If you want to know what’s really killing America’s newspapers, read the May 7 report in the New York Times titled “Push for Profits Left Nursing Homes Struggling to Provide Care.”
That’s right, it’s a story about nursing homes and why one-third of all the coronavirus deaths in this country have been nursing home residents or workers. The connection between that story and the newspaper crisis is simple: private equity.
In last week’s column I referred in passing to private equity’s role in destroying newspapers. Let me explain.
What is “private equity”? you may be asking. The name sounds harmless enough. Privacy is a good thing, and so is equity. In this case, though, the privacy means freedom from public disclosure and reporting, which are required by law of all publicly traded companies. Private equity investors essentially operate in the shadows, buying up highly profitable businesses and lowering quality while extracting huge profits in the form of management and consulting fees. Eventually, the businesses are gutted and left to die.
That’s the nursing home story. “When the pandemic struck, the majority of the nation’s nursing homes were losing money, some were falling into disrepair, and others were struggling to attract new occupants, leaving many of them ill equipped to protect workers and residents as the coronavirus raged through their properties,” wrote Matthew Goldstein, Jessica Silver-Greenberg, and Robert Gebeloff in the Times. “Decades of ownership by private equity and other private investment firms left many nursing homes with staggering bills and razor-thin margins, while competition from home care attendants and assisted-living facilities further gutted their business. Even so, many of their owners still found creative ways to wring profits out of them.”
Like nursing homes, newspapers were once big moneymakers and so attracted private equity investors. The investors, who would have been just as happy to buy asphalt companies or toy stores so long as they made their 25-percent profit, fueled outfits like Digital First Media and GateHouse, which bought up hundreds of small and medium-size papers and proceeded to squeeze the life out them, laying off journalists and selling off real estate and other assets while collecting gigantic management fees. When the strangled papers ended up on life support, management declared bankruptcy, taking advantage of legal loopholes to make even more money.
Independently managed nursing homes, especially those run by nonprofit and faith-based organizations, get the highest ratings and have the best health and safety records. For-profit, private-equity-owned homes have the lowest and worst. These facts have been known for years. Only now are we seeing the consequences in tens of thousands of deaths.
So when you hear that it’s the internet, or the pandemic, that’s killing newspapers, stop and go a little deeper. As we say in this business, follow the money.