Under Pressure, Carlyle Issues Patient Promise

Buyout of Nursing-Home Chain Sparks Worries on Staffing Levels

From left, SEIU members Esperanza Carillo, Iris Powell and Jesus Andrate protest last month in front of Carlyle's D.C. headquarters. The union is trying to organize workers at Manor Care, which the private-equity firm is buying. (By Stephanie Kuykendal -- Bloomberg News)

The Carlyle Group, under siege for weeks by a labor union critical of its $6.3 billion purchase of Manor Care nursing homes, has taken the rare step of putting in writing its promise to provide adequate staffing and resources to the chain.

The District-based buyout giant said it has sent to state regulators across the nation a "patients first" pledge, vowing to provide quality services to patients and proper education and training to staffers who care for them. The private-equity firm also said it will make the investments necessary to "ensure Manor Care's facilities continue to be . . . state of the art."

The pledge comes in the wake of concerns over whether the private-equity firm might cut staffing and reduce patient care in pursuit of financial goals.

"We are confident, because we have been doing this for 20 years, that we can provide quality products and services to people that is completely compatible with providing a return to investors," said Karen H. Bechtel, Carlyle managing director and head of its health care team.

Health-care experts differed on the value of Carlyle's pledge.

David A. Goldstein, an associate professor of clinical medicine at the University of Southern California Keck School of Medicine, said he considered Carlyle's pledge "relatively meaningless." He added, "For-profit companies should not be in the business of health care. Their allegiance is not to patients. It's to their stockholders."

But Joseph C. d'Oronzio, associate professor of health policy at Columbia University's Mailman School of Public Health, called the pledge "a positive and good gesture." He added that "Carlyle won't be able to run a nursing home and get Medicaid and insurance funding without toeing that line and answering to state regulators."

The Service Employees International Union, which is trying to organize Manor Care's 60,000 employees, has conducted a grass-roots offensive against Carlyle and private equity in general for the past month. The union's campaign has included demonstrations outside Carlyle headquarters, radio advertisements urging listeners to call Carlyle executives, and a caravan from Manor Care headquarters in Toledo that arrives in Washington today. The caravan plans to deliver a petition and set of demands to Carlyle.

SEIU spokesman Andy McDonald says Carlyle is "a big, powerful firm. They have a responsibility that matches their size, which is one of the top five biggest buyout firms. They employ 280,000 worldwide and have $75 billion in assets under management."

Manor Care shareholders voted last week to approve the purchase, and the deal is expected to close by the end of the year.

Bechtel said Carlyle has plans to expand the business to increase profitability.

"Our business plan categorically does not call for us to lay off people," Bechtel said. "It would not be in our interest in any way to have patient care suffer. It is fundamental to our investment thesis that we continue to improve and enhance patient care because that will attract even more patients and make this a better investment. This is logical and simple. If we didn't provide good care, we wouldn't have good patients."

Last week, Senate Finance Committee Chairman Max Baucus (D-Mont.) and its ranking Republican member, Charles E. Grassley of Iowa, sent letters to Carlyle and four other private-equity firms asking for information related to their ownership and management of nursing homes. The committee has authority over nursing homes and health care.

Baucus and Grassley also sent a letter to the Centers for Medicare and Medicaid Services asking the federal agency responsible for overseeing nursing home inspections to account for a report of higher health and safety violations in nursing homes that have been bought by private-equity investors.

Manor Care, which traces its roots to a single nursing home in Wheaton 48 years ago, has grown into one of the largest providers of long-term care and services in the country. The company has more than 500 facilities under the Heartland, ManorCare Health Services and Arden Courts brands.

Staff researcher Richard Drezen contributed to this report.