Tuesday, November 20, 2007

Strange Coalescence of Bush Operatives


It seems each new story on The Carlyle Group's planned purchase of giant nursing home provider ManorCare reveals another six degrees of Kevin Bacon to the Bush White House. Consider recent announcements:

1) Fran Townsend, White House Homeland Security Adviser announced her resignation yesterday. Mrs. Townsend did a huge favor for The Carlyle Group after Hurricane Katrina. She omitted the private equity underwriter's brand new affiliate, LifeCare Hospitals and their 24 long term, acute care patient deaths from the White House Lessons Learned report. In 2006, LifeCare invested over $500,000 in lobbying services. Did any of that go toward influencing the White House to not weigh in? As for Fran's reason for leaving, it's to enter the private sector, doing risk management for a large bank or investment company. Or maybe a huge private equity firm?

2) Capital Hill hearings on the deal focused on concerns regarding patient care and patient safety. One might expect Carlyle's clear track record of failing patients in a time of disaster to be pertinent. With this Congress and Executive, that's apparently not the case. If Carlyle can fail patients in one of twenty one LTAC's, what might they do with 550 mostly nursing homes?

3) Having encountered some resistance to the deal, Carlyle put its lobbyists in gear. Guess which group landed squarely on Carlyle's side? The American Health Care Association/Alliance for Quality Nursing Home Care and its contracted lobbyist, Tom Scully. Tom happens to be a General Partner for a different private equity firm, Welsh, Carson, Anderson and Stowe. But he currently hangs his hat at Alston & Bird, alongside Bob Dole and Tom Daschle. Tom Scully served under President Bush as the head of Medicare/Medicaid. He designed the Medicare Prescription Drug benefit before cashing in big in the private sector. A recent article mentioned Tom's lobbying to prevent cuts in payments to long term hospitals (like Carlyle's LifeCare Hospitals). Chambers USA said of Alston & Bird, "the firm is particularly good for healthcare lobbying.”

4) Another ex-Medicare/Medicaid chief under George H.W. Bush, Gail Wilensky will pocket $790,000 in options and stock appreciation rights from the sale of Manor Care. Her 27,205 shares of owned stock at $67 per share bring her total take to $2.6 million. Her capital gains tax savings due to Bush Jr.'s tax cut could amount to $130,000. Note that over two thirds of Manor Care's 2006 revenue came from Medicare and Medicaid, Gail's prior responsibility. (Ms. Wilensky is also a director of Cephalon, Inc.; Gentiva Health Services, Inc.; Quest Diagnostics Incorporated; SRA International; and United HealthCare Corporation.)

5) The Service Employees International Union claims to take the high road on behalf of health care workers. Yet, their claims ring hollow as union President Andy Stern already called employer sponsored health insurance "dead." Andy has his eyes on being a huge group contractor for employees having to buy their own health insurance (this is from a Republican and Democratic plan offered in Feb. 2007). Mr. Stern wants to manage those billions in health insurance funds in a strangely Carlyle like echo.

6) President George W. Bush served on the Board of a Carlyle affiliate, CaterAir in the 1990's.

7) While the American Health Care Association pushes for the Carlyle sale to go through, it's also targeting members of Congress in the Fall 2008 elections. Why are they giving Republicans a free pass on the issue AHCA uses to rake Democrats over the coals? The Alliance for Quality Nursing Home care continues to spend money on Tom Scully's services at Alston & Bird.

Time will show if Fran Townsend ends up with as good a job as Tom Scully, but she clearly will make yacht loads. The question is will it be for The Carlyle Group? They'll have just made a killing in China from the IPO of China Pacific Life. Unfortunately, real death happened in LifeCare and Tenet hospitals after Hurricane Katrina. Between the two health care companies, they spent nearly $1.9 million in lobbying services for the year Katrina struck and the following one when Fran produced her investigative report. Somehow they managed their risk well enough to warrant not a mention. Yes, Fran's global risk management skills could come in handy, for the right firm.