Congress unlikely to block Carlyle deal

Congress unlikely to block Carlyle deal

	Published : Thu, 15 Nov 2007 21:02 By : Agencies Print this Story

WASHINGTON (AP) - Despite pressure from a union representing health care workers, Congress offered no signs Thursday it would intervene in a private-equity firm's pending buyout of the largest nursing home chain in the country.

Federal regulators have already cleared Carlyle Group's $6.3 billion purchase of Manor Care Inc., which operates more than 500 nursing and rehabilitation centers across the country. But that hasn't stopped the Service Employees International Union from persisting in its criticism of the deal, arguing that Carlyle could cut back on staffing and hurt quality of care.

Manor Care has pledged to maintain staffing levels, and says the SEIU is inflating concerns over the deal to recruit more members. SEIU currently represents just 1,000 of the company's 60,000 workers.

'We understand SEIU's motives: they want to unionize our employees and they will do whatever they can to create the pressure needed to gain access to them,' Manor Care spokesman Rick Rump said Thursday in an interview.

Subcommittee Chairman Pete Stark did not promise a legislative fix, but he echoed many of the unions concerns in his remarks.

'How can we hold nursing home chains accountable for the quality of care if they are hiding their true ownership relationships?' Stark asked. The California Democrat and ranking member Dave Camp, R-Mich., said they would ask the Government Accountability Office to investigate how private equity buyouts affect care at nursing homes.

While the Carlyle buyout is still expected to close before the end of the year, analyst James Kumpel of Friedman, Billings, Ramsey cautioned investors that the 'acquisition has been delayed largely due to 11th hour lobbying efforts at the state and federal levels.' Kumpel downgraded the company's stock last month to 'market perform' from 'outperform' on risks that SEIU's 'saber-rattling' could delay completion of the deal.

At the union's urging, state lawmakers in Pennsylvania, Florida and Michigan have already held hearings on the issue, prompting state health regulators to re-examine Carlyle's plans. Since all nursing homes must be licensed at the state level, local regulators could potentially block Washington-based Carlyle's takeover within their jurisdictions.

SEIU took its concerns to Capitol Hill Thursday, complete with statistics it says highlight the negative impact of private-equity ownership on patient care.

According to SEIU, violations of nursing care standards increased nearly 30 percent at Mariner Health Care after the chain was taken private in 2004 by National Senior Care.

SEIU's nursing home analyst Arvid Muller also highlighted the complicated corporate structures private equity firms often set up after buying nursing homes, arguing these reorganizations are designed to diminish the parent company's legal accountability.

Muller said Carlyle plans a similar overhaul of Manor Care, such that each nursing center would become a separate company.

'Part of Carlyle's restructuring plan involves creating multiple limited liability corporations, and 'limited' liability means just that, limited,' Muller said in testimony before the House Ways and Means Health Subcommittee.

Manor Care says it has always operated through several hundred subsidiaries and will have the same number after the Carlyle deal closes.

With millions of baby boomers approaching old age, nursing and rehabilitation centers have become a popular acquisition targets for Wall Street in recent years.

Nursing home operator Genesis Healthcare Corp., based in Kennett Square, Pa., approved a buyout offer in May. And shareholders of Scarsdale, N.Y.-based National Home Health Care Corp., agreed to be acquired in June.

Shares of Manor Care Inc. fell 44 cents Thursday to $63.61 in midday trading.