In the wake of Brius Healthcare threatening to shut down three of Humboldt County’s five nursing homes last year, Gov. Jerry Brown signed legislation last week aimed at protecting nursing home residents whose facilities face closure.
Assemblyman Jim Wood, who represents California’s North Coast region, introduced AB 275 earlier this year after working to successfully block Brius from closing the three homes. Brius, which has monopoly control of Humboldt’s skilled nursing industry, would have forced nearly 200 frail seniors to move to homes far from their families had the homes been shuttered.
Jim Wood, California State Assemblymember
“During those many months, residents and their families were on a roller coaster ride of anxiety,” Wood said in prepared statement. “It became obvious to me that new protections would have to be put in place to prevent this trauma from happening to other residents in the future.”
Wood’s bill increases the notice periods — from 30 to 60 days — that long-term care facilities are required to provide residents, their families, and state agencies when they are planning to close.
The bill also requires a resident’s personal doctor or facility medical director, if the resident doesn’t have a doctor, to provide a thorough medical and social assessment of each resident to help limit any trauma residents might face in transferring to another facility. Additionally, the legislation authorizes the California Department of Public Health to reject a facility’s relocation plan if it determines it lacks adequate protections to minimize transfer trauma.
Brius threatened to shut down the Humboldt facilities in what critics said was a ploy to boost the company’s Medicaid reimbursement rates.
After a four-month stand-off with local officials and patient allies, including the California Association for Nursing Home Reform and the National Union of Healthcare Workers, Brius CEO Shlomo Rechnitz backed down and agreed to close only one facility without forcing any residents out of the county and away from their loved ones. The conflict included street protests by nursing home residents’ family members and supporters, full-page newspaper advertisements, and extensive news coverage by television, print and radio outlets.
“Although this was an issue that directly affected a rural community I represent, this situation could occur anywhere in California where beds are limited or similar ownership situations exist,” Wood said. “So I am very pleased that this bill will become law in January.”
Brius will be the subject of a California state audit looking into the company’s business dealings with other firms owned by Brius CEO Shlomo Rechnitz and his family members.
Both legislators represent Humboldt County, where Brius controls every nursing home. Last year, the lawmakers successfully fought Brius from closing three of its five homes in the county without giving into the firm’s demand for higher reimbursements for Medi-Cal patients.
“Through that process we learned a lot about Brius, its ownership structure and business operating procedures,” Wood said in a prepared statement. “(That) compelled us to better understand the impact and appropriateness of what are called related-party transactions.”
State Sen. Mike McGuire and Assemblymember Jim Wood
Brius, which controls one of every 14 nursing homes beds in California, received over $507 million in Medicare and Medi-Cal funds in 2015 – more than 80 percent of its total annual revenue. An analysis of state data by the National Union of Healthcare Workers found that during the same year, Brius paid over $67 million to 65 companies controlled by Rechnitz or his relatives.
“We commend State Sen. McGuire and Assemblymember Wood for requesting this audit,” NUHW President Sal Rosselli said. “With thousands of the California’s frailest seniors living in Brius homes, the state has an obligation to determine whether the company is spending taxpayer money as it was intended – to care for its residents.”
The California state auditor will examine data Brius reported to the Department of Public Health, Department of Health Care Services and Office of Statewide Health Planning and Development. The audit will also review current protocols for capturing transactions between companies with the same owner as well as the appropriateness of the transactions in order to ensure that services provided are fairly priced.
Several reports have already questioned whether Brius homes may be overpaying for rent and other services from Rechnitz-owned firms. For example, the North Coast Journal reported the following in 2016:
The disclosures include a section dubbed “related party transactions,” which describes financial interactions between parent companies and subsidiaries. Think of it as a kind of conflict of interest statement. In 2015, Eureka Rehabilitation and Wellness Center paid $42,000 to Boardwalk Financial Services, LLC for “administrative services.” The company employs Rechnitz as a consultant. It also paid $864,894 to lease the property. Who owns the property? Rechnitz. Eureka Rehabilitation and Wellness Center also paid $110,204 for medical supplies to TwinMed Medical Supplies and Services, owned by Shlomo Rechnitz and his twin brother, Steve. And it paid $47,663 to SR Capital, LLC, which lists Rechnitz as its managing member. Altogether, in the 2014-2015 fiscal year, as Rockport/Brius was playing a financial game of chicken with Partnership Healthcare and refusing to take in vulnerable seniors and people with disabilities, it managed to shunt more than $4.6 million back into companies affiliated with Shlomo Rechnitz.
While, on paper, the company may have lost money, Rechnitz still managed to profit. The amount he took in for lease payments alone in 2015 on the five properties — more than $3.5 million — was easily enough to cancel out Brius’ “unsustainable” combined loss of almost $1.5 million from the company’s Humboldt County holdings that year.
“As good stewards of state resources we must understand how Brius Healthcare and affiliated companies receive and invest Medi-Cal dollars,” McGuire said in a prepared statement.
Wood added, “This audit will investigate the inner workings and interrelated business relationships that exist in this industry and determine whether changes need to be made to protect the use of public funds for this vulnerable population.”
NUHW represents workers at two Brius homes in Marin County. Maria Martinez, who has worked as a nursing assistant for 27 years at the Brius-owned San Rafael Healthcare and Wellness Center, told Audit Committee members Wednesday in Sacramento that Brius “cut staffing levels, basic supplies and resources” when it took over the San Rafael home in 2012. “The quality of care for our residents has gone way down,” she said urging them to approve the audit. “We are understaffed almost every single day.”
Following this week’s approval of the audit request, the California State Auditor will now assign a team of auditors to carry out the investigation. The audit results will be published in 2018.
Last year, Humboldt County residents learned that when a single company monopolizes an entire county’s nursing home beds, patients are at its mercy. Now, the county’s representative to the California Assembly, Jim Wood, is championing legislation that would limit the power of nursing home conglomerates to move patients far from their loved ones.
Last week, Wood introduced Assembly Bill 275 in response to Brius Healthcare’s bid last year to close three of its five nursing homes in Humboldt County. Brius, the largest nursing home operator in the state and the only one in Humboldt, threatened to force nearly 200 elderly and frail patients out of the county in what critics said was a ploy to boost the company’s Medicaid reimbursement rates.
After a four-month stand-off with local officials and patient allies, including the California Association for Nursing Home Reform and the National Union of Healthcare Workers, Brius CEO Shlomo Rechnitz backed down and agreed to close only one facility without forcing any residents of the county and away from their loved ones.
The episode was “a roller coaster ride of anxiety” for patients and their families, Wood, the Assembly Health Committee chairman, said upon introducing the legislation last week. “It became obvious to me that new protections would have to be put in place to prevent this trauma from happening to other residents in the future.”
Wood’s bill would strengthen patient safeguards and empower state regulators to protect patients and prevent operators from simultaneously closing multiple homes in one community.
Rather than merely being able to accept or reject an operator’s closure of a nursing home, Wood’s bill gives the California Department of Public Health the authority to require operators to adopt specific measures to “help prevent possible resident transfer trauma.”
If an operator is proposing to close two or more nearby facilities simultaneously, the department would be authorized to deny approval and “require the facilities to resubmit their closure plans with different timelines.”
The bill also:
Increases from 30 days to 90 days the advance notice that operators must give to residents prior to closing a facility.
Requires that patients being forced to relocate are assessed by a doctor and a mental health clinician.
Mandates that operators closing two or more facilities within a six-mile radius conduct a “Community Impact Report.” The report would include the number of affected residents; the number of nearby nursing homes; the reason for the closures; the number of residents who could potentially experience transfer trauma; and the number of residents who are taking psychotropic medications, diagnosed with dementia or under conservatorship.
