When nursing home magnate Shlomo Rechnitz threatened earlier this year to close three of his five skilled nursing facilities in Humboldt County, he insisted they were losing money.
But a story in this week’s North Coast Journal sheds some light on how Rechnitz, a Los Angeles billionaire, squeezes big-time profits out of nursing homes that show losses on paper. It’s called self-dealing.
Through his company, Brius Healthcare, Rechnitz is the largest nursing home operator in California, controlling one out of every 14 beds. But he also owns a nursing home supply company and several of the buildings that house his facilities, including the five in Humboldt County, where he has monopoly control.
The Journal story found evidence suggesting that Rechnitz over-billed his Humboldt nursing homes for supplies and charged at least one of them exorbitant rent. The upshot is the nursing homes struggle on paper, while Rechnitz profits.
“According to documents available through the California Department of Public Health, Brius facilities in Humboldt County reduced admissions by 30 percent from 2014 to 2015. But, curiously, the amount spent on medical supplies jumped.
(State) records show Humboldt facilities purchased $117,000 more in “routine supplies” from TwinMed, Rechnitz’s company, in 2015 than it had the previous year, when it had more patients.”
A spokesman for Rechnitz didn’t comment on the expenditure or this additional tidbit from the Journal story.
Eureka Rehabilitation, a Rechnitz-owned home with 99 beds paid $95,367 to TwinMed for “routine supplies” between November 2014 and October 2015. During that same period, Broadway Villa, a 144-bed nursing home in the city of Sonoma, spent just $22,376 on patient supplies.
Then there’s the rent. Broadway Villa, operating in a far costlier market, paid $587,318 to lease its recently-renovated building, according to the Journal. Eureka Rehabilitation, on the other hand, paid $864,899 for its lease to a company controlled by Rechnitz.
And that doesn’t look to be an outlier. Using data provided by the National Union of Healthcare Workers, the Journal reported that Rechnitz’s five Humboldt nursing homes last year “paid twice as much per bed in rent ($8,481) as a comparable company in Marin County ($4,813).”
“On paper, Eureka charted a staggering $1 million dollar loss for the 2014-15 fiscal year. But according to these same records, all five companies sent around $4.6 million back to companies associated with their owner, who in 2015 said his income was around $3 billion a year.”
Did Rechnitz plow that money back into his nursing homes? Nope. More on that in an upcoming post.