Five Star Quality Care, Inc. (NASDAQ:FVE)

The model of all these operations is horrific. These are labor intensive to the extreme and expensive. The lavish retirements of the 1970s are over. With Obamacare, the middle class and even upper middle class is stone cold broke. So assisted living is coming home and with it home health care. The warehouse facility model will never work in the USA.

I am both a doctor and lawyer and I have devoted a lot of study into health care delivery and this model doesn't work. I have land in NC that I consider turning into a retirement assisted living community with nursing home on the campus. Even with a sense of community it could not work. A client getting assisted living and home health by our community could not refer the patient to our own nursing home on the campus. Instead they would be sent 30 miles away to anther facility far from their friends and any support groups. It is inhuman.

Then you have lawsuits. A tiny excoriation turns into a bed sore which is an automatic lawsuit. A patient falls and breaks a hip, its a lawsuit. No service business can survive such an environment; one with so much government regulation and fragmentation and intensive labor.

It might work in Asia or Mexico or Costa Rica or Columbia or the Philippines where regulation is relaxed and lawsuits nonresistant and no Stark styled laws. The more the regulation, the greater the societal guilt. This is an American fairy tale with a most unhappy ending.

To help you understand this. Suppose you owned a burger joint. Each year your costs of labor went up 15%. Your cost of ingredients went up 20%. Your number of lawsuits doubled each year. Government could shut you down on a mere complaint, a mere surprise visit where a refrigerator was a degree off. Then on top of that, reduce the expendable income of your customers by 7% a year. Your facility costs rise, with Obama killing coal, your utility costs double. At some point the guy that makes burgers and sells them out of a grocer store in the frozen food section stays in business but you don't.

The assisted living and nursing home businesses are more labor intensive and fundamentally impaired across the spectrum. This business model is dead.

FVE has reorganized , eliminated, rents, and sold two hospitals. FVE expects to realize. Cash proceeds of approximatrly $8.0 M Relieved of rent obligation .Approximatrly $11.5M per yr.Now 5 star business wil be private paying Senior living communities (approximately 77% ) who pay for services with private resources. Should be high quality service s