Why repeat offender nursing homes elude accountability

This article is the second installment in “Chronic Conditions,” a three-part series on CMS’ Special Focus Facility program. Part one published on Dec. 9 and part three published on Dec. 11.

Fallbrook Rehabilitation and Care Center stands out as one of the worst among the more than 1,200 nursing homes in Texas and the nearly 15,000 facilities nationwide.

Over a three-year period at the skilled nursing facility in Houston, one patient died after staff did not notice her ventilator had disconnected. Another patient nearly died after employees failed to administer intravenous antibiotics to treat a life-threatening infection and pneumonia.

The Texas Department of Health and Human Services cited Fallbrook for more than 50 other health and safety violations.

Fallbrook was fined about $640,000 between April 2021 and July 2023, according to Modern Healthcare analysis of April 2024 CMS data. The amount was among the top 30 fines paid by nursing homes nationally and was more than six times the average fine other Texas nursing homes with CMS one-star ratings were assessed during that period.

Yet the 200-bed nursing home collected more than $20 million in reimbursements from Medicare, Medicaid and health insurance companies in 2021 and 2022, according to the most recent full-year cost reports from the Centers for Medicare and Medicaid Services.

Fallbrook Rehabilitation and Care Center was one of the 184 worst-performing nursing homes that share a common trait: It was part of an ownership group that had more than five nursing homes in CMS’s Special Focus Facility program, or SFF, which is designed to identify and either fix or shut down skilled nursing facilities with the poorest safety and quality.

The ownership groups can control facilities through convoluted webs of individuals, private equity investors, limited liability companies, real estate investment trusts and other trusts that often transfer money to related companies or third parties with ownership interests in the nursing homes.

The Human and Human Services Department Office of Inspector General has identified this as a problem.

"OIG is concerned that nursing facility owners, operators and private investors participating in related-party transactions may be engaging in 'tunneling' — the practice of misrepresenting or hiding profitability by overstating payments for operational expenses that are funneled to related parties," the watchdog agency wrote in a regulatory compliance guidance document published Nov. 20.

Related parties sometimes lease property back to nursing homes at inflated rates and charge them for costly ancillary services, such as staffing and interior decorating, that leave the providers strapped for cash and struggling to provide proper care.

A 2021 National Bureau of Economic Research study that examined Medicare data between 2000 and 2017 found nursing homes owned by private equity investors experienced a 3% decline in hours of care per patient day and that patients had a 10% higher mortality rate during a nursing home stay and the 90 days afterward than the industry on average.

“There is no question that many of the private equity groups that own nursing home facilities are prioritizing profit above the health and safety of residents,” Senate Aging Committee Chair Bob Casey (D-Pa.) said in a statement.

Patient advocates contend that many of these poor-performing nursing homes are structured more as financial instruments than healthcare providers.

The business model often encourages cost-cutting, especially in staffing, to maintain profitability, said Marjorie Moore, executive director of Voyce, a long-term care ombudsman organization in St. Louis.

“You can tell the care is bad and there just aren’t enough staff,” Moore said. “If you need to cut money out of the expenses, the only thing that you can cut in many cases is staff. We’ve talked to certified nursing assistants that are on an eight-hour shift and are supposed to care for 30 people. That is everything. That is getting them out of bed, getting them ready for the day, sometimes helping them go to the bathroom and changing diapers.”

CMS’ oversight and quality improvement for nursing homes, including SFF, is “broken,” Holly Harmon, senior vice president for quality, regulatory and clinical services at the American Health Care Association/National Center for Assisted Living, said in a statement.

“Rather than helping facilities understand how to comply with regulations and make quality improvements, the survey process cites and fines with no additional help,” Harmon said. “Improving oversight where regulators are responsible to work together with facilities to enhance quality care should be our focus.”

Ownership groups

Modern Healthcare analyzed the ownership information contained in a public database CMS uses to create a list of nursing home networks. CMS’ programmatic network analysis uncovered more than 500 ownership groups or affiliated entities.

Modern Healthcare also identified other groups not found by CMS’ analysis through a manual examination of the data, connecting homes through common individuals and organizations.

Using this data, Modern Healthcare focused on those groups affiliated with at least five nursing homes among the 747 facilities that had been on an SFF program or on its waiting list from January through July 2023. The ownership circles with the most Special Focus facilities or candidates accounted for 184, or 25%, of the total.

Genesis HealthCare, a Kennett Square, Pennsylvania-based, publicly traded holding company that owned 242 nursing homes, had the highest number of SFF or SFF candidate skilled nursing facilities at 35, or 15%, of its nursing home portfolio.

The estimate is based on CMS’ network list from July 2023, the earliest available snapshot that can be matched with the list of both Special Focus facilities and candidates used in the analysis.

CMS knows that certain owners are connected to numerous poor-performing nursing homes but can only address problems at individual facilities, an agency official said.

“We are very much aware of owners of multiple facilities, and we see the patterns,” the CMS official said.

“We would need Congress to be able to do something like that, to have oversight over owners directly or to be able to take any kind of action about preventing ownership,” another CMS official said. “That’s just not currently the authority we have right now.”

A troubled history

CMS’ inability to hold a tangled web of bad nursing home owners accountable for ongoing poor performance is part of the reason their facilities consistently wind up as Special Focus facilities or candidates for the SFF program.

The owner Modern Healthcare identified with the highest percentage of nursing homes that were in SFF or on the waiting list was Samuel Goldner, through his investment company Goldner Capital Management, the Goldner Family Trust and affiliated entities.

Fallbrook Rehabilitation and Care and Viviant Healthcare of Murfreesboro, Tennessee, were among his properties. During the period reviewed, 13 of the Goldner group’s 32 nursing homes — or 41% — were in SFF program or deemed candidates for it.

Goldner’s CMS provider identification number was affiliated with more than 32 nursing homes dating to 2022 that operated under a variety of complicated ownership structures linked to Goldner, his investment company or other entities.

One of the nursing homes, Liberty Health and Wellness, attracted attention in January 2024 when it settled a lawsuit involving a patient who died at the Liberty, Missouri, skilled nursing facility, which had been an SFF candidate.

In September 2023, a landlord forced the sale of two Goldner-affiliated nursing homes in South Carolina after the owner failed to pay $2.3 million in back rent and violated a rental agreement when one nursing home became a Special Focus Facility and the other became a candidate.

Between Jan. 1, 2023, and April 30, 2024, CMS terminated eight Goldner-affiliated nursing homes from Medicare and Medicaid over quality and safety violations, including Viviant Healthcare of Murfreesboro.

The facilities were among 33 nursing homes CMS booted from Medicare and Medicaid participation over that period. Of those, 18 were Special Focus facilities or candidates, including three Goldner-affiliated nursing homes.

Goldner has also closed or sold 22 other nursing homes in the past year, including Fallbrook Rehabilitation. As of this April, Goldner was still affiliated with at least three nursing homes, according to CMS data. Those records lag from real time and may not reflect sales or closures that have since occurred.

In October 2024, Goldner Capital Management filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Eastern District of New York, listing up to $50,000 in assets and between $10 million and $50 million in debts.

Fallbrook Rehabilitation and Care is representative of how Goldner and some nursing home owners operate their facilities.

When Goldner acquired the nursing home in 2019, it was called Cypress TX Healthcare LLC on CMS documents but did business as the Texas Institute for Clinically Complex Care. Cypress TX Healthcare was listed as the facility’s owner and SG Cypresswood Holdings LLC as an indirect owner.

All three companies were incorporated on the same day and shared a mailing address with Goldner, his investment firm and the Goldner Family Trust, which had an indirect ownership stake in Fallbrook Rehabilitation and Care.

The skilled nursing facility underwent two name changes under Goldner: It was known as Zion Healthcare Cypresswood from 2020 to 2021, and Asbury Care Center of Houston in 2022.

Goldner and Goldner Capital Management did not respond to requests for comment on the operation of the various nursing homes and the numerous health and safety violations they amassed.

New owner, new name

In July 2023, Vertical Health Services bought the troubled Houston nursing home known then as Asbury Care Center and renamed it Fallbrook Rehabilitation and Care. The Puyallup, Washington-based company acquired 16 other Goldner-affiliated facilities in the past year.

In February 2024, Fallbrook was sold again — this time to the Frio Hospital District in Pearsall, Texas.

As of April 2024, Fallbrook remained an SFF candidate, while two other Goldner nursing homes that Vertical Health Services acquired remained on the SFF candidate list. Neither Vertical Health Services, nor Frio Hospital District responded to requests for comment.

Ownership turnover of nursing homes is somewhat common, especially among the worst-performing ones, according to CMS. The agency estimated more than 500, or 3.5%, of skilled nursing facilities change hands annually, with lower-rated nursing homes most likely to be sold.

Ownership churn often causes staff turnover, which can contribute to a nursing home consistently performing poorly on health and safety protocols, said Greg Shelley of the Harris County Long-term Care Ombudsman Program in Texas.

Shelley said new owners sometimes can rehabilitate bad nursing homes. But he added it is rare for nursing homes to improve when they change hands from one troubled for-profit owner to another.

“On the private equity side of things, you’ll see folks come in and scoop up poorly operated nursing homes at a bargain price,” Shelley said. “They will then take over operations and run on a razor-thin margin to make as much profit as they can. Like a lot of businesses, if you cut staffing, you save money. But then the quality of care usually goes down.”

Regulators respond

Federal and state regulators are training their sights on owners to crack down on poor-performing nursing homes.

Last year, CMS issued a rule requiring nursing homes participating in Medicare and Medicaid to disclose additional ownership and management information. This March, the Health and Human Services Department joined the Justice Department and the Federal Trade Commission in an investigation into healthcare acquisitions involving private investors, private equity funds and other for-profit companies. The agencies said concern about risks to patient health and safety triggered the inquiry.

The response from Washington is a step in the right direction for Charlene Harrington, professor emeritus at the University of California, San Francisco School of Nursing and an expert in post-acute care. But Harrington said the federal response does not go far enough. CMS must set a higher bar for nursing home ownership, she said.

“CMS has to set criteria on who can be an owner,” Harrington said. “You and I could buy a nursing home if we could get enough money. We don’t have to have expertise, experience or be financially solvent. We could have 100 nursing homes that provide horrible care, and we could still buy and sell facilities.”

Some states are attacking that issue. A California law that went into effect last year can prevent anyone from acquiring at least a 5% ownership interest in a nursing home if they previously owned or managed a long-term care facility that was terminated or suspended from Medicare or Medicaid participation within five years.

Last year, the Pennsylvania Department of Health issued a regulation, backed by the Service Employees International Union, that would prevent the new owner or operator of a nursing home from obtaining a license based on their history of owning or operating other long-term care facilities.

A similar measure is pending New Jersey.

It's much easier to stop bad owners from buying nursing homes in the first place than it is to force them out of business down the road, Harrington said.

Mari Devereaux and Kara Hartnett contributed to this story.