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National Chain Applies to Buy Five Vermont Nursing Homes



Valley News Staff Writer
Friday, April 22, 2016

(Editor’s Note: This article was published November 14, 2015.)

A national nursing home chain that is facing U.S. Justice Department charges of fraud and inadequate staffing is seeking regulators’ approval for its purchase of five Vermont homes, an acquisition that would make it the largest nursing home operator in Vermont and New Hampshire.

A certificate of need application pending before the Green Mountain Care Board would allow Genesis Healthcare Inc. to purchase the 102-bed Springfield Health and Rehabilitation Center in Springfield as well as homes in Bennington (100 beds), Berlin (141), Burlington (126) and St. Johnsbury (110).

In a Nov. 6 securities filing, Genesis said it expects a closing by the end of the year for a $240 million deal involving 24 skilled care facilities in nine states. That deal includes the Vermont properties, for which Genesis would pay $37.5 million.

The deal would reduce the supply of nursing home beds in Vermont by 1 percent. That’s because Genesis wants to eliminate 52 of the 579 licensed beds it would acquire and carry out renovations that would create 52 new private rooms for nursing home patients.

The nursing home makeovers would be in line with state policies that aim to “achieve an even mix of home and skilled nursing care in each county and to promote the availability of private rooms,” Genesis said in its application.

Genesis executives did not respond to multiple telephone messages seeking comment.

The Vermont nursing homes that Pennsylvania-based Genesis wants to buy were each built more than 40 years ago. As proposed, the deal would leave Genesis with more than 1,000 beds in Vermont, or about 30 percent of the state’s skilled-nursing-facility capacity.

Jackie Majoros, the long-term care ombudsman for the state, represents the interests of nursing home residents. Majoros said that because of the scale of the transaction, she had requested interested party status in the proceedings before the Green Mountain Care Board.

Majoros said her main concern is the quality of care and availability of services to nursing home patients and that she planned to submit formal questions about the deal prior to a Thursday deadline and to monitor the proceedings.

“Some of the facilities that Genesis (currently owns) are below average or much below average, and some of the facilities” involved in the current deal have even lower ratings, she said.

Genesis currently provides 454 skilled nursing beds in four Vermont homes: two in Rutland and one each in St. Albans and Newport. Those homes have 500 employees, paid nurses $14 million in 2014 and provided more than 80 percent of their services to Medicaid recipients, according to Genesis’ application. Medicaid is a joint state-federal health insurance program for people with low income and limited assets.

Government-compiled measures of the health, staffing and other conditions in homes that Genesis currently operates in the Twin States have ranged from much above average to much below average, but in other regions federal regulators and private lawsuits have alleged serious abuses in Genesis facilities.

Genesis is a big player in the nursing home industry. It employs about 100,000 people caring for 47,000 residents in 509 nursing homes and other facilities it operates in 34 states, and has projected annual revenue of $5.8 billion. It is a publicly traded company controlled by a small ownership group with a long history in the nursing home industry.

Genesis operates two dozen nursing homes in New Hampshire where, with about 2,250 beds comprising about 30 percent of the Granite State’s skilled nursing facility capacity, it is the largest private nursing home operator.

Federal law mandates regular inspections of nursing homes that house recipients of Medicaid and Medicare, the federal health insurance program for seniors and some people with disabilities.

The U.S. Centers for Medicare and Medicaid Services defines one star as much below average, two stars as below average, three stars as average, four stars as above average and five stars as much above average. The agency computes its star ratings using reports by state health inspectors and self-reporting from nursing home operators on staffing and care quality. Overall ratings combine both elements.

Genesis’ Upper Valley facilities include the 68-bed Elm Wood Center in Claremont, which has a two-star overall rating, and a 110-bed center in Lebanon, which has a five-star rating.

The proposed deal would transfer to Genesis properties currently controlled by a Canadian company called Revera Assisted Living Inc. In the Twin States, that includes five Vermont properties and a 108-bed, two-star Rochester, N.H., nursing home.

Genesis recently warned investors that it faces legal actions by the Justice Department based on allegations that Genesis failed to adequately staff some of its homes in California and that in some instances Genesis, which receives about two-thirds of its revenue from the Medicare and Medicaid programs, violated fraudulent claim laws and regulations. In its Nov. 6 filing, Genesis said that it had set aside a total of $37.5 million to finance possible settlements of those legal actions.

Genesis said that included $30 million it had set aside to settle possible Justice Department actions in two cases.

In one case, the Justice Department has informed Genesis that federal lawyers plan to pursue legal actions concerning alleged staffing violations in 22 California nursing homes. Those allegations were the subject of a 2006 class-action lawsuit Genesis settled, without admitting any wrongdoing, in 2010 by agreeing to make payments totaling $62.8 million. That settlement came after a verdict against Genesis by a Northern California jury that valued the claims at more than $670 million, according to news reports.

In the second case, the Justice Department told Genesis that investigators were looking at allegations that from 2005 until 2013 Genesis and a rehabilitation services subsidiary violated fraudulent claims laws.

In its filing, Genesis also said that it had set aside an additional $7.5 million to fund a possible settlement of Nevada whistleblowers’ lawsuits filed in 2013 that alleged violations of state and federal false claims laws by a Genesis subsidiary that provided hospice care. Hospice is pain management and other care for dying patients who stop receiving curative care.

In 2014, the Justice Department entered the case and alleged that the hospice subsidiary “focused on maximizing Medicare reimbursements for as many patients as possible” and “regularly ignored concerns expressed by its own physicians and nurses that its hospice patients were not terminally ill.” The Justice Department filing described alleged violations from 2010 until 2013, including an instance in which a hospice provider falsely characterized one patient as having metastatic lung cancer, then collected $163,000 by keeping him in hospice for nearly three years.

Genesis’ ownership interests in its New Hampshire and Vermont nursing homes are dispersed among an array of corporations, limited liability companies, partnerships, trusts and individuals.

In 2007, Arnold Whitman, a member of Genesis’ board of directors, gave a reporter for The New York Times this explanation for the way ownerships are structured in the nursing home industry: “Lawyers were suing nursing homes because they knew the corporations were worth billions of dollars, so we made the companies smaller and poorer, and the lawsuits have diminished.”

Revera’s six Vermont nursing homes, with 675 beds, have fared poorly in the ratings compiled by CMS. The five homes that Genesis wants to buy and another home had a mean rating of two out of five stars for overall performance and health inspections, and just under three stars for staffing and care quality.

Two Revera homes in Vermont — the Berlin Health and Rehabilitation Center and the Rowan Court Health and Rehabilitation Center in Barre — got CMS’ lowest overall rating of one star.

Earlier this year, Rowan Court was designated a “special focus facility” by CMS. That identifies the home, according to CMS, as one of “a minority of nursing homes (that) have more problems than other nursing homes ..., more serious problems than most other nursing homes (including harm or injury experienced by residents), and a pattern of serious problems that has persisted over a long period of time.”

But Rowan Court is not part of the portfolio of properties that Genesis wants to buy. Instead, Rowan Court is being sought by a pair of limited-liability companies controlled by a group of New York investors who recently bought nursing homes in Pennsylvania and New York

The overall star ratings of Genesis’ current Vermont properties vary widely. Belaire Quality Center in Newport got five stars, while Mountain View Center in Rutland got four stars, but the company’s St. Albans facility got only two stars and the Rutland Healthcare and Rehabilitation Center got only a single star.

Rick Jurgens can be reached at rjurgens@vnews.com or 603-727-3229. This story is part of a project that is supported by a Health Care Performance Reporting Fellowship from the Association of Health Care Journalists and by The Commonwealth Fund.