Better Solutions for Healthcare

Washington Post: Profit and pain: How California’s largest nursing home chain amassed millions as scrutiny mounted

By Debbie Cenziper, Joel Jacobs, Alice Crites, Will Englund

December 31, 2020

The largest for-profit nursing home operator in California took control of his first home in 2006 in a Los Angeles suburb that calls itself “the city of opportunity.” Over the next decade, he built a sprawling network of facilities from San Diego to the state’s northern coast.

The chain known as Brius Healthcare received more than $800 million from Medicare and Medicaid in 2018 to care for thousands of elderly residents in about 80 nursing homes. Instead of relying upon outside vendors, Brius pursued a business practice long used by a majority of for-profit nursing homes nationwide: paying related companies for goods, services and rent.

More than 70 percent of the country’s nursing home providers use operating funds to pay themselves through so-called related parties — companies they or their family members partially or wholly own. In 2018, Brius nursing homes paid related parties $13 million for supplies, $10 million for administrative services and financial consulting, and $16 million for workers’ compensation insurance, state records show. The homes also sent a total of $64 million in rent to dozens of related land companies.

The practice is legal and widely supported by the industry, which argues that related parties help control costs and limit financial liability. Watchdog groups counter that nursing home owners can reap excessive profits from public funds by overpaying their own companies. Related parties generally do not have to disclose profits, leaving regulators with little way to assess the financial gains of owners.

In recent weeks, consumer advocacy groups appealed to the Biden transition team, advancing a proposal that would require owners to submit tax returns and consolidated financial reports for all related parties, management, land companies, holding companies and parent companies. The proposal calls for the federal government to stop troubled owners from operating homes and to ensure that profits and administrative costs are reasonable since roughly 85 percent of nursing home revenue comes from Medicare and Medicaid.

Watchdog groups are also pressing for legislation in California, where few providers have drawn as much scrutiny as Brius Healthcare. The operation, primarily owned by Shlomo Rechnitz, has for years found itself in the public eye, questioned by state regulators, prosecutors and plaintiffs’ attorneys about its business practices and quality of care. Staffing levels and health and safety ratings at dozens of the homes in recent years have fallen below the state average, federal data shows, and lawsuits alleging poor patient care have drawn headlines.