Stocks Of The Fevered Fifty Publicly Traded Nursing Home Companies Soar, Then Crash
In spite of the looming problems with Medicare reimbursement, publicly traded nursing home chains became one of the hottest things on Wall Street. Everyone viewed Medicare and Medicaid as a risk-free source of revenue that made this a business where no one could lose money. In 1966 there were only a few publicly traded nursing home chains, by 1969 there were 58, and by 1970 there were 90. The best known were called the “Fevered Fifty”, and they were promising investors returns of 20-25% a year. In many cases, they went public before they had even completed the construction of their nursing homes, with prices at a huge premium to the rest of the market. The stock of the “Fevered Fifty” exploded in 1969 and 1970, then the bottom fell out by 1971, as reality set in.
In part, the precipitous fall in the stock price was due to was poor management and unrealistic expectations, but there were also some highly visible instances of fraud. The most notorious one was Four Seasons Nursing Centers. Four Seasons came public at $11, shot up to $181.50, then dropped to $.06 a share when the SEC suspended trading after indicting the company president, partners in their accounting firm (Arthur Andersen!), and two officers of a brokerage firm for securities violations. Four Seasons started out as a construction company, but investors didn’t seem to care that the owners had no medical background as they pumped the stock higher before the fraud came to light.
Four Seasons entered bankruptcy and was reorganized as ANTA. ANTA’s subsidiary, Four Seasons Nursing Centers, was later acquired by Manor Care, a much healthier publicly traded nursing home chain that ultimately merged with Health Care Retirement to form HCR Manor Care.