Long Term Care Hospitals

The New York Times had an interesting article about the growing industry of long term care hospitals.  The greedy owners manipulate the Medicare and Medicaid regulations on reimbursement to make even more money and profit.

Fewer than 10 hospitals dedicated to long-term care existed in the early 1980s, according to Medicare officials.  More than 400 long term care hospitals have opened nationally in the last 25 years.   These hospitals have sprouted driven by Medicare rules that offer high payments for hospitals that treat patients for an average of 25 days or more.  Long-term care hospitals now treat about 200,000 patients a year, including 130,000 Medicare patients — at a projected cost of $4.8 billion to the government this year, up from $400 million in 1993. 

Among the more peculiar aspects of long-term care hospitals is that nearly half of them, and almost all of Select’s, are actually “hospitals within hospitals.” They do not have their own buildings and instead occupy a floor or two of an existing hospital. They contract most services from the host hospital, so they can be opened quickly and cheaply.

Yet under Medicare rules, because they have different owners, the two hospitals are considered separate for payment purposes. This means there can be a second reimbursement when a patient is simply transferred between floors.  Under Medicare payment rules, traditional hospitals often lose money on patients who stay for long periods. So they have a financial incentive to discharge patients to long-term hospitals, which then receive new Medicare payments for admitting the patients. Both hospitals benefit financially.  The industry’s growth is an example of how health care companies can exploit the $450 billion Medicare program.

 

Few long term care hospitals have doctors on staff. Select, which has 23,000 employees and provided care to 42,000 patients in 2009, has no physicians on its board or in management. In 2007, it hired a physician for a new position, national medical director. The physician, Dr. David Jarvis, does not work at Select’s headquarters in Mechanicsburg, Pa., and has no management responsibilities. He estimated he spent only 10 hours a week working for Select Medical. Select Medical Corporation is a publicly traded Pennsylvania company that runs 89 long-term hospitals, more than any other company.

Lawsuits, state inspection reports and statistics deep in federal reports paint a troubling picture of the care offered at some Select hospitals, and at long-term care hospitals in general. For-profit long-term hospitals generally spend less on patients and have higher margins than comparable nonprofits, according to data from the Medicare Payment Advisory Commission, a Congressional research agency. In 2007, for-profit long-term care hospitals had margins of 6 percent on Medicare patients, while regular hospitals lost an average of 6 percent on Medicare patients, according to the commission. In a presentation to investors last month, Select Medical reported that it improved its margins by lowering staffing levels and supply costs. Medicare inspection reports, however, describe preventable patient injuries and deaths, and they portray Select’s hospitals as understaffed and with high turnover.

In 2007 and 2008, Select’s hospitals were cited at a rate almost four times that of regular hospitals for serious violations of Medicare rules. Other long-term care hospitals were cited at a rate about twice that of regular hospitals. Long-term care hospitals also had a higher incidence of bedsores and infections than regular hospitals in 2006, the most recent year for which federal data is available.

Unlike other specialized hospitals, like psychiatric or children’s hospitals, long-term care hospitals do not treat specific types of patients or offer services unavailable in regular hospitals. They are defined solely by the fact that they keep patients longer than other hospitals. They are also smaller than a typical hospital, averaging about 60 beds.

Despite the rapid expansion of long-term care hospitals, Medicare has never closely examined their care. Unlike traditional hospitals, Medicare does not penalize them financially if they fail to submit quality data.

Select also manipulates how long patients stay, to maximize its profits. A hospital is certified as a long-term care hospital and receives high Medicare reimbursements if most patients stay at least 25 days. But Medicare pays the hospital a set amount for each patient, meaning that patients who stay longer than that become less profitable. Therefore, long-term care hospitals are most profitable if most patients are discharged at or just after their 25th day, with a few discharged earlier. Select adheres closely to this formula, with an average length of stay at its hospitals of about 24 days, according to public filings. At some Select hospitals, the 25th day is called the “magic day,” ex-employees say.

Partly owned by a private equity firm, Select Medical sold shares to the public in September. Its top two executives, a father and son named Rocco and Robert Ortenzio, have made about $200 million from salary, benefits and share sales since founding Select in November 1996. The Ortenzios, who are veterans of the for-profit hospital industry, still own about 10 percent of the company, worth about $200 million.
 

Kickback Settlement

Numerous websites and news organizations have written about the recent settlement between the DOJ and Murray Forman, Rubin Schron, and Leonard Grunstein, owners and operators of hundreds of nursing homes through various entities such as Mariner, Sava Senior Care and Fundamental Long Term Care Holdings.  See articles and press releases here, here, here, here, here, here, here, here, here, here, here, and here.

What is incredible and disappointing about the settlement is the DOJ only made these criminals  pay $14 million but did not make them testify, admit guilt, payback the kickback, or take away their ability to continue owning and operating nursing homes.  What kind of penalty is $14 million when they have stolen millions more from Medicare and Medicaid?  Why did the DOJ make the now defunct Mariner pay but not their successor Sava Senior Care?   Why did they allow the Complaint to be dismissed before the settlement?  Why did they allow Forman and Grunstein, the masterminds behind the illegal scheme deny any responsibility or wrongdoing?  Why didn't they make Forman and Grunstein pay the kickback back to Medicaid and Medicare?

The settlement resolves the United States’ allegations that the defendants solicited and received kickback payments from Omnicare, Inc. (“Omnicare”), the nation’s largest pharmacy that specializes in dispensing drugs to nursing home patients.  

"As outlined in the government's complaint, Rubin Schron, Leonard Grunstein and Murray Forman tried to disguise an unlawful kickback payment," said Mary Louise Cohen, a Washington, DC, attorney with Phillips & Cohen LLP, which represents the whistle-blower. "Omnicare's $50 million payment for a small unit of Mariner Health Care -- which had less than $3 million in assets and only two employees -- just didn't add up without figuring out what else Omnicare was getting as part of the deal."

In a Complaint filed in March 2009 and unsealed in November 2009, the United States alleged that Omnicare, Mariner, Sava, Grunstein, Forman, and Schron conspired to arrange for Omnicare to pay $50 million in exchange for agreements by Mariner and Sava to use Omnicare’s pharmacy services for 15 years.   In 2004, Grunstein and Forman proposed that Schron provide financial backing for the acquisition of Mariner, which at that time was one of Omnicare’s largest customers. Grunstein and Forman attempted to arrange the Mariner acquisition so that Schron would have to contribute as little cash as possible. To achieve this end, Grunstein and Forman pursued a plan to sell to Omnicare the right to continue providing pharmacy services to Mariner, even though Forman was warned by lawyers that selling the right to provide pharmacy services would constitute an illegal kickback.

Grunstein and Forman thereafter arranged for Omnicare to pay them $50 million to purchase a  Mariner company that had only two employees and no tangible assets.  Omnicare paid $40 million of this amount up front, prior to actually acquiring the Mariner business unit, and simultaneously obtained new 15-year pharmacy contracts from Mariner and from Sava, a new nursing home chain that Grunstein and Forman created from Mariner. Grunstein and Forman illegally tied the new pharmacy contracts to Omnicare’s agreement to purchase the small Mariner business unit, and that the total $50 million purchase price for the business unit actually was a kickback by Omnicare to keep the future business of Mariner and Sava. In 2006, after the Government issued subpoenas concerning the transaction, the individual defendants created backdated documents in a further attempt to hide the kickback.

In November 2009, the United States and Omnicare entered into a $98 million settlement agreement that resolved Omnicare’s civil liability under the False Claims Act for paying kickbacks to keep the Mariner and Sava business.  So Forman and Grunstein coerced OmniCare to pay them a $50 million kickback and Omni had to pay $98 million but Forman and Grunstein and their companies only had to pay $14 million!?!

As part of the settlement, Mariner has entered into a corporate integrity agreement. This agreement provides for Mariner to put in place procedures and reviews to avoid and promptly detect conduct similar to that which gave rise to this matter. At the same time, OIG-HHS has reserved its rights to seek exclusions of Sava, Grunstein, Forman, and/or Schron from participation in Medicare, Medicaid, and all other Federal health care programs.

"I suspect that if you got [Grunstein, Schron and Forman] all in a room and asked them whose fault this was, they'd all be pointing at someone else," says one person familiar with the case. "And that's really what this transaction was about --setting up all these different entities and shells and moving pieces so that nobody had responsibility."

Rubin Schron, a New York real estate investor who along with National Senior Care Inc., bought Mariner Health Care Inc., which is at the center of the kickback scheme. -- Leonard Grunstein, a New York real estate attorney who was a partner with the law firm, Troutman Sanders. He was Schron's agent in the purchase of Mariner Health Care Inc. and in the alleged kickback scheme. -- Murray Forman, an associate of Grunstein's and Schron's who also is president of a Long Island school board. -- Mariner Health Care Inc., a Delaware corporation with headquarters in Atlanta, Georgia, that operates nursing homes and, according to the government's complaint in this case, is controlled by Schron. -- SavaSeniorCare Administrative Services LLC, a privately held Delaware company with headquarters in Atlanta, Georgia, also reportedly controlled by Schron. Sava affiliates lease and operate nursing homes.

This settlement is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $3 billion


 

Analysis shows less care at for-profits

The Billings Gazette had an article proving that for-profit nursing homes provide less quality care than non-profit nursing homes.  A disproportionate number of Montana nursing homes rated below average by the government are operated by for-profit corporations, an analysis shows.   Almost 60 percent of the state’s skilled-nursing facilities awarded one or two stars by Medicare are for-profit entities, according to information available on the government’s Nursing Home Compare Web site.  For profits tend to cut corners and decrease staffing for profit and bonuses.

Medicare rates nursing homes on a five-star scale using data collected during annual inspections. Facilities are also scored on their staffing levels and how they perform on certain quality measures. Some 26 of Montana’s 90 nursing homes earned one or two stars in the most recent analysis. One star is “much below average” and two stars is “below average,” according to Medicare. 

“I don’t think it means a lot,” said Jerry Smyle, vice president of operations for Lantis Enterprises Inc., which owns 12 for-profit nursing homes in Montana.

Of course, he doesn't.

Sunwest sells to Blackstone/Emeritus

Oregonlive had an article about SunWest's recent sale of nursing homes.  Sunwest Management has signed a deal to sell 134 of its senior housing facilities to a group led by private equity giant Blackstone for $1.15 billion in cash and assumed debt.  The price is lower than the approximately $1.27 billion price tag discussed last September when the deal first came to light.  Blackstone Real Estate Advisors VI LP is leading the acquisition group. Teaming with Blackstone are Seattle-based Emeritus Senior Living and Columbia Pacific Advisors, an entity controlled by Dan Baty, chairman and co-CEO of Emeritus.   Baty went to considerable lengths to win a seat at the negotiating table. His company, Columbia Pacific, bought up $290 million in debt that various Sunwest entities owed to lenders and shrewdly attempted to use its new position as a creditor to leverage a better deal out of Sunwest.

Sunwest was once the fourth-largest assisted living company in the country. It fell into disarray in 2008, a victim of the credit crisis, its own out-of-control growth, greed, mismangement, and poor quality of care. The company's crash led to one of the largest investment scandals in Oregon to come out of the economic downturn. In the summer of 2008, Sunwest affiliate companies stopped making promised interest payments on the more than $400 million it owed to some 1,200 investors.

The U.S. Securities and Exchange Commission sued Sunwest and its former CEO, Jon Harder, in March, accusing the company of running a Ponzi-like scheme. Like nearly everything about Sunwest, the proposed sale to Blackstone is controversial. Some investors feel that Blackstone is offering a lowball price. The bid must be approved by U.S. District Judge Michael Hogan, who has been overseeing a complex legal mediation involving Sunwest, its investors and lenders since early this year.

If the Blackstone/Emeritus group does not prevail, it could be entitled to $13 million in breakup fees and expense reimbursement, according to court documents outlining the tentative deal.

Long Term Care Living ran article explaining the deal between Emeritus and Blackstone, and Sunwest.  Emeritus Corporation, a national assisted living provider, has entered into a joint venture agreement with Blackstone Real Estate Advisors and Columbia Pacific Advisors to acquire 134 senior living communities currently operated by an affiliate of Sunwest Management for $1.5 billion.

 

The joint venture will post a $50 million purchase deposit in conjunction with the signing. The purchase includes cash, the assumption of secured debt, and the potential equity rollover of up to $25 million by the existing Sunwest investors.

 

The agreement also contains provisions to allow Emeritus a right of first opportunity to purchase the communities or the joint venture interests at fair value and includes a profit sharing provision for Emeritus if the deal’s internal rate of return exceeds established thresholds.

 

 

Guilty plea in health care fraud case

St. Louis Today had an article about a criminal enterprise masquerading as a nursing home.  Luckily they got caught and the company pleaded guilty to fraud and will pay $1.6 million in fines and restitution.

When the Texas-based Cathedral Rock Corp. bought 11 Missouri and Illinois nursing homes in 2001, owner and CEO C. Kent Harrington told employees that residents were the first priority and would get "extra-special treatment."

The real priority was packing elderly and disabled clients into those homes — including five in the St. Louis area that were understaffed and provided substandard care, according to court documents and federal prosecutors.   Until 2005, the services "were grossly inadequate" and represented "a complete failure of care," Assistant U.S. Attorney Dorothy McMurtry said in court.

It also settled a whistle-blower civil lawsuit filed by nurses in 2003 that triggered what officials said was a relatively rare criminal prosecution of a nursing home over poor care.

Five Cathedral Rock-owned companies that ran those homes agreed to pay $1 million in criminal fines and penalties, and $628,000 in the civil settlement.  The companies will be formally sentenced in April, likely to some term of probation in addition to the fines and penalties.  So no one is going to jail for defrauding the government, stealing from medicare and medicaid, and directly causing the deaths of dozens of residents!

Among the claims was that the homes' staff doctored patient charts, falsified drug records and failed to give necessary medications. Some residents suffered from bed sores. Others wandered away. One ended up on a roof. One was found days later. One died after falling from a window.  The homes were repeatedly cited by regulators, fined and penalized.   Officials said the homes filed corrective plans but then failed to comply or "misrepresented" their efforts to comply.

"FTB (fill the beds) is everything," read a 2004 e-mail from a Cathedral Rock regional vice president to another executive. "Whereas compliance is important and cost control is as well, CENSUS is to be your primary focus," the e-mail read.

In 2004, Cathedral Rock had 2,600 beds in 25 nursing homes and assisted-living facilities in Missouri, Illinois, Texas, Ohio and South Carolina, Harrington said at the time.

Its website currently lists 1,308 beds in 15 homes in Texas and New Mexico. A spokesman said it no longer operates facilities in Missouri or Illinois.

 

Greedy CEO pleads guilty

The Hartford Courant had an article about another greedy nursing home CEO. The former chief executive of a now defunct nursing home chain pleaded guilty to federal charges that he improperly used money intended for the homes to buy real estate.   Raymond Termini pleaded guilty to conspiracy to commit wire fraud and engaging in unlawful monetary transaction.

Termini stole a $6 million loan for private business transactions, and up to $2 million for sprinklers at the nursing homes instead to buy real estate and other purposes.  Termini was CEO of Middletown-based Haven Healthcare, one of the state's largest nursing home chains before it filed for bankruptcy protection in 2007, operating 27 facilities in five states, including 15 in Connecticut.  Termini agreed to forfeit $500,000.  So he steals millions but he "agreed" to pay a measly half a million. 

"Mr. Termini admitted he made some errors," Keefe said. "Otherwise he did a lot of good for a lot of people in that industry."

 

 

Siphoning funds for profit and greed

The Providence Journal had an article about the federal government seeking more than $12 million from former nursing home executive Antonio L. Giordano and his associates, claiming they enriched themselves by diverting millions of dollars from nursing homes as the homes slipped into debt, in violation of an agreement with the U.S. Department of Housing and Urban Development.

The government, on behalf of HUD, accuses Giordano; his longtime chief financial officer John J. Montecalvo; Pasquale V. Confreda, a general partner with Coventry Health Center Associates, and Coventry Health Center Associates itself of illegally channeling money from two nursing homes to themselves and businesses that included two consulting firms, one owned by Giordano’s daughter and the other by his son.

The nursing homes — Mount St. Francis Health Center, in Woonsocket, and the Coventry Health Center — were backed by HUD-insured financing and later went into receivership. Those named in the suit were barred from transferring money or property belonging to the nursing homes while the homes were not financially solvent under the terms of the HUD mortgage insurance.

Giordano and Montecalvo oversaw the management of both nursing homes. Confreda was a general partner of Coventry Health Associates, which owned the 344-bed Coventry Health Center.

The suit filed in September in U.S. District Court says Montecalvo and Giordano misused $4.2 million in Mount St. Francis funds in violation of the HUD agreement reached when the parties secured an $8.6-million HUD-insured mortgage. The government by law is allowed to seek double the amount that was allegedly misspent, or $8.5 million, including legal fees.

Giordano, Montecalvo, Confreda and CHC Associates are accused of diverting another $1.8 million from Coventry Health Center, equaling $3.6 million, with legal fees. In that case the parties secured a $15.3-million HUD-insured mortgage after refinancing.

The case grew from an audit done by the Office of the Inspector General of the nursing homes’ operations from Jan. 1, 2000, to Dec. 31, 2003, the suit says. According to the suit, $958,675 associated with the 194-bed Mount St. Francis was disbursed in violation of the HUD agreement.

The largest sums included $224,720 paid to a consulting firm run by Giordano’s son, Antonio A. Giordano, and $272,200 to a firm led by his daughter, Mary D. Gentili. Another $104,520 went to the now-closed Hillside Health Center that Montecalvo managed as well as $109,000 to the Sterling Health Care Management Co., where Montecalvo acted as general manager.

In addition, according to the suit, Giordano and Sterling, under Montecalvo, received $1.4 million each in management and partnership fees that violated the agreement.

The suit claims $1.4 million in funds related to the Coventry Health Center were diverted to eight entities in violation of the HUD agreement. The largest sums in that batch included $250,000 that went to Management Realty Service, a Rhode Island company where Giordano’s daughter served as president, and $267,000 that went to the consulting firm she led. Another $425,816 went to Sterling, the suit says.

Giordano and Montecalvo pleaded guilty in 2006 to federal charges that they misused money from the two homes and from the now-closed Hillside Health Center in Providence. Giordano was sentenced to 2½ years in prison and Montecalvo to 2 years.

They later admitted to embezzlement and conspiracy charges in state court, where they agreed to pay about $1.1 million in fines and restitution but avoided additional jail time.  Giordano and Confreda were also named as major delinquent borrowers in the state’s credit-union crisis of the early 1990s. In 2005, the state agreed to accept a $3-million payment to settle the debts left over from the banking crisis. The deal, approved by the DEPCO Asset Review Committee, cancels out more than $10 million in delinquent loans Giordano and his business partners owed Rhode Island taxpayers.

They be placed under the jail.

 

Reflections of a former nursing home administrator

 Long-Term Living posted an interview online on Dec. 3, 2009 with a former administrator who has written a book about his career as an administrator in Maryland nursing homes.  Elliott D. Cahan, a retired administrator, gives in his book, A Place Like Home, candid reflections on running facilities for for-profit and not-for-profit operators in Maryland.  Below are just a few of the excerpts from the interview where he admits that corporate control of the budget, concern about proftis, and quality of staff cause problems in trying to run a nursing home.   Cahan elaborated on all of these points in an interview with Richard L. Peck, former Long-Term Living Editor-in-Chief.

Peck: Your comments in your book, though, present quite a mixed picture—principally, that the administrator’s job is a juggling act. Would you elaborate?

Cahan: All the disparate parties involved in resident care—residents, families, staff, regulators, owners—come at it from different angles, but ultimately, it’s the administrator who is holding the bag for providing the care. Put it another way, it’s like a stack of cards and you’re never quite sure which card is holding up the stack—take away the DON, the nursing assistant, the RN, and will the whole thing collapse? It’s a precarious business. And yet I always found it interesting that Maryland had no requirement for a state surveyor to have worked in a long-term care facility. It’s a job that is more difficult than many people think.

Peck: Would you say that an administrator’s principal focus would be on staff?

Cahan: I think a principal role for the administrator is to clear the way of all red tape and roadblocks so that staff will have an environment for success. If you do this, they will provide good care. You can’t pay the highest wages, although they should be competitive, but basically if you provide an environment where staff feel appreciated and want to show up every day, good care will result. Specifically, that means giving them the supplies, the equipment, including maintenance and repair, and in general eliminating frustration from their daily work.

Peck: By the same token, what do administrators need?

Cahan: They need to be empowered by the owner, the board, and the corporate office. They need more than “sometimes” authority—for example, having no control of the budget but being held accountable for spending nine bucks for doughnuts at a staff meeting.

Peck: Among the more controversial statements you make in your book is that, from a quality standpoint, not-for-profit facilities are preferable to for-profit facilities. Would you discuss that?

Cahan: That probably is the most controversial statement in my book. But I can only go by personal experience. I’ve heard for-profit management of one chain admit that it was all about the quarterly share price, not the residents. At least they were honest. In general, the for-profit chains thought that they would create efficiencies through centralization but it never happened. Also, they went through a period when they bought provider companies at crazy prices, with huge mortgages that operations could never support. It made me wonder whether investors really understood the field, but this had a bearing on quality. I’m not saying this is a hard-and-fast rule—there were for-profit facilities in inner city neighborhoods that offered much better environments than was available at home, and I’ve seen not-for-profits that provided low quality of care. I was just addressing the overall situation with that comment.

 

Medical Industry maintains status as highest paid jobs

I have seen two lists that discuss the highest paid jobs.  One list is based on the Bureau of Labor Statistics and the other is from Forbes Magazine.  Both are dominated by health care professionals and show that there is clearly no need for tort reform.


1. Anesthesiologists: $197,340. (And anesthesiologists make more money in the state of Washington than in any other U.S. state)

2. Surgeons: $206,150. (Highest-paying state: Wyoming.)

3. Obstetricians and gynecologists: $192,040. (Highest-paying state: New Hampshire.)

4. Orthodontists: $194,900. (Highest-paying state: Wisconsin).

5. Oral Surgeons: $190,760. (Again, the highest-paying state is Wisconsin.)

6. Internists: $176,860. (Highest-paying state: Louisiana.)

7. Prosthodontists: $169,940. (Highest-paying state: Virginia)

8. Psychiatrists: $154,990. (Highest-paying state: Idaho.)

9. General Practitioners: $161,850. (Highest-paying state: Kansas.)

10. Chief Executive Officers: $144,600. (Highest-paying state: New Jersey.)

11. Dentists: $154,950. (Highest-paying state: Maine)

12. Physicians/Surgeons: $169,220. (Highest-paying state: Utah.)

13. General Pediatricians: $153,440. (Highest-paying state: Louisiana.)

14. Pilots/Co-pilots/Flight Engineers: $140,380. (Highest-paying state: Illinois.)

15. Podiatrists: $125,500. (Highest-paying state: Oregon.)

Long Term Care Costs increase....again.

McKnights ran an article about the increase in nursing home and assisted living costs which each rose by an average of 3.3% over the last year, according to the 2009 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs.

The average cost of a private room in a skilled nursing facility expanded to $219 per day from $212 a day in 2008.

Semi-private room costs increased by 3.7% to $191 per day.

The monthly cost of assisted living nationally rose to $3,131 from $3,031 in 2008.

The average hourly cost of an in-home caregiver climbed by 5% to $21 per hour, up from $20 the previous year.

Once again, Alaska topped the list of states for the most expensive nursing home care. The average daily rate in that state is $584. Louisiana received the opposite distinction. Its average nursing home rate totaled just $132 per day—the lowest in the country, according to the MetLife report.
 

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