The cycle of buying and selling care homes has led to shortcuts, closures, even fraud – and imperiled vulnerable residents’ health. In an already fraught industry embattled by a variety of problems – particularly those that directly affect residents’ care, like eviction of Medicaid patients, lack of regulation, chronic understaffing, and poor infection control – massive fraud cases are as shocking as they are common.
In 2015 New Jersey-based Skyline Healthcare LLC, owned by Joseph Schwartz, began gobbling up nursing homes, amassing enough facilities to provide them with an estimated several hundred million dollars a year of taxpayer money in the form of Medicare and Medicaid reimbursements. Just two years later, they were managing at least 100.
Then Skyline effectively disappeared overnight, leaving staff to wonder why food vendors were no longer being paid, why their paychecks were bouncing, why the lights weren’t on. Nine facilities in Pennsylvania were similarly abandoned, along with dozens more in other states including South Dakota, Kansas and Massachusetts.
On average, nursing home workers make $19,000 a year, and many rely on second jobs or food stamps to get by. “The thing that is still sad is these people are low-paid to begin with,” Chris Sloat, an administrative organizer with SEIU Healthcare of Pennsylvania, the largest healthcare union in the state, said about staffers cheated out of pay and benefits by Skyline. “And now the debt that they have, people coming after them for bills, is just mind-blowing. And they don’t have the money. There’s still this residual effect from everything Schwartz has done.”
The collapsing of Skyline was a foreboding of disasters to come – a sign of how a cycle of buying and selling had opened the precarious industry up to fraudsters who could amass a string of facilities, suck the money out of them, and then run off, leaving residents and staff without much recourse. The case was an unheeded warning that the industry was insufficiently regulated and absolutely unprepared to withstand any new crisis that might come along.
On Easter weekend, the pandemic struck a remaining Skyline facility in New Jersey, as if to prove a point. An anonymous tip brought police to Andover Subacute and Rehabilitation Center where they discovered the bodies of 17 residents piled into the facility’s tiny four-person morgue. The grim Easter Sunday discovery at Andover Subacute in New Jersey, the state’s largest licensed facility, was not the end of unnecessary deaths there. By mid-June, at least 70 residents and staff members had died in the facility, where nearly 550 residents lived. Local news reported that Louis Schwartz, the son of Joseph Schwartz and the vice-president of mergers and acquisitions for Skyline, was a 50% owner of the facility. According to Skilled Nursing News, as of July, 2019 Skyline still retained an ownership stake in “more than 50 nursing homes”.
Flipping, or the buying and selling of nursing homes with the purpose of turning a quick profit, is exceedingly common. Once dominated by individual, family-owned non-profits, over the past few decades the industry has experienced the penetration of for-profit corporate ownership leading to an increase in facility sales and contributing to the overall uptick in closures across the US – more than 550 nursing homes (out of a total of 15,600) have closed since June 2015.
In Pennsylvania, nursing homes inhabit an “extremely volatile market”, according to Zach Schamberg, the president and CEO of the Pennsylvania Health Care Association, which represents the nursing home industry. There are a total of 700 facilities in the state. In just the past three years, there have been 100 nursing home sales, changes of ownership, or reorganizations, he told me, a rate that has doubled between 2007 and 2017.
According to industry advocates like Schamberg, the increased number of sales is due to the costs of care rising about 2.5% a year while Medicaid reimbursements do not. “So do the math,” Shamberg said. But patient advocates, who acknowledge the stagnation of reimbursement rates, strongly deny that increasing those rates alone will solve the industry’s problems. Rather, studies have shown, when Medicare and Medicaid rates increase, care quality often doesn’t.
Philip Esformes, whose string of nursing homes stretched from Illinois to Florida, was sentenced to 20 years in prison last September for paying doctors to refer patients to his facilities and for taking taxpayer money that he never applied to residents’ care. His indictment included money laundering, receiving healthcare kickbacks, bribery conspiracy and obstruction of justice. Esformes, who owned multiple homes and drove around Miami Beach in a Ferrari, amassed $1.3bn in Medicare and Medicaid money. The case reached court several years after reporting by dogged journalists at the Chicago Tribune, David Jackson and Mario Ariza. In a 2016 documentary about the case, Jackson states, “the scope of the schemes is staggering”.
HCR ManorCare, a national chain of facilities, collapsed after investment from private-equity firm the Carlyle Group. Within four years, ManorCare sold most of the buildings its facilities operated in for $6.1bn, funneling the profit to shareholders. ManorCare continued operation of the facilities but became strapped with monthly rent payments they couldn’t make. With $7.1bn in debt, the company filed for Chapter 11 bankruptcy in 2018.
The elusive multimillionaire Joseph Schwartz, owner of Skyline, has become, to thousands of elders, their families and their caregivers, the face of all that is wrong with the American nursing home industry. When Schwartz abandoned dozens of facilities, starting in 2017, residents were left sitting in their own feces, unfed and unbathed. Whatever staff remained, like Shelly Robinson, were left to buy food for elders and to pay the facility’s utility bills. “Sometimes, as employees, we purchased snacks for our residents so they had snacks,” Robinson said.
In some cases, state governments stepped in to care for the abandoned residents, overseeing operations until a buyer could be found for the facility. Families were shocked by not just the neglect but the blatant lack of communication about their loved ones’ status.
“It seems like they had a plan to go in there for two or three years, bleed the nursing homes and then just bail out,” Thomas Pasternack, the owner of Walsh Pharmacy in Fall River, Massachusetts, told southcasttoday.com after three Skyline facilities left him with $200,000 of unpaid bills.
When they left Lancaster Care and Rehabilitation, Skyline refused to pay staff for any of the time off they had accrued. “Skyline said they weren’t paying us for our sick time or vacation time,” Robinson explained. “It was actually our time that we accrued through working, but they said they weren’t going to pay us.” Pennsylvania does not require that staff and residents of a facility be notified of a change of ownership for the first 30 days. When staff are finally informed of the sale, they must scramble to negotiate livable salaries and benefits with the new owner. The incremental erosion of wages and benefits increases the precarity of staff and their families but it also jeopardizes the health of residents who suffer from short staffing and staff members who can hardly pay their own bills.
The Covid-19 pandemic has escalated the repercussions of mismanagement, fraud and the lack of regulations. States all across the country, like New York, are moving to provide immunity from Covid-19 litigation to nursing homes. Last month, 250 patient advocacy organizations wrote a letter asking legislators to not provide immunity to the nation’s facilities.
The letter states: “Essentially, the only mechanism available for a nursing home resident to hold facilities responsible for substandard care is judicial recourse. By removing this safety net, nursing homes will have little to no oversight.”
When asked what needs to be done to correct course, Robinson, a veteran of the industry – she’s worked in nursing facilities for more than 30 years and joined SEIU in 1993 – says: “Stop making money the bottom line and care for our elders. They are people and they have lives and families and you can’t just put a dollar sign on their head.”
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