Oversight of nursing homes called ‘befuddling’

The virus swept through Country Villa Sheraton nursing home in Los Angeles in the past year, killing 24 residents. Country Villa Rehabilitation Center, also in Los Angeles, and Country Villa Plaza in Santa Ana, lost 13 residents each.

The devastation was by no means unique to this cluster of 18 Southern California-based nursing homes. Across the country, other facilities also have suffered crushing casualties from the pandemic.

What’s different about Country Villa is that its current owner, Los Angeles businessman Shlomo Rechnitz — a controversial figure who runs these 18 homes through a web of companies — isn’t licensed by the state to operate them.

Instead, public health officials have left his applications “pending” for years.

State rules require nursing home operators to be licensed by the California Department of Public Health, which oversees nursing homes. But the department has allowed Rechnitz to skirt those requirements for Country Villa, according to a CalMatters investigation.

81 facilities

Rechnitz and his companies, including Brius Healthcare, have acquired at least 81 facilities with more than 9,000 beds, making him California’s largest nursing home owner. Rechnitz helped build his portfolio by purchasing Country Villa through a 2014 bankruptcy auction.

Today, the Country Villa stalemate reveals a state licensing process that is opaque, confusing and rife with inconsistencies, CalMatters found. A review of state public health records, licensing correspondence, court records and facility financial reports shows misleading public information about who runs these Country Villa facilities — and bewildering delays by the state in deciding who is fit to hold the licenses to care for their fragile residents.

The state Department of Public Health gave brief and often vague responses via email to CalMatters’ questions about the change-ofownership process, and why the Country Villa impasse has lasted so long. While the department provided documents in response to a Public Records Act request, it would not make anyone available to speak with CalMatters to answer key questions about state oversight and problems with the licensing process.

The state’s inconsistencies are not limited to Country Villa. During the period that the Country Villa applications have languished, the state denied Rechnitz’ companies’ licenses in 2016 for at least five other facilities, saying the practices in many of the chain’s homes had contributed to residents’ illnesses, injuries and deaths. The state then later approved licenses for his companies to operate two other nursing homes in Southern California.

“I’m just a little speechless when it comes to this ownership nightmare in California and how it’s gotten to this point,” said Molly Davies, the Los Angeles County long-term care ombudsman, whose office advocates for residents of nursing homes and other adult care facilities.

“Really there’s an issue of the process having no integrity.”

State officials and Brius’ attorney, Mark Johnson of San Diego, say running the homes during the yearslong licensing indecision isn’t breaking any laws.

Johnson said in an emailed statement that all Country Villa facilities have licenses in good standing and are being operated under an “interim management agreement,” which he described as “state approved.”

“We fully expect the applications to be approved,” he wrote. Johnson did not answer detailed questions from CalMatters about the situation with the state, and Rechnitz did not return phone calls or emails.

After Rechnitz bid on the Country Villa homes in federal bankruptcy court in 2014, Vice President Kamala Harris, then California’s attorney general, was so concerned with his track record that she filed an emergency motion to prevent him from purchasing or managing the homes. Harris referred to Rechnitz as “a serial violator of rules within the skilled nursing industry”— comments his attorney characterized at the time as “defamatory” and “outrageous.”

Concerns over quality

The California Department of Public Health has repeatedly raised its own concerns about the quality of care in many of the chain’s facilities. However, the state has sent conflicting messages over the years, having publicly endorsed Rechnitz in an unrelated 2011 court case as “highly qualified,” court records show.

Ultimately, the bankruptcy judge did allow Rechnitz, 49, to purchase the Country Villa homes. As is true with cars and hair salons, however, buying nursing homes isn’t the same as having a license to operate them.

In California, entrepreneurs can buy nursing homes that are failing or are simply up for sale, but they can’t “buy” the licenses to run them. That decision is left to the state, which requires all new owners to submit change-of-ownership applications that are then screened to ensure the applicant is deemed qualified to operate the facility.

State licensing rules and lingo can be confusing. The roles of “owner,” “operator” and “licensee” are often referred to interchangeably — at times, the person or entity the state officially considers the licensee of a home has actually sold it; the person who bought it might not have their own license but now controls operations.

That’s because, during the application process, the state allows new owners to operate homes using the license of the previous owner. Such arrangements are intended to be brief. But, sometimes, they’re not. Add to that the additional complexity of management companies, in which yet another business comes in and runs the day-to-day operations of a home, and you get Country Villa.

Five years after receiving change-of-ownership applications for the Country Villa facilities, the department still hasn’t made a decision about whether to grant Rechnitz’ companies the licenses to run these 18 homes.

“This is an outrageous situation,” said Charlene Harrington, a professor emeritus at UC San Francisco who studies skilled nursing facilities. “I can’t believe the state has allowed this to happen. It’s gone on for so long.”

As COVID-19 has transformed many nursing homes into death traps, the role of state regulators has become even more critical in protecting some of California’s most vulnerable residents. Since the pandemic began, state records show, more than 9,000 nursing home residents have died of the virus — about 16% of California’s total deaths — though many health care experts believe that is an undercount.

Elder care advocates and some state leaders say the licensing impasse involving the Country Villa homes, with more than 1,700 beds, raises broad accountability questions: What is the state public health department’s role in ensuring timely compliance with its own licensing requirements? What happens if it doesn’t?

If the department denies the change-of-ownership applications for Country Villa, what would become of these residents?

The department refused CalMatters’ requests to speak directly with state officials, including its director, Dr. Tomás Aragón, and Heidi Steinecker, until recently a deputy director and top nursing home regulator. Representatives of Gov. Gavin Newsom as well as the state’s Health and Human Services Agency, which oversees the department and is led by Dr. Mark Ghaly, also declined to be interviewed. Both referred CalMatters back to the California Department of Public Health.

In four emails between Nov. 13 and April 2, three of which were unsigned, the department briefly answered CalMatters’ questions about the state’s licensing process. In one, a department representative said the state considers individual change-of-ownership applications on a caseby-case basis, and reviews of applicants with larger portfolios or more complex organizational structures take longer. As part of that, the state conducts a thorough investigation into the applicant’s history of compliance with state regulations, the email stated.

When asked whether interim management agreements need the state’s blessing, an unnamed department spokesperson said last week that an applicant “is not required to seek additional approval as a management company” while the change-of-ownership bid is being processed.

How long can this “pending” status go on?

“There is no statutorily defined timeframe to complete the application review process,” department spokesperson Mark Smith wrote in a Jan. 29 email.

The department told California’s state auditor in 2018 that it was “developing regulations to clarify” the change-of-ownership application process. But in an email to CalMatters last week, a spokesperson said those efforts have been “placed on a temporary hold due to staff redirections associated with COVID response.”

One California lawmaker, Democratic Assemblymember Al Muratsuchi of Los Angeles, recently introduced Assembly Bill 1502 that would forbid using management agreements to “circumvent state licensure requirements.”

It would also require owners and operators to get approval from the state Department of Public Health before acquiring, operating or managing a nursing home. These issues have been a significant focus for California Advocates for Nursing Home Reform, which sponsored Muratsuchi’s bill. His office said the bill recently stalled in the Assembly health committee and is not expected to be heard until next year.

In March, Muratsuchi joined other lawmakers in announcing a package of seven nursing home bills aimed at improving corporate transparency, enhancing state enforcement and protecting the rights of nursing home residents.

“Right now, our system of government oversight is either nonexistent or totally ineffective,” Muratsuchi said.

In the 15 years since Brius, one of Rechnitz’ main companies, embarked on its growth trajectory, the forprofit chain has faced increasing scrutiny for poor quality care and inadequate staffing levels, according to federal and state inspection reports, plaintiffs’ attorneys and media accounts.