By DT Cochrane & Toby Sanger
For-profit long-term care facilities in Ontario and other provinces recorded far more COVID-19 infections and deaths of vulnerable residents than either municipal or not-for-profit facilities during the pandemic. We estimate that if for-profit facilities had the same lower death rate as municipal facilities, over 1,400 fewer residents would have died in 2020.
While failing to provide the level of care of their non-profit counterparts, for-profit long-term care (LTC) facilities in Ontario diverted billions in public funding into profits while paying very little in tax. We estimate that for-profit long-term care corporations diverted almost $4 billion in public funding away from improving care for residents to their profits over the last decade, and more than $400 million annually in recent years.
About one-third of core public funding for LTC is “unrestricted”, which means it can be spent however a facility chooses and any unspent money does not have to be returned to the government. This is the money that for-profit owners can claim as profit. We estimate that more than half of this money —$440 million in 2019— was diverted to profits.
If the funds that were diverted into profits had been spent to improve care, much death and suffering during the pandemic could have been prevented. Prioritizing the pursuit of profit over provision of high-quality care is a fundamental reason why housing conditions, levels of care, infections, and death rates have been worse on average at for-profit facilities.
The government of Ontario provides almost $6 billion annually in public funding to LTC operators, with a majority going to for-profit operators and about half of the for-profit total going to the four largest operators: Revera, Extendicare, Sienna, and Chartwell. These amounts are set to increase substantially and must ultimately be paid for by Ontarians through their taxes.
The corporations that reap profits from this public funding contribute very little back to the public purse. Three of the largest for-profit LTC operators in Ontario—Chartwell, Extendicare and Sienna—had an average effective tax rate of only 4.5% on their profit over the last decade. This is well below the Canada-wide average effective tax rate, which is already at historic lows. At the average rate, the three companies would have paid almost $500 million more in corporate income taxes between 2010 and 2019. One of the three—Chartwell—is able to pay little or no tax because it benefits from the controversial income tax exemption for real estate investment trusts, better known as REITs.
We only know about the tax avoidance of Chartwell, Extendicare and Sienna because they are publicly-listed and have to disclose some financial information. Privately-held for-profit LTC corporations have likely also taken steps to avoid taxes. Unfortunately, because of a lack of financial transparency, we cannot know how much tax they actually paid. Revera, the largest privately-held operator, has established subsidiaries in well-known tax havens.
Ontarians deserve the best possible long-term care. That requires thoughtful and effective spending of their healthcare dollars, transparency about where the money they provide to LTC goes, and for any corporations involved in that care to pay their fair share of the taxes on which they depend.
Improving the long-term care that we provide to our elderly and vulnerable citizens is a key issue in Ontario. Poorer conditions in for-profit LTC facilities have been a long-term problem that were tragically magnified by the COVID-19 pandemic. The billions in public funding Ontarians provide for LTC should not be diverted to corporate profits. The findings of this report support three recommendations for Ontario.
Recommendation 1: Require all for-profit LTC operators to publicly disclose relevant financial, ownership, and employment information, including revenues, profits, taxes paid, executive salaries, and dividends. Facility level information on the use of public funds and staffing should also be disclosed.
Recommendation 2: Close loopholes that allow corporations receiving public funding to engage in aggressive tax avoidance schemes—such as the use of subsidiaries in tax havens, or the REIT structure—that provide tax breaks with no public benefit. Pending this closure, require for-profit operators to sign an agreement not to engage in aggressive tax avoidance.
Recommendation 3: Create a plan to shift all publicly funded long-term care facilities to nonprofit operators.