"They're short-staffing," says an aide at a Beverly home in Center Point, Alabama. "If you have twenty residents, it means you can't spend as much time with them as you should. You don't give residents the kind of care they deserve."

In nursing homes, skimping on labor costs can be lethal. In Minnesota, investigators found that at least eight residents at Beverly homes died after receiving inadequate care and supervision between 1986 and 1988. Myrtle Schneuer, 83, choked to death after a nurse's aide gave her bacon and toast, despite a doctor's order to feed her only soft food because she had difficulty swallowing. Lucy Gralish, 79, suffered for three hours after a heart attack before the home called a doctor. Joy Scales, 65, died of a skull fracture after an aide left her unattended on the toilet, contrary to her doctor's orders. "So much of this goes right back to the question of staffing and corner-cutting," James Varpness, the Minnesota ombudsman for older residents at the time, told reporters. "Why are people being left unattended on toilets so that they fall off and fracture their skull? It's because the nursing staff has too much to do and something else that needs to get done."

In many homes there are still too few aides to do the job. In 1993 two dozen employees at a Beverly home in Yreka, California, signed a letter to David Banks, warning him that staffing was dangerously low. "We are jeopardizing the safety of our residents as well as our own," the employees wrote. "It is a matter of time before a tragedy occurs that may have been preventable." They were right. In 1995 a suit was filed alleging that Reba Gregory, a 69-year-old resident, had been dropped by a nursing aide who was trying to move her from her bed without assistance, fracturing her right hip and shoulder. Last March a jury awarded Gregory a record $95.1 million--later reduced by a judge to $3 million--after evidence showed that time sheets the company originally claimed were destroyed had in fact been doctored to reflect nonexistent staffing.

Beverly has also repeatedly broken the law to prevent its 65,000 employees from joining a union to improve staffing and conditions. Last August the National Labor Relations Board issued an unusual corporationwide "cease and desist" order against the company for 240 violations of labor laws in eighteen states, including threats, coercion and surveillance of employees. A study of federal contractors by the GAO ranked Beverly among the fifteen worst violators of federal labor laws.

Beverly and others in the industry complain that Medicaid rates are simply too low to pay for decent staffing and adequate care. In Arkansas, where Beverly owns one of every six nursing-home beds, Medicaid reimburses the industry an average of $63.99 a day for each resident--only two-thirds the national average. But the low rates don't stop companies like Beverly from enjoying big profits. According to the latest available figures, Arkansas nursing homes rank second to last in the nation in median spending on direct care for patients and dead last in staffing levels. Such miserliness enables them to post the eighth-highest profit margin nationwide--nearly double the US average. Seven of the twenty most profitable homes in the state belong to Beverly.

Even when the company claims a loss, it still finds ways to make money. The home in Jacksonville, where Jewel Forester died of an overdose, reported a loss of $859,000 for fiscal 1998, which ended last June. But cost reports filed with the state show that the "loss" included nearly $309,000 in "management fees and home office costs" that the home passed along to corporate headquarters. According to proxy statements, David Banks and two other Beverly executives topped $1 million in compensation for 1997.

When it comes to compensating nurse's aides, however, Beverly and other chains plead poverty. In Arkansas, where nursing homes pay half of their 25,000 employees only $5.15 an hour, the industry didn't want to use any of its profits to raise the minimum wage as mandated by Congress. So during the closing days of the 1997 state legislative session, lobbyists snuck an amendment into the budget requiring taxpayers to reimburse nursing homes for any increase in the minimum wage. Republican Governor Mike Huckabee vetoed the bill, but lawmakers easily overrode him. The measure could end up costing taxpayers more than $17 million.

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