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Shot down before, this time advocates have momentum as bill heads to a vote

By J.W. August

Photo:  Isolation of patients in nursing homes during COVID era increases need for state oversight; image CC-by-NC via Bing

Update August 11, 2022:  AB 1502 has passed the State Senate Judiciary and Appropriations Committees, and now heads to the Senate floor.

Update 5 p.m. --AB 1502  passed the Assembly this afternoon by a 47-12 vote and now heads to the State Senate.

January 31, 2022 (San Diego) -- If you want to drive a car in California you need a driver's license. In San Diego County all dogs must be licensed.  But if you own a nursing home, you can buy another home or chain of facilities, and no license is required. 

Unlike a driver who is in multiple accidents or an animal that's attacked someone, there are no rules when it comes to the takeover or sale of nursing homes, no matter how ugly the track record of the firm buying or selling a nursing home.

Even if a chain operator has a history of poorly managed homes, it can add to its portfolio and can do so without first obtaining a license, as long as it submits a license application. The trouble is, such applications can take years to process.

The California Department of Public Health, which is charged with providing oversight of the nursing home industry, says it has no authority to disqualify owners and operators who are already in operation in the state. The agency says this is allowed to happen under what they call a Management Operations Transfer Agreement.

This is what Tony Chicotel, attorney for California Advocates for Nursing Home Reform (CANHR), calls “zombie licenses.”. He explains it’s  “the essence of license-evasion.” 

Critics like Chicotel say given the hands-off approach of the Department of Public Health, it appears the agency prefers a bad operator over no operator. 

 “DPH may be convinced that bad operators are the best we can do but it's not true,” says Chicotel. He continues  “There are good operators and there is plenty of money to be made while providing good care. The good operators are unfortunately squeezed out by the operators willing to cut staffing, defy the rules, and put profits over people.”

Assembly Bill 1502 (Muratsuchi), the CANHR-sponsored bill to reform nursing home ownership in California, is the solution to the problem, say supporters. 

The bill would empower the agency to disqualify unfit operators and owners, requiring them to meet certain qualifications and bar them from buying or operating a home without state approval. Additionally, the buyers couldn’t create businesses to get around the licensing requirements. And finally, the public would be able to be part of the takeover discussion.  Previous efforts to create suitability requirements for owners in 2016 and 2019 went nowhere. 

The full Assembly is expected to vote on moving this latest legislation to the state Senate this week, possibly as early as today. Attempts to get a comment from the California Department of Public Health regarding the allegations and the proposed legislation have not been responded to, though initially this reporter was told the agency was working on a response.

Patricia McGinnis, executive director of CANHR, told state legislators the bill “addresses one of the gravest threats to the health and safety of nursing home residents: the proliferation of unsuitable, unapproved and unaccountable persons and entities owning and operating skilled nursing facilities in California.”

McGinnis founded CANHR in 1983 and has been an industry watchdog responsible for a number of previous bills that became law. The legislation is needed because McGinnis says the department of health is not getting the job done.

“They’re supposed to be protecting the residents of skilled nursing facilities and health care facilities in California. And they don't,” she said.

Eight out of 10 nursing homes in the state are owned by large corporate chains. The two largest chain operators in the state are Providence Group and Bruis Health, which both have connections  to the San Diego region. 

They are going after the $10 billion pie from Medicare and Medicaid provided by the federal government for nursing home operations. In 2020, the estimated average cost per patient day for a skilled nursing facility in California was $304, according to the 2020 Genworth Cost of Care Survey.

And yet, says McGinnis, “We've got nursing homes in California that are operating without licenses without approval from the department and they're the biggest chains in California.”

The Assembly bill notes that a national study of nursing home transactions shows a “tremendous churn in chain ownership, the dominance in chain ownership is growing, chains targeted the worst-quality nursing homes for acquisition, poor quality of care persisted in these facilities after they were acquired, and nursing homes owned by chains had much worse records than other facilities.”

For a consumer or an advocate, “it's very hard to tell who owns what,” says McGinnis. CANHR has found “these larger chains will separate all their individual facilities into limited liability corporations which makes it hard to track ownership.

The second largest chain in California is owned by Los Angeles businessman Shlomo Rechnitz. He is owner of two homes in Spring Valley and three homes in San Diego. He became a major player when he acquired at least 81 facilities in California since 2006. 

Four of Rechnitz’s San Diego area nursing homes are now under an agreement with the federal government – a ‘corporate integrity agreement’ – for their role in a kickback scheme; gifting local hospital discharge planners with massages, sporting tickets and bay cruises in exchange for clients referring patients to the Rechnitz facilities. 

According to a fact sheet provided by CANRH, Rechnitz corporations applied for nursing home licenses at six locations in the past that were denied “due to horrific conditions in its facilities,” which included 265 serious federal violations and 108 state citations.  But a string of homes they picked up in 2014 still have not obtained licenses from the state, including one in Redding where Rechnitz is being sued as an “unlicensed owner-operator.”  The allegation is the facility is responsible for COVID-related deaths of some 24 elderly and dependent residents.

View documents: (Courtesy: Jocelyn Wiener, CalMatters)

This reporter attempted to speak to Rechnitz by contacting one of his attorneys of record, also finding and calling eight phone numbers attached to him including his residence phone as well as two foundations he is head of. In addition, I emailed four active e-mail accounts that go back to his name. No response has been received to date.

The biggest chain in the state also has a San Diego tie. Plum Healthcare Group is located in San Marcos. It controlled 54 facilities in California up until last November.  Providence Group out of Farmington, Utah acquired the company and is  now the state's largest chain. It controls 140 homes in California, Kentucky, Missouri, Nevada, Ohio, South Carolina and Texas. The state's department of health services was not told about the deal.

The bill’s co-sponsor, Assemlymember Al Muratsuchi, said in a media release this law is in response to a real need.  "We need to do more to protect seniors living in nursing homes and other residential care facilities.  Tragically, the pandemic has magnified the dangers of living in nursing homes when operated by unfit owners."

For more information about AB 1502, including CANHR's support letters and fact sheet,  AB 1502 web page.  Also see:

JW August is an award-winning journalist and freelance producer who has served as investigative producer for NBC 7 San Diego and as managing editor and senior investigative producer at ABC 10 San Diego. His in-depth investigations have included a wide range of topics such as  rising seas, hate groups, nuclear fuel storage, stem cell clinic claims, dolphin deaths, and massage parlors as fronts for organized crime.

His 40-year career includes many honors, notably 35 Emmy awards from the National Academy of Television Arts and Sciences, the National Press Club award for consumer reporting, the Freedom Foundation award for coverage of hate groups along the border, the National Society of Professional Journalists’ Sunshine Award for fostering open government in San Diego, and the Investigative Reporters and Editors award for outstanding investigative reporting on illegal waste dumping.

August is past president of the Society of Professional Journalist’ San Diego Chapter , as well as past president of Californians Aware, a public interest group devoted to helping the press and public hold public officials accountable for their actions. He is also an adjunct professor at Point Loma Nazarene University, teaching investigative skills and long-form storytelling to aspiring future journalists.





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