of the story involves the implications for the quality of care. Few would want the quality of their care to be motivated by profit, especially profit going to investors.
What happened with the situation of long-term care in Ontario in terms of death and failure of the system during COVID-19 has been strongly linked to the for-profit corporate ownership in the sector there. I have feared the entry of these corporations into long-term care in New Brunswick. Now it has happened. And it is only going to get worse unless something is done.
Joan McFarland is a retired professor of Economics at St. Thomas University.