Most nursing homes are for-profit and N.J. doesn’t exactly know who owns them. Can they be held acco
Updated: Jul 27
Scheinbaum spoke for the company, but little was heard from Schwartz.
Records later revealed that Schwartz is the son of Joseph Schwartz, the former operator of a failed multi-state nursing home chain that once operated out of a second-floor office above a Wood-Ridge pizza parlor in Bergen County and collapsed amid widespread financial problems and allegations of mismanagement.
But the full ownership trail at Andover did not end there.
While the nursing home in Sussex County is licensed and operated by Alliance Healthcare Holdings of Lakewood, headed by Scheinbaum, the property itself is owned by Altitude Health Services of Evanston, Il., and leased to Alliance.
Such multi-layer arrangements are not unusual. Increasingly, nursing homes have been turning to complex ownership and management deals involving separate operating companies and rental agreements with property owners serving as landlords for the actual buildings.
Critics, however, say such agreements create “opaque financials” that make it hard to tell just who is behind the operation of a long-term care facility. And according to recent consultant’s report for the New Jersey Department of Health, it serves to obscure those responsible for delivering care, “curtailing the ability of the state and residents to hold them accountable.”
It is an issue that has been raised nationwide.
The ownership of the nation’s nursing homes has become heavily for-profit, experts say, and has moved in a big way to the use of limited liability partnerships and other entities that do more than spread the financial risk among multiple players.
Dividing a business into separate real estate investment and nursing home operations protects the assets of a nursing home property — the buildings and land — should the operator of the facility face a court judgment for abuse, negligence, or issues such as employment litigation.
Lenders and private investors are also more often to put up money to owners of real estate not directly involved in running nursing homes, say those who follow the industry.
But Charlene Harrington, a professor emeritus at University of California San Francisco who studies skilled nursing facilities, said how ownership is structured is about more than than just simple risk avoidance.
“These complex ownership arrangements are to avoid government scrutiny, to litigation, and to pull out hidden profits from the operating company into their related companies,” she said. “New Jersey and other states need to crack down on for-profit nursing homes and especially chains.”
Questions about ownership have grown amid a pandemic that has left a trail of death in nursing homes from Andover and beyond. The grim statistics in New Jersey now include more than 6,670 residents dead since the coronavirus struck, amid more than 24,500 cases. The numbers have led to calls in the Legislature for stronger oversight.
Jonathan Dolan, president & CEO of the Health Care Association of New Jersey, which represents long-term care providers, called the Manatt Health findings unwarranted.
“Its recommendation of increased regulation of for-profit ownership in an already highly regulated industry is completely unnecessary,” said Dolan.
He pointed out the consultants to the state themselves cited statistics that show the form of ownership is not an indicator of quality of care.
Indeed, the Manatt report itself noted that with some exceptions, the intensity of COVID-19 cases in New Jersey nursing homes was largely mirrored their surrounding communities. Larger nursing homes have not had a higher rate of confirmed COVID-19 cases or deaths on a per licensed bed basis than smaller nursing homes, while for-profit and not-for-profit nursing homes have had similar rates of COVID-19 cases and deaths per licensed bed.
Still, the report to the Department of Health noted there has been some correlation between number of COVID-19 deaths per licensed bed and nursing homes cited for health and infection control deficiencies.
David Stevenson, a professor of health policy at Vanderbilt University School of Medicine who has written about the continuing move by private equity firms into the nursing home industry, said there is no question that ownership influences the quality of care that nursing homes provide, for better and worse.
In New Jersey, nearly three in four nursing homes are for-profit facilities, records show. At the same time, a NJ Advance Media analysis of federal data shows non-profit nursing homes in the state on average are rated higher overall than for-profit facilities, and provide more hours of direct care by nursing aides.
“What’s harder to know is how ownership structures and their complexity impact care,” Stevenson said.
He added that the influence of companies that own the real estate side of things is similarly opaque.
In researching long-term care facilities, Stevenson has noted that a key to enforcing policy and regulatory directives is to have timely, detailed data about ownership structures and management arrangements. But in a 2013 study of Texas nursing homes, he and other researchers found the number of facilities using some kind of a partnership structure almost tripled over a six-year period.
That did not tell the whole story, they said. Not only were there major changes in ownership structure and management, but the “degree of complexity“ of those arrangements also significantly increased.
In California, Harrington noted that nursing homes are required to disclose ownership of individuals or corporations with 5% or greater ownership, and the name of the licensee. But she noted that regulators have not been enforcing the requirement to fully report the names of all the parent companies of the licensee and their related owners and corporations, allowing each facility to largely hide its chain ownership arrangements by individual owners or groups of owners as well as by parent companies.
Some nursing homes have as many as eight or ten layers of parent companies and dozens of related companies, she said.
Industry officials maintain that split ownership arrangements are not unusual.
“Like many other industries, ownership structures of for-profit nursing home companies are often split between real estate and operations,” Dolan said. “The Department of Health is provided detailed ownership information prior to a New Jersey nursing home transfer.”
State Department of Health officials say they have set up an electronic licensing system, which will helps follow ownership quickly and in more real-time. Department spokeswoman Donna Leusner said the system enables them to electronically process applications and transfers of ownership. But the system has only been on-line since April and the department said it cannot say how many nursing homes in New Jersey changed hands in the past year.
Still, the Department of Health’s process for reviewing changes of ownership falls far short, found Manatt Health, the consulting firm retained by the state to conduct a review of New Jersey’s nursing home oversight.
New Jersey currently collects information from anyone with a 10% direct or or indirect ownership interest in a nursing home facility, said Manatt.
At least 15 states require disclosure of ownership interest of 5% or more, according to the University of Minnesota’s School of Public Health — Arkansas, Idaho, Illinois, Indiana, Louisiana, Maryland, Missouri, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Rhode Island, Virginia and Washington. Vermont requires disclosure of 5% interest and change of ownership requires disclosure of owner having been convicted of Medicaid fraud.
“Rigorous change of ownership requirements are critical for ensuring accountability and promoting quality and stability of the workforce,” said Manatt Health in their report to the state.
Facilities that change ownership in New Jersey are not subject to any additional oversight or reporting following the change.
Health officials here said the state has never disapproved a change of ownership application. They said while they do not collect data on which ones operate under arrangements that split property ownership and licensed operational responsibilities, as at Andover, new regulations take affect soon will require the Health Department be notified when land is being sold under a hospital.
Andover Subacute and Rehabilitation, the state’s largest nursing home, came under intense scrutiny by regulators after the discovery on Easter Sunday of 17 bodies that had been stored in a temporary morgue on site, after a COVID-19 outbreak there spun out of control.
So far, 81 people have died there in the pandemic in the nursing home’s two facilities. At Andover I, a smaller, low-rise facility, 17 people have died from the coronavirus. Andover II, a larger two-story complex set up for dementia and Alzheimer patients and those with mental health issues, 64 people have died.
Its current owners took charge of the facility in 2017 after a deal with Skyline Healthcare, a multi-state nursing home chain based in New Jersey, collapsed amid the troubled firm’s financial problems across the nation after failing to make payrolls and meet other obligations.
Earlier this year, the company and its owner, Joseph Schwartz, was sued in federal court, accused of stealing more than $2 million from employees’ paychecks that was supposed to pay for their health insurance.
Scheinbaum became the owner of the facility on June 1, 2017, according to a spokeswoman, who said while Schwartz’s son has an ownership stake, he is only an investor and has no involvement in the facility’s operations.
As for its business structure and relationship with Altitude Health Services, the spokeswoman echoed Dolan, noting that it is common across the long-term care industry for property to be owned by a landlord and leased out to the licensed operator.
Calling it “a sensible and typical business arrangement” that helps offset some of the up-front financial costs, she said such agreements enable operators to “focus investments on the resources and services necessary to deliver high-quality care.”
A draft bill now circulating in the Legislature and obtained by NJ Advance Media calls for stricter oversight of nursing homes, including identifying facilities “that may be in acute financial distress or at risk of filing for bankruptcy protection.” It also proposes new disclosure requirements for nursing home license transfers.
The bill has yet to be introduced.