Oversight of nursing homes ‘broken’
Editor’s Note: Part one of this story ran in Wendesday’s edition of the RecordBee and can also be read online at Record-Bee.com. Thefinalpartwillprintin Friday’s edition.
The department and Brius’ attorney, Johnson, disagree. “State statutes permit potential new owners of skilled nursing facilities to enter into management agreements to operate facilities while a change-of-ownership application is pending,” an unidentified department spokesperson said.
A ROCKy HIStORy
Rechnitz, a Los Angeles entrepreneur, was in his mid-30s when he began buying nursing homes in 2006, creating a complex business structure for his holdings, public records show.
For a while, the California Department of Public Health seemed to support this newcomer, hiring his company to manage distressed facilities. In August 2011, Dr. Ron Chapman, then director of the department, petitioned in Santa Barbara Superior Court to have Brius, through its CEO, Shlomo Rechnitz, temporarily take over a struggling Santa Barbara nursing home.
“Mr. Rechnitz is a highly qualified individual and has an excellent background and reputation,” the petition stated.
Three years later, though, some state health officials were expressing worry about then expanding operation.
Jean Iacino, a top official at the Department of Public Health, penned a declaration supporting thenAttorney General Harris’ 2014 emergency motion. She said she worried about the safety of placing additional residents under the care of Rechnitz and his corporate entities, “given their demonstrated record of repeated and ongoing noncompliance with state and federal regulatory requirements, and resultant enforcement actions.”
Iacino expressed “great doubt as to whether Rechnitz can satisfy this ‘good character’ requirement.” California’s Health and Safety Code requires that applicants for a health facility license be of “reputable and responsible character.”
Another state official, Robert Sands of the Department of Health Care Services, also registered “grave concerns… about the pending sale of additional facilities,” according to his own declaration.
In a strongly worded response to Harris’ emergency motion, filed with the bankruptcy court the following day, Rechnitz’ attorney in the bankruptcy proceeding, Robert Orgel, described the state’s critiques as “irresponsible, baseless and injurious character assassination.” He said the emergency motion had nothing to do with Rechnitz’ qualifications to operate nursing homes, but was instead the result of “a financial regulatory dispute with Rechnitz as to a single cost report.”
“That such defamatory statements are made on the State’s behalf is reprehensible, and they should be withdrawn on the record,” he wrote in the response.
In October 2014, U.S. Bankruptcy Judge Catherine Bauer approved the sale of the 18 Country Villa homes to Rechnitz, noting that the state still maintained regulatory authority and that purchasing the homes did not mean he was being granted a license to operate them.
Even before Rechnitz acquired Country Villa, some of the homes had been mired in lawsuits. After the purchase was finalized, concerns about practices in those facilities continued to crop up in lawsuits and government investigations.
Today, 46% of Rechnitzaffiliated nursing homes have an overall rating from Medicare of one or two stars out of five, compared with about 26% of all homes across California with similarly low ratings. A federal two-star rating is described as “below average”; a one-star rating as “much below average.”
Rechnitz told The Sacramento Bee in 2015 that the facilities’ below-average performance reflects the fact that he often takes over homes that are already in distress.
Licenses denied — does it matter? While the state has left Country Villa homes in licensing limbo, officials were more decisive about another acquisition by Rechnitz and his chain.
As he did with Country Villa, Rechnitz submitted change-of-ownership applications for Windsor Chico Creek and four other Windsor facilities in February 2015. The five facilities, mostly located in Northern California, together represent more than 600 beds.
Unlike with Country Villa, though, the department said “no” — explaining that many facilities “owned, managed, or operated, either directly or indirectly, by the applicant” had poor track records, according to 22-page denial letters addressed to Rechnitz. In July 2016, the California Department of Public Health rejected Rechnitz’ companies’ applications to take over operations of the five Windsor homes.