Carlyle nursing-home deal alarms watchdogs

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Thursday, November 08, 2007

Gazette Detroit Bureau

DETROIT — The Carlyle Group’s $6.3 billion acquisition of Manor Care Inc., which operates 27 nursing homes in Michigan, has touched off a firestorm of controversy in Lansing and Washington.

Fifteen state Democratic lawmakers and patient-care advocates have asked the Michigan Department of Community Health to delay or deny the Carlyle Group’s license application to operate the businesses.

In Washington, U.S. Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee, and Rep. Barney Frank, D-Mass., head of the Financial Services Committee, have said they would investigate business practices of nursing homes owned by private investment groups.

State Reps. Robert Jones, D-Kalamazoo, and Kathy Angerer, D-Dundee, plan to hold joint hearings this month in Lansing to investigate the Carlyle acquisition of Manor Care, Angerer said Wednesday during a conference call with reporters.

Jones is chairman of the House Senior Health, Security and Retirement committee. Angerer chairs the House Health Policy committee.

They and Dingell also are asking the Department of Community Health to delay issuing a license until after the hearings are held.

The Carlyle Group said it plans to complete the acquisition by the end of this month. Stockholders of the Toledo-based Manor Care approved the acquisition last month.

Carlyle, headed by former IBM Corp. Chairman Louis Gerstner Jr., is one of the nation’s largest private-equity firms. It manages $58.5 billion in assets and owns stakes in more than 500 companies.

Manor Care is a publicly held corporation that has about 3,000 workers in Michigan and 60,000 nationwide.

In southwestern Michigan, Manor Care owns the Heartland Health Care Centers in Kalamazoo, Three Rivers and Battle Creek.

Private-equity firms come under less regulatory scrutiny than do publicly held companies and are not required to publicly report revenues, profits and other financial information.

A variety of critics say they fear the quality of patient care will erode if the state allows Carlyle to take over the nursing homes.

Last month, Carlyle issued a “patients first” pledge that, among other things, vowed to give quality health care to patients and provide education and training to Manor Care workers.

Carlyle also said it would “strive to exceed all federal and state requirements.” The company said it wouldn’t comment further on the deal. Manor Care also has not responded to requests for comment.

Gazette staff writer Alex Nixon contributed to this report.

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