PAUL KITAGAKI JR. / THE SACRAMENTO BEE

First of three parts

One nursing home chain operating in California racked up abuse complaints last year at a pace seven times the statewide rate.

A large competitor placed one in every 15 of its long-term residents in restraints.

Still another corporate giant whose nursing homes dominate the Sacramento region experienced high nursing staff turnover at 90 percent of its facilities.

If you’re a consumer anguishing over the placement of a loved one needing full-time nursing, how would you know this?

The short answer: You wouldn’t.

As the population ages, and more families face the daunting task of choosing long-term care, consumers remain largely in the dark about the ownership of many California nursing homes – and their track records.

While industry officials contend they are intensely regulated by both the state and federal government, no single agency routinely evaluates nursing-home chains to gauge the overall care provided by their facilities.

Data are available for individual nursing homes, as federal, state and nonprofit groups keep records that chronicle staffing levels, bedsore rates and use of antipsychotic drugs, among many issues. But in California, the agency charged with overseeing these skilled-nursing facilities, the Department of Public Health, makes no effort to measure quality of care throughout a chain, or determine whether corporate policies and practices are contributing to any patterns.

Some companies doing business in California go to great lengths to create complex business structures, building layers of limited liability companies and partnerships with curious relationships to one another. The tangled corporate webs make it difficult for consumers and government regulators to identify who’s running the operations – and who should be held responsible when things go wrong.

“It’s a huge maze to try and figure out who owns what. And that’s deliberately done.”

– Charlene Harrington, professor emerita of sociology and nursing at the University of California, San Francisco

“It’s a huge maze to try and figure out who owns what,” said Charlene Harrington, professor emerita of sociology and nursing at the University of California, San Francisco, who has spent 35 years researching the nursing-home industry.

“And that’s deliberately done.”

Yet knowing who owns what can be critical for fragile patients seeking long-term care, according to a Sacramento Bee investigation, which analyzed thousands of federal and state records detailing the ownership of the state’s 1,260 nursing homes.

In addition to identifying owners with at least a 5 percent stake in any California-based facility, The Bee also examined government and industry data to determine how the largest owners and their facilities performed on 46 measures, including quality-of-care indicators, staffing, complaints and deficiencies found during inspections. The analysis took into account the federal government’s star-rating system, as well as rankings determined by the nonprofit California HealthCare Foundation. State and federal inspectors logged most of the measures, although nursing homes self-reported patient care and staffing data.

Clear differences emerged among the state’s biggest operators. In the same way that restaurant franchises or department-store chains deliver similar experiences to consumers – for better or worse – The Bee found that some large nursing-home companies also produce systemic results.

Among the findings:

▪ In California, 25 for-profit nursing-home chains control about half of the state’s 120,000 licensed beds. The Bee found 10 of those chains – including the two largest, Plum Healthcare Group and a network owned by Shlomo Rechnitz of Los Angeles – performed below statewide averages last year in more than half of the examined quality-of-care categories, which gauge the incidence of problems such as pressure sores, infections and falls. Twenty of the top 25 chains fell below state averages in at least three out of five staffing measures.

▪ Some large chains have facilities suffering from the same care issues, despite being located hundreds of miles apart. For instance, within Plum Healthcare Group, which operates more nursing homes in the Sacramento region than any other company, 90 percent of the company’s 42 homes statewide last year had higher than average nursing-staff turnover. About 65 percent of the facilities owned by Longwood Management Corp. have higher than average rates of patients in restraints.

▪ Among the 25 largest chains doing business in California, the lowest performing in The Bee’s analysis are EmpRes Healthcare Management LLC and LifeHouse Health Services. Facilities owned by these chains consistently fell below state averages on most measures, and both owners were more likely to log complaints and federal deficiencies than most of their large competitors.

▪ Below-average staffing or high turnover were issues in nine out of 10 of the state’s largest nursing-home chains in 2012, the most recent year staffing data are available. The state’s largest chain, headed by Rechnitz, earned poor or below-average staffing ratings from the nonprofit California HealthCare Foundation in about 80 percent of its 54 homes. Even so, Rechnitz recently was given a federal judge’s blessing to purchase 19 more facilities.

Oversight of California nursing homes, and their owners, has waxed and waned over the years. In 2001 and 2002, under then-Attorney General Bill Lockyer, the state aggressively pursued chains by prosecuting two of the largest nursing home owners: Sun Healthcare Group of Irvine, and the California subsidiary of Beverly Enterprises Inc. In both cases, the state got permanent injunctions requiring that they improve care.

By contrast, the Department of Public Health was hauled before legislative leaders earlier this year amid charges it was dismissing hundreds of nursing-home complaints without adequate investigations. Assemblywoman Mariko Yamada, D-Davis, grilled health officials at the hearing and requested an audit of how the department regulates long-term care facilities.

“The state is not doing its job in protecting its most vulnerable residents,” said Carole Herman of the Sacramento-based Foundation Aiding the Elderly, who filed a lawsuit last year against the Department of Public Health charging it failed to promptly investigate nursing-home complaints.

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

Mark Reagan, legal adviser for the California Association of Health Facilities, the industry’s trade group, disagrees that there is any shortage of government oversight – or that chainwide performance is overlooked.

Reagan’s organization can recite at least 17 local, state and federal entities that oversee some aspect of nursing homes in California, from licensing to funding to food safety to criminal investigation.

“Government regulators do look broadly,” Reagan said, describing how government oversight of the industry has mushroomed over the past 10 to 15 years.

“You have a very robust range of investigative entities that look at every element,” he said.

Government oversight, though, does not necessarily help consumers connect the nursing-home dots. A family wanting to examine chainwide quality patterns faces a herculean task.

The Bee, for instance, spent months untangling federal Medicare and state records to identify owners and assess their facilities’ performance as of the end of 2013. Even then, the findings continued to shift as chains consolidated and transferred ownership of individual homes, and glaring gaps in government data collection became evident.

The reality is, most average consumers – in the midst of a family crisis – are unlikely to slog through voluminous public records and cumbersome statistics when hunting for a nursing home, said several elder-care advocates.

“People make relatively uninformed decisions in a lot of cases,” said Eric Carlson of the National Senior Citizens Law Center.

“That’s not to blame them,” he said. “It’s just the situation in which they find themselves.”

The bottom two

In California, more than 100,000 people live in skilled-nursing facilities, often transitioning from the hospital. Most of them are women, and most are older than 75. They come for a variety of reasons: a broken hip that requires care and rehabilitation; recuperation from serious surgery that needs daily monitoring and pain management; a chronic heart condition that leaves an individual too frail to dress or use the bathroom; the helplessness that comes with the final stages of Alzheimer’s.

From the outside, the facilities look similar: typically beige, low-slung buildings tucked into quiet neighborhoods or perched alongside busy urban thoroughfares, American flags flapping from tall poles.

What happens inside varies dramatically.

Among the top 25 players, two nursing-home chains stand out as the lowest performing in The Bee’s analysis: EmpRes Healthcare Management LLC, based in Vancouver, Wash.; and LifeHouse Health Services, headquartered in Culver City.

Together, the two companies operated 20 homes statewide last year, including 11 in Northern California, and consistently fell below the state average in numerous measures The Bee considered. Over the last 31/2 years, LifeHouse lagged state averages in 40 out of 46 measures, which gauge such critical aspects of care as staffing levels, patient welfare, complaints and deficiencies. EmpRes fell below in 39 of those measures.

Formerly known as Evergreen Healthcare, EmpRes was sold to its employees in 2008 and became one of the country’s first long-term care companies to be 100 percent employee-owned, according to its website. The chain had 11 nursing homes in California last year, the majority in Northern California, including Tracy, Vallejo and Chico.

No one from EmpRes responded to phone calls, a letter and emails from The Bee, directed to the Vancouver home office.

The company faced negative publicity this year following allegations that a 93-year-old woman was sexually assaulted by a certified nurse assistant at Evergreen Arvin Healthcare, a skilled-nursing facility southeast of Bakersfield.

In May, two of the woman’s grandchildren filed a lawsuit against the facility, three associated limited liability companies and 11 company officials, alleging that the elderly woman “died an agonizing and horrible death” last year as a result of her injuries, according to court documents. The lawsuit claims the facility administrator and others knew of accusations that the nurse assistant had sexually assaulted another resident days earlier, but that he was not suspended or disciplined.

“Defendants, and each of them, failed to staff the facility appropriately and allowed a situation to develop where a known sexual predator was on premise(s) in the guise of caring for the residents,” the lawsuit states.

The California Department of Public Health investigated the Arvin facility and issued a $20,000 fine, determining the facility had failed to protect its residents from sexual assault. The facility also was given a Class A citation, a penalty reserved for violations that pose imminent danger to residents.

Within the EmpRes group, The Bee found, the rate of complaints from patients and family members was above the statewide average. The rate of federal deficiencies cited by inspectors related to patient medication also ranked high: Nine of the company’s 11 homes had more deficiencies related to drug administration for each patient bed than the statewide average over the last 31/2 years.

The impact of medication errors on fragile patients can be devastating, as evidenced in records kept by the Department of Public Health.

Earlier this year, an EmpRes nursing home in Oroville was fined $50,000 by the state after failing to give a resident daily antibiotic injections in March 2012, as ordered by her doctor. The patient’s infection worsened and she developed septic shock, dying two days later. “We might have been able to prevent it if she had gotten the first shot,” the physician was quoted as saying in a state report.

The facility, Olive Ridge Post Acute Care, was cited for failing to protect residents from serious medication errors and was issued an “AA citation,” the most serious penalty the state can level against a nursing home.

Another medication error resulted in an AA citation at a different EmpRes facility in Lake County. Last year, Evergreen Lakeport Healthcare was fined $100,000 after a nurse mistakenly gave methadone to a patient in August 2011. The nurse, who had confused one patient with another, realized her mistake 15 minutes later, but the staff did not call 911 for another eight hours, state inspectors found. The patient died shortly thereafter.

In issuing the AA citation, the state determined that the mistakes were a direct cause of the woman’s death. It was the third time the Lakeport facility had been cited for medication errors since 2009. The Oroville facility also had been cited previously for making a medication mistake.

The Bee found that, for each patient bed, EmpRes’ ratio of registered nurses was about 13 percent lower than the statewide average.

Harrington, the UCSF scholar and registered nurse who has studied nursing-home chains, said repeated medication errors within an ownership group suggest the chain doesn’t have enough nurses. They also may lack the right mix of nurses, she said.

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

Many companies slash costs by reducing the number of RNs, relying instead on lower-paid licensed vocational nurses with considerably less training to handle medications, Harrington said.

“They do it to save money,” she said. “… LVNs don’t have the expertise to be taking care of these complex residents.”

Two ends of the spectrum

The home page for LifeHouse Health Services, headquartered in Culver City, features a smiling celebrity spokeswoman – actress-singer Shirley Jones – pictured alongside a bubble of text: “Warmth. Comfort. Experience. Professionalism. That’s so rare these days, but that’s LifeHOUSE!”

There’s another side to the LifeHouse story.

Nursing turnover at LifeHouse’s nine California nursing homes was nearly double the statewide average in 2012. About 1 in 8 of its long-term patients was reported to be in moderate to severe pain last year, also double the statewide average. And the chain had persistently high rates of complaints and deficiencies compared to state averages.

The company’s San Jose Healthcare Center was fined $30,000 last year by the state for failing to meet minimum levels of nursing staff care.

Its sister facility in Paradise, the Cypress Healthcare Center, also was fined $15,000 last year for missing state-ordered staffing minimums. The Paradise facility was fined another $10,000 last year and picked up a Class A citation after an unsteady 76-year-old resident was brain-injured in a fall while going to the bathroom unassisted.

Joseph M. Earley III, a Paradise attorney who has filed lawsuits against both EmpRes and LifeHouse, said in an interview that LifeHouse is “woefully inadequate,” especially in the area of staffing. Between January 2012 and December 2013, Earley filed four lawsuits against Cypress Healthcare, all alleging problems with staffing or quality of nursing care. In each case, the patient had died.

“Their focus is far too much on profit,” Earley said. “They’re taking money out of the facilities that could be used to add staffing or increase pay rates.”

Bruce Ward, chief administrative officer at LifeHouse, said such criticism “is unfair and ill-informed.” He said LifeHouse “uses an organization structure highly similar to the organization structures used by virtually all middle- to large-size organizations with multiple health care facilities” and that it “delivers consistent, high quality of care.”

“It is far easier for plaintiffs’ attorneys to criticize health care, and secure hundreds of thousands of dollars in fees to do so, than it is to deal on an ongoing basis with the actual demands of skilled nursing care,” he said.

Ward said the company specializes in taking over and improving bankrupt or near-bankrupt homes. Those homes tend to have “high turnover, deferred maintenance and a range of other challenges,” he said.

“LifeHouse has worked hard and spent millions of dollars to improve those facilities,” he added.

Ward said the state’s method of measuring nursing turnover captures a large number of temporary and occasional employees who are hired to meet short-term needs. LifeHouse performs better on maintaining permanent employees, he said, pointing to a separate state measure that tracks long-term employee retention.

The high average rate of residents who report being in pain at LifeHouse facilities, he said, reflects the company’s practice of accepting more patients with debilitating conditions. He said the company has appealed the state’s findings at its Paradise and San Jose homes, and that subsequent state audits of the homes have found no similar problems.

Homes owned by Shlomo Rechnitz, the state’s largest operator, fell below state averages on 35 of the 46 measures The Bee considered. Rechnitz did not respond to interview requests. However, in written responses, his legal and public-relations advisers emphasized that Rechnitz and his principal company, Brius Healthcare Services, have taken over numerous troubled facilities suffering significant patient-care issues.

“This should be taken into account when looking globally at the performance of all Brius facilities,” the advisers wrote.

They also noted that the federal government gave Brius high marks, on average, for meeting several quality-of-care measures.

At the top of The Bee’s analysis, three large nursing-home chains – the Ensign Group, North American Health Care Inc. and Generations Healthcare – consistently performed at or above the state average in numerous categories over the last 31/2 years. All three are based in California.

Generations Healthcare, for example, had one of the lowest rates of nursing turnover among the large chains. And it had fewer complaints and deficiencies than most of its large competitors.

Headquartered in Newport Beach, the company was started in 1998 by Thomas Olds Jr., who was a founding partner of another chain, Covenant Care Inc. Generations began with one 89-bed nursing home and has expanded to own 19 facilities in Northern and Southern California, 17 of them nursing homes. Nine of its 17 skilled-nursing facilities earned five-star ratings from the federal government for excellence in 2013, the highest stamp of approval, while another six facilities received four stars.

Olds attributes low nursing turnover and other successes to his intimate involvement in operations, treating employees well and a clearly stated operating philosophy that “expects extraordinary results.”

“Once your employees see you doing the right thing, then they’re committed to being a part of that,” he said.

Did Plum deliver?

In February 2011, as Sacramento continued its slow climb out of the recession, an announcement rippled through the state’s nursing-home world.

After 50 years in business, Rocklin-based Horizon West Healthcare Inc. was being acquired by a relative newcomer, Plum Healthcare Group LLC. The San Marcos company, founded in 1999, was about to become the Sacramento area’s predominant nursing-home operator – assuming control of 12 Horizon West facilities in the four-county region, and another 15 elsewhere.

At the time, Horizon West was in trouble: hefty regulatory fines. Accusations of Medicare fraud. A stunning $29 million jury award in the death of a 79-year-old resident of an Auburn facility.

A 2011 news release stated that Horizon West had “hand-picked” Plum because of the company’s “excellent track record of mobilizing facility staff to achieve quality patient care and regulatory compliance …”

Plum co-chief executive Mark Ballif told The Bee in February 2011 that his company would bring “a really strong compliance record … We’re eager to bring that to the table.”

Did Plum deliver?

Yes and no, according to The Bee’s investigation.

While Ballif recently stated that Plum facilities provide quality care, a deeper dive into the company’s performance record reveals an uneven pattern. A few of the homes ranked among the region’s best, but the chain also was hit last year with higher-than-average rates of complaints for alleged abuse, quality-of-care and patient-rights issues.

Last year, Plum operated 12 of the 62 homes in the four-county region, more than any other provider. But the shadow of Horizon West looms. Eight of those homes ranked in the bottom 24 regionally in 2013 in terms of performance measures analyzed by The Bee – and all but one of those are former Horizon West properties. At the opposite end of the spectrum, three Plum homes ranked in the top 25.

A theme emerged among the poor performers: high staff turnover. All but one of the eight lowest-performing Plum homes saw nursing staff turnover above 80 percent in 2012. Plum’s Lincoln Meadows Care Center in Placer County reported nursing staff turnover of 144 percent that year, the highest rate in the region, with multiple positions turning over more than once.

Concerns over patient safety also emerged as an issue. Plum’s Westview Healthcare Center in Auburn logged 11 abuse complaints last year, more than any other home in the region. Its Auburn Oaks facility saw 41 federal deficiencies related to the life and safety of patients during the last 31/2 years, also more than any other facility in the region.

In an email response to The Bee, Ballif pointed to the federal government’s rating system as evidence that his company overall provides quality care to patients. The federal government uses a five-star system to rank nursing homes based on inspection reports and data self-reported by facilities.

The system, Ballif said, “helps residents and families see a single measure for total quality to inform their choice of facility … The average score across all Plum-affiliated facilities is four stars.” The company has 50 facilities in California, Utah and Arizona.

Locally, two Plum facilities that once were owned by Horizon West – Lincoln Meadows and Westview – each received only one star at the end of 2013 from the U.S. Centers for Medicare and Medicaid Services, a designation that means the federal government considers performance “much below average” based on staffing, deficiencies and quality-of-care measures.

But several Horizon West homes have improved since Plum took them over, Ballif noted. Some of those changes are evidenced by improved federal ratings, while other improvements will take longer to become evident because the federal government uses roughly three years of data when compiling its rankings, he said.

Six of the 11 local homes Plum purchased from Horizon West in early 2011 improved their federal rating between 2010 and 2013, according to government data. The newest federal ratings for 2014 show that Lincoln Meadows upped its status to three stars this year; Westview remains a one-star facility.

And, the latest ratings show, seven Plum facilities in the Sacramento region earned the coveted five stars.

A notorious distinction

In addition to Plum, eight more of the 25 largest chains in California have homes in the four-county region.

One Carmichael home owned by Genesis HealthCare Corp. has been singled out by federal regulators with a stern message: Improve or else.

Carmichael Care & Rehabilitation Center on Fair Oaks Boulevard, recently renamed Eagle Crest, was added this year to a government watchdog list as one of the nation’s most troubled facilities. Only five other homes in California appear on this “Special Focus Facility List” maintained by the U.S. Centers for Medicare and Medicaid Services.

Special Focus Facilities are surveyed more frequently and, if problems persist, are subject to possible fines and other penalties, including termination from the Medicare and Medicaid programs.

The Bee found that Carmichael Care/Eagle Crest ranked near the bottom in performance measures among the Sacramento region’s 62 nursing homes, falling below state averages in 31 out of 46 indicators. Its owner, Genesis HealthCare, has its own badge of notoriety: Last year, it was slammed with complaints of abuse at seven times the statewide average.

The chain, privately held and based in Kennett Square, Pa., recently was ranked by Provider Magazine as the nation’s largest nursing facility company. Genesis acquired Sun Healthcare Group Inc. and its subsidiary, SunBridge Healthcare LLC, in December 2012, picking up Carmichael Care/Eagle Crest in the deal, among many others.

Genesis spokeswoman Jeanne Moore did not respond to specific questions about Carmichael Care/Eagle Crest. She noted that the majority of abuse complaints in the company’s other California facilities came at two of its behavioral-health centers, which house mentally ill patients. She said it is unfair to include those centers when comparing Genesis with other companies.

“Behavioral-health centers are licensed as skilled-nursing centers but cannot be compared to a traditional skilled-nursing center,” Moore said. In behavioral-health centers, she explained, “combative behaviors and resident-to-resident altercations may be more common than in a traditional skilled-nursing center.”

Genesis has “a zero-tolerance abuse policy at all of its centers,” she said.

While for-profit facilities dominated the ranks of bottom performers in the region in 2013, the top-25 list looks remarkably different: Ten are operated by nonprofits or hospitals.

Eskaton, a Sacramento-based nonprofit, has two of the top-performing facilities in the region, and none of its four facilities had any serious citations over the last three years.

All four are well-staffed compared to most nursing homes in the state. Eskaton’s turnover rate in its skilled-nursing facilities, for instance, was about 21 percent in 2012, compared with more than 70 percent for LifeHouse and Plum.

Todd Murch, Eskaton’s president and chief executive officer, said the company’s ability to retain high-quality staff is “really at the core of excellence.” At Eskaton’s nursing home in Fair Oaks, which recently received the highest five-star rating from the federal government, three of the top administrators have collectively worked at that facility for 22 years, he said.

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

“Even in today’s world, there’s still a value of nonprofit ownership in nursing homes,” Murch said. “Statistically, history will show that nonprofits typically staff higher, typically have longer-tenured staff and typically offer better pay and benefits than for-profit nursing homes.

“The tendency of nonprofits to have longer stability and continuity in a community is a big thing.”

Lost in a fog

Up and down the state, consumers who are unhappy with nursing-home care often lay the blame on overworked, undertrained and poorly supervised staff. In civil actions and in complaints filed with the state, patients and family members describe the sometimes-chaotic conditions inside California’s nursing homes.

Unnecessary falls. Soiled diapers that go unchanged. Unanswered call lights. False entries scribbled into charts. Pressure sores that turn deadly when patients are not repositioned.

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

“Staffing – that’s the thing it almost always comes down to,” said Earley, the Paradise attorney who specializes in elder abuse and neglect.

“If they’d just increase staffing, a lot of these problems wouldn’t happen,” he said. “It always, always comes down to staff.”

The Bee’s analysis found that among California’s 10 largest chains, nine fell below state averages in three out of five key staffing measures in 2012, the latest data available.

The five measures examined by The Bee were nursing turnover and four staff-to-patient ratios, which look at the facilities’ levels of registered nurses, licensed vocational nurses, physical therapists and aides. Overall, the state requires a minimum of 3.2 nursing hours per resident day, but the statewide average in 2012 was actually higher, at 4.1 hours. To earn a superior rating from CalQualityCare.org, the nonprofit industry watchdog, facilities must have somewhere between 4.1 and 6.5 nursing hours per patient day, depending on case mix.

Among the 25 largest operators, three ranked lowest in terms of staffing performance: Rechnitz and his principal company, Brius Healthcare; EmpRes; and LifeHouse. The Bee found that these three chains fell below statewide averages on all five staffing measures.

Ward cited numbers from the first six months of 2014 that showed nursing staffing at LifeHouse’s homes on average exceeded government requirements. Rechnitz’s legal team made a similar argument: “Every single facility has met or exceeded state staffing requirements on a monthly or even weekly basis since acquisition,” they said in a written statement.

EmpRes did not return calls for comment.

In California, elder-abuse attorneys have successfully argued that bad corporate practices – especially in the area of staffing – can spread like an infectious disease throughout a nursing-home chain.

In Humboldt County, a jury in a class-action lawsuit ordered Skilled Healthcare Group Inc. to pay a jaw-dropping $677 million in damages in 2010 after finding the national chain had violated state staffing regulations in all 22 of its California facilities. The amount later was negotiated down to $50 million.

Emails introduced at trial in Humboldt County illustrated pressure from corporate administrators to keep staffing costs down. After one staff person reported that four out of five facilities fell below state staffing minimums for a week, the president of Skilled replied: “Thanks again for sending this. Nice hour controls. Keep on that overtime.”

In another case, a federal judge in Oakland issued an injunction in 2012 against Evergreen Healthcare, now EmpRes, for chronic understaffing. The judge overseeing the class-action lawsuit ordered that the chain be monitored for 21/2 years to ensure that the homes comply with state staffing requirements.

Earley, the Butte County elder-abuse attorney, argued in court that a management decision about staffing in a LifeHouse facility ultimately contributed to the death of an 88-year-old Paradise man, a fixture in his small community north of Sacramento.

LifeHouse did not respond to questions about the case.

The story begins, as these matters often do, with a calamity.

In early 2011, Eugene and Bonnie Nidiver – married for 60 years – had just returned from a 17-day cruise to Hawaii, and were planning their next cruise to Alaska.

The couple’s plans were upended when Eugene missed a step on a friend’s new deck and fell, breaking his pelvis and left wrist.

PAUL KITAGAKI JR./ THE SACRAMENTO BEE

Bonnie Nidiver, now 86, describes her husband as a fit and active man who could be seen walking daily, working out three times a week at the Elks Lodge and sharing lunch on Tuesdays with his buddies. A retired Navy veteran who served on the aircraft carrier USS Cowpens in World War II, he was a 50-year member of the Masons and active in the Shrine Club, American Legion and Moose Lodge.

Eugene’s broken bones were treated at the hospital, and on April 6, 2011, he was admitted to a nursing home for rehabilitation. What he got, according to family members and court documents, was an unrelenting series of powerful drugs for sleeplessness and pain that left him confused and disoriented.

Bonnie, who visited the Cypress Healthcare Center daily, said she alerted staff – constantly – to the deteriorating condition of her husband.

“They changed his whole personality,” she said. “He was a non-pill-taker. He wouldn’t even take an aspirin unless he was desperate.”

On May 3, 2011, Eugene fell from his wheelchair but was not immediately reassessed for fall risk, nor was he given any preventive devices or alarms, the complaint states.

Three weeks later, on the night of May 23, 2011, Bonnie recalled how she gave her husband a “good old mushy kiss,” and he told her how much he loved her. It would be their last coherent conversation.

The next day, Eugene fell again, toppling from his wheelchair in the main lobby and breaking his right hip. He was hospitalized and rapidly declined, lost in a fog of pain and medication, attorney Earley said.

Eugene Nidiver died in hospice care on June 16, 2011, 10 weeks after being admitted to Cypress Healthcare Center.

The widow and her son, Scott Nidiver, filed suit in Butte County Superior Court in a case their attorney says revealed the facility’s lack of sufficient, qualified registered nurses “who had the time to actually do the nursing.” Instead of analyzing why Eugene Nidiver was having trouble sleeping, or was agitated and experiencing pain, they simply medicated him with a lineup of sedatives, antidepressants and narcotics, Earley said.

The nursing home agreed to a $400,000 judgment in the case. Earley also had sued the parent company, LifeHouse Health Services LLC, but a judge threw out that case last month. LifeHouse argued it had no liability because it doesn’t hold a health care license and does not provide day-to-day care for individual patients.

The case highlights an issue playing out in courtrooms up and down the state: Who’s really in charge of these facilities? Who calls the shots? And who should be held responsible when things go wrong?

COMING MONDAY: Untangling the ownership web.

Call The Bee’s Marjie Lundstrom, (916) 321-1055.

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

Second of three parts.

Marisa Conover of Fair Oaks built her career dealing with complicated people and problems. As a former executive with CBS Records International, she handled worldwide distribution of video and merchandising for such artists as Michael Jackson, Barbra Streisand and The Rolling Stones.

Then she encountered a challenge closer to home.

Conover believes that questionable care at a Roseville nursing home – and the injection of a powerful antipsychotic drug – contributed to the death of her mother in December 2012. Genine Zizzo, a 5-foot-1 widow who had lived in the same Orangevale home for 50 years, died at age 82 following a 10-day stay at Roseville Point Health & Wellness Center.

Conover filed a complaint with the state through a Sacramento-based advocacy group. She researched the controversial use of “chemical restraints” in nursing homes to subdue and control patients. She gathered her mother’s medical records and coroner’s reports, highlighting in yellow the apparent inconsistencies and contradictions.

But when Conover began poking around the Internet to research the ownership history of Roseville Point, she hit a wall.

Despite her business acumen, she gleaned surprisingly little about the individuals behind the 98-bed nursing home on Sunrise Avenue.

“Who are these people?” asked Conover, 56, nearly two years after her mother’s death.

Conover had bumped up against one of the most complicated ownership groups in the state.

DAVID LIVINGSTON / GETTY IMAGES FILE

As it turns out, Roseville Point is part of Shlomo Rechnitz’s expanding universe of homes across California.

Rechnitz, a 43-year-old Los Angeles entrepreneur, has rapidly become the state’s largest nursing-home owner with about 75 facilities from San Diego to Los Angeles to Roseville to Eureka. His homes have been the target of more complaints and federal deficiencies per bed than most other large chains in California, according to a Sacramento Bee investigation.

Consumers would be hard-pressed to know that – or even to link Rechnitz to any particular nursing home using the state’s website. Some of the state’s leading elder-care advocates said they had never heard of Rechnitz or his principal company, Brius Healthcare Services.

Rechnitz’s history in California is a case study in the evolving nature of nursing-home ownership, and the complexity of the industry’s corporate structures. As private investment groups scoop up an ever-larger share of the nation’s skilled-nursing care market, it has become increasingly difficult to decipher who owns the nation’s largest chains.

Elder-care advocates will tell you this is no accident: A convoluted ownership structure, they say, is a way for owners to hide assets and shield themselves from civil and criminal liability when patients are abused or neglected in their care. Confusing lines of ownership also make it harder for regulators to detect worrisome patterns of care among facilities within a chain.

Congress felt so strongly about improving nursing-home transparency that the Affordable Care Act now includes strict new reporting requirements for owners. But the government’s ability to untangle the ownership web has been slow and inconsistent.

A 1997 California law requires state officials to make detailed ownership information publicly available, but the state’s health facilities website continues to provide scant and often misleading information.

In the absence of complete government databases, The Bee spent several months sifting through federal and state records to piece together ownership structures for California’s 25 largest skilled-nursing-home chains. Among the findings:

▪ Company structures can be extraordinarily elaborate. Rechnitz has crafted a network of nearly 80 separate entities that oversee 54 nursing homes up and down the state; he recently acquired 19 more facilities in a bankruptcy case. Another large player, Longwood Management Corp., has built a different corporation for each of its 32 homes. The corporations have names like Tzippy Care Inc. and SGV Healthcare Inc. that are difficult for consumers to link without poring through public records.

▪ Many nursing-home chains create management companies to provide administrative services to their homes. Owners say the model creates efficiencies. Critics, including a Glendale lawyer who has filed suit over the practice, contend it’s a ploy to skim off nursing-home revenues to line investors’ pockets.

▪ Ten of the 25 largest chains in the state make it hard for consumers to see what facilities they own. In addition to their complicated business structures, the large chains of Brius, Plum Healthcare Group, Country Villa Health Services and Sun Mar Health Care have no websites. Other large ownership groups, including Longwood Management and North American Health Care Inc., offer bare-bones websites with no specific facility information.

▪ California nursing-home owners and executives have widely diverse backgrounds, with many lacking health care experience. One Los Angeles-based owner, Sol Majer, spent 20 years in the cosmetics industry, manufacturing a line of nail polish, hair removal wax and false eyelashes. Another large ownership group is led by two high-powered Los Angeles developers, Jacob Wintner and Ira Smedra, officers in the ARBA Group whose ventures have included upscale shopping centers.

Mark Reagan, legal adviser for the California Association of Health Facilities, said complex business structures are a necessity for nursing-home owners – and the health care industry in general.

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

Nursing homes rely on Medicare reimbursements, along with Medi-Cal money on the state level, he said. If all the facilities and assets are held by only one corporation – and just one of its facilities gets into serious trouble, such as a criminal elder-abuse conviction – the entire group of sister facilities also is at risk of losing government funding, Reagan said.

“No responsible health care company will hold all of its assets in a single corporation. ”

– Mark Reagan, legal adviser for the California Association of Health Facilities

“No responsible health care company will hold all of its assets in a single corporation,” said Reagan, describing the multilayered structures as a “sound business practice.”

Reagan said he does not believe consumers are harmed by the approach, and that elder-abuse attorneys are savvy enough to sort out the pieces in a civil lawsuit.

Not every nursing-home chain in California that blurs its ownership delivers bad care. Not every chain that puts it all out there, on websites or in marketing materials, has a stellar record.

Still, elder-care advocates contend that some nursing-home operators strive to keep things murky, at the expense of consumers. And, they point out, unwitting consumers could wind up transferring their loved ones from one troubled facility to the next, without ever realizing they’re part of the same chain – and the same set of problems.

“People don’t really know who owns nursing homes,” said San Francisco elder-abuse attorney Kathryn A. Stebner, who has filed class-action lawsuits against several large chains.

“If I’m buying a product,” she said, “I want to know who makes it.”

‘A crazy web’

If Rechnitz is a mystery figure in some corners of the nursing-home world, he is certainly well-known in select Los Angeles social circles.

Rechnitz is described as a businessman and philanthropist who has donated millions to Jewish institutions and charitable causes, according to articles in the Jewish press in Los Angeles. Details of his oldest daughter’s lavish wedding in February at the Beverly Hilton Hotel are scattered across the Internet.

He appears to have entered the nursing-home business through a side door. He and his twin brother, Steve, co-founded a medical-supply company in 1998 called TwinMed, which services nursing homes with such items as exam gloves, glove box holders and incontinence briefs.

Rechnitz founded Brius in 2004, and soon was buying up facilities at a rapid pace. By early last year, his homes across the state were grossing $600 million a year, he said in a Jan. 24, 2013, deposition in Orange County.

Elder-abuse attorney Michael Moran quizzed Rechnitz that afternoon about his complex corporate network, contending Rechnitz had given away a nursing home to escape a $4.5 million judgment. At one point, Moran asked Rechnitz why he was associated with more than 100 different businesses.

“… (T)hat has to be the stupidest question I’ve ever heard,” Rechnitz replied, according to a transcript from the ongoing case. “… It’s possible there are dumber questions, but it ranks high up.”

The question never was answered. The contentious back-and-forth between Rechnitz and Moran – whom Rechnitz suggested was “an ambulance chaser” – reflects the persistent tension between nursing-home owners and the attorneys who sue them, unraveling their structures in the process.

Using several state and federal databases, The Bee identified 130 business entities tied to Rechnitz’s nursing-home chain – and that was before he added 19 facilities in a bankruptcy proceeding this year, as well as three others. The data show that he shares ownership in some facilities with 26 individuals.

A corporate pattern soon emerges, one shared by other nursing-home chains operating in California: a nursing home owned by a limited liability company, which is owned by another limited liability company, which is owned by another one after that, with the primary owner at the top of the pile. Some chains structure the various entities as general partnerships, others as corporations.

Picture a giant, elaborate wheel, with the owners at the center, then dozens of spokes splaying out toward subsidiaries that in turn connect to other wheels, with more spokes connecting to individual homes.

One of the state’s most complex chains was dissected recently in federal bankruptcy court in Santa Ana. Country Villa Health Services filed for Chapter 11 protection in March, blaming a bevy of class-action lawsuits. The case involved 18 nursing homes and one assisted-living facility, though the company had “concurrently managed 50 nursing facilities within the state,” according to court papers.

For consumers, the real confusion lay in the name: Country Villa owned only some of the more than 30 nursing homes in California that carried its name. Others were owned by someone else, but Country Villa exercised “operational/managerial” control, federal records show.

Other homes were owned or managed by Country Villa but did not carry the Country Villa brand. And still other homes carried the Country Villa name but, at least according to federal ownership records, no longer had a relationship to the company.

In 2012, 27 nursing-home licensees that had contracted with Country Villa for administrative services sued the company, alleging mismanagement. Two of those licensees carried the Country Villa name, giving the strange but false impression that Country Villa was suing itself.

Stephen Reissman, CEO of Country Villa Health Services, did not return phone calls for comment.

Following Country Villa’s bankruptcy declaration, Rechnitz this year won approval from a federal judge to buy the company’s 19 facilities for $62 million cash.

Even before the deal, Rechnitz’s business setup was elaborate. Each of his 54 homes was licensed under a separate limited liability company or general partnership. All the names are different, though some are similar sounding.

Rechnitz did not respond to interview requests for this series. But in a lengthy written response to Bee questions, his legal team said he structures his company in a way common in the health care industry. By establishing smaller groups of facilities under local management and oversight, they wrote, the system actually “provides for more individualized monitoring of the facilities.”

As the organization has grown, they added, “it has often acquired facilities in groups with different sets of investors. … This necessitates establishing different companies.”

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

The philosophy proved to be a challenge for Conover. When she began researching the Roseville facility that housed her mother, she found that the “licensee” was identified by the California Department of Public Health as Solnus Three LLC. That branding is shared by seven other nursing homes owned by Rechnitz and his various business associates in California, beginning with Solnus One (a facility in Alameda) on up to Solnus Eight (a nursing home in Oakland).

But nothing on the state’s website links the 54 homes to any common ownership. Neither Rechnitz nor Brius Healthcare appears anywhere in the department’s public “licensed facility listing report,” which allows viewers to see all nursing homes in the state.

The same is true for Plum Healthcare, the chain with the biggest presence in the Sacramento region. All 42 homes owned by Plum last year, including 12 in the Sacramento region, were licensed to separate limited liability companies.

And like Brius, Plum has its own inventive branding for its licensees, generally invoking flowers and trees. In Sacramento, Plum nursing homes are licensed to Crocus Holdings, Gladiolus Holdings, Jonquil Holdings and Oleander Holdings, among others. Elsewhere in California, Plum licensees include Douglas Fir Holdings, Norway Maple Holdings and Golden Oak Holdings.

Unnecessary risks

Nursing-home owners make no apologies for the business structures. In fact, they have been explicitly advised to do it this way.

In 2003, the Journal of Health Law published an article directing nursing-home operators to create elaborate, multilayered structures to help immunize themselves from costly lawsuits and loss of government funding.

“More than a few judgments against nursing homes have been based on specious allegations,” the authors wrote. “Nonetheless, the reality is that nursing homes are unsympathetic defendants.”

The authors detailed how “restructuring can reduce the unnecessary risks,” specifically by creating a web of separate entities.

Nursing-home operators have long complained that their work with elderly and medically fragile patients makes them easy prey for personal-injury lawyers looking for swift settlements and big payouts. In California, experienced elder-abuse attorneys routinely take a contingency fee of 25 percent to 40 percent.

A 2013 study by a risk-consulting firm found that the frequency of claims against nursing homes is rising nationally. In California, claims cost facilities an estimated $2,790 per occupied bed last year, the study showed.

Elder-abuse attorneys counter that lawsuits – and the financial awards that result – help uphold standards for care in an industry that is woefully underpoliced by government agencies.

“Good cases with good verdicts are a significant tool to help fix bad nursing homes and to educate the public,” said Moran, the Santa Ana attorney.

Lesley Ann Clement, a Sacramento attorney specializing in elder-abuse cases, said that lawyers who sue nursing homes have had to develop expertise in following the paper trails and piecing together the ownership puzzles to identify potential assets.

PAUL KITAGAKI JR. / THE SACRAMENTO BEE

Clement teamed up with Sacramento attorney Ed Dudensing in 2010 on an elder-abuse case in which Dudensing devoted 11/2 years to deciphering the labyrinthine corporate structure of former nursing-home giant Horizon West Healthcare of Rocklin. The company, which had a history of licensing violations and run-ins with regulators, sold its nursing homes to Plum Healthcare Group in 2011.

The case revolved around the treatment of Rebecca Bush, who was 79 and suffering from mild dementia when she entered a Davis nursing home in 2007. During her stay, Bush became severely dehydrated, developed pressure sores that required hospitalization and was left for long periods of time in wet or soiled briefs, the lawsuit states. She died in January 2013 at age 85.

The legal team eventually identified 27 defendants in the case, including 13 inter-related business entities and 13 key individuals associated with the nursing home, Sierra Health Care Center of Davis. Twelve of the 13 individual defendants, Clement said, were family members.

“It was a crazy web,” Clement said of Horizon West, which resisted disclosing to the plaintiffs the intricacies of its corporate structure and finances.

The company’s legal team vigorously pushed back against giving up that information, citing privacy concerns for the family of owners. The real issue, the lawyers argued, was the care that Rebecca Bush received, not the “highly personal financial information of individual defendants,” court filings state.

The civil lawsuit dragged on for more than three years until it was dismissed in February of this year, after a confidential settlement was reached. A family member declined to discuss the case because “the wounds are so fresh.”

In the case of Roseville Point, and the death of Genine Zizzo, Conover said she chose not to pursue civil action over what she considers to be a “medical assault.”

The California Department of Public Health found no evidence of wrongdoing at the facility in connection with Zizzo’s death, according to an August 2013 letter to Carole Herman of Foundation Aiding the Elderly, which filed the complaint on Conover’s behalf.

In that letter, the department wrote that the allegations of elder abuse, improper drugging and other violations had not been substantiated by an unannounced visit to the facility. Asked about Conover’s accusations, Rechnitz’s legal team referred to the state’s decision to close the books on the case and declined to comment further due to privacy laws protecting patients.

Herman promptly requested an “informal conference” to protest the finding, as allowed by law, but has heard nothing more than a year later, she said. The state’s Health and Safety Code does not spell out a time frame for the state to respond to conference requests.

Conover also received a letter last year from a Tustin law firm representing Roseville Point. The attorney expressed “sincere condolences” for Zizzo’s death – then cautioned Conover that she was to “cease and desist” all contact with nursing-home employees or “a restraining order will be sought.”

Follow the money

Glendale attorney Russell Balisok has spent nearly 40 years suing nursing homes, chronicling an array of grievances and human tragedies. Now he’s taking on the business model itself.

In 2012, he filed a lawsuit on behalf of California Advocates for Nursing Home Reform, accusing Country Villa of charging its facilities exorbitant management fees, then pocketing the profits. The suit contends the chain is not investing in adequate care – and that the state is letting them get away with it.

At issue is the chain’s use of a “management company,” Country Villa Service Corp., to oversee its facilities, a practice that is common in California and elsewhere. Under this business model, a separate entity – often created by the owners – extracts a percentage of the facilities’ gross revenues in exchange for a variety of management services.

Nursing-home operators say there is nothing wrong with the practice. Reagan, the industry legal adviser, said the arrangement actually positions chains to provide better care, as it is cost-effective and lightens each facility’s administrative load.

Besides Country Villa, some of the biggest chains in California rely on management companies, among them EmpRes, North American Health Care and Genesis.

“It makes more sense to centralize services,” Reagan said.

Balisok, on the other hand, derides the practice as the “scheme du jour” in California. His lawsuit, filed in Alameda County, contends Country Villa’s nursing homes are “enslaved by the management agreements and will never make any money.” The management company effectively strips away the authority of the on-site nursing-home administrator, Balisok said, violating state requirements that the licensed administrator retain operational control.

The arrangement leaves each nursing home with little money, or any real ability to funnel resources into patient needs, he said.

Clement, the Sacramento elder-abuse attorney, said some chains take the model further, creating all kinds of spinoff companies that service a nursing home. These in-house entities – known as “related parties” – may be set up to supply pharmaceuticals, underwrite insurance, handle bookkeeping, provide therapy or oversee worker’s compensation.

“They’re charging above-market rates for everything,” said Clement. “And it’s all the same people.”

Whether the entity is a management company or a pharmacy, she said, the idea is the same: extracting money from the nursing home for investors and keeping the facility underfunded.

“When you look at the facility itself, it’s losing money every month,” said Clement. “So that’s telling you the building is underfunded. Every penny that comes in the door from the patients … gets swept up to corporate headquarters. And they have control.”

Sacramento elder-abuse attorney Chris Buckley said there is great incentive for operators to “siphon it all up to the mother ship,” leaving the cash-strapped facility essentially judgment-proof.

The unusual nature of such arrangements has tumbled out in court.

“When you look at the facility itself, it’s losing money every month. So that’s telling you the building is underfunded. Every penny that comes in the door from the patients … gets swept up to corporate headquarters.”

– Lesley Ann Clement, a Sacramento attorney specializing in elder-abuse cases

In one elder-abuse lawsuit, filed in 2006 against a former Horizon West facility, attorney Dudensing demonstrated that the nursing home – Colonial Healthcare in Auburn – had paid its in-house insurance company annually for a liability policy. The catch? The $1 million policy came with a $1 million deductible, according to court documents obtained by The Bee.

In court, the former director of financial management at Horizon West Healthcare Inc., Dennis Roccaforte, explained that the liability insurance company was wholly owned by Horizon West and, he believed, was based in the Cayman Islands, according to a transcript of the first trial in March 2010, which examined Horizon West’s complex corporate network.

Yet even Roccaforte said he was “surprised” by the policy limit and deductible when Dudensing presented him with the policy on the witness stand.

The jury in the case ultimately slammed Horizon West with a $29 million verdict in connection with the death of 79-year-old Frances Tanner, a retired public servant.

These “related party” transactions are common in California, as evidenced by nursing-home cost reports filed annually with the state. Are they overcharging? Or just efficient?

Charlene Harrington, a professor emerita of sociology and nursing at UC San Francisco, said it is difficult to know because California does not require related parties to file cost reports, or to say exactly what services are provided in exchange for payment.

Roseville Point Health & Wellness Center, for instance, reported $812,000 in profits last year to the Office of Statewide Health Planning and Development. It also paid out nearly $1 million to companies that service the home that also are owned by Rechnitz.

Roseville Point paid Rechnitz’s company Twin Med LLC about $130,000 last year for medical and other supplies, according to reports submitted by the facility. It paid Eretz Roseville Properties LLC about $800,000 in lease payments. The registered partner for Eretz is SYTR Real Estate Holdings. The registered partner for SYTR is Shlomo Rechnitz.

Lincoln Meadows, owned by Plum Healthcare, reported $821,000 in profits last year to the state. The facility also paid out $523,000 in administrative services fees to Plum Healthcare LLC.

Carmichael Care & Rehabilitation, owned by Genesis and recently renamed Eagle Crest, reported a net loss of $1.35 million last year. The cash-strapped facility paid $400,000 to Genesis Healthcare for “home office services”; $500,000 to Genesis Eldercare Rehabilitation Services for physical, occupational and speech therapy; and $40,000 to Genesis Eldercare Staffing Services for “contract nursing.”

The problem with the state’s reporting system, said Harrington, is that “all you see is the amount that was spent.”

“They don’t have to show how they spent the money,” she said. “Unless there’s a lawsuit, you’re not going to see it.”

Because they are effectively paying themselves, she said, there is a built-in conflict of interest. “They have every incentive to pay as much as possible to their related companies, rather than to keep the costs low.”

Connecticut took on the issue this year with a new law being watched closely by other states. The legislation requires for-profit nursing homes to disclose the financial status of any related-party businesses that contract with the facilities. The law followed the bankruptcy of a Connecticut-based nursing-home chain in which the CEO diverted money from his facilities for personal use, including the purchase of a yacht, apartment buildings, a lakefront home and a Nashville, Tenn., music company.

Rechnitz’s legal team defended the use of related parties to provide services, saying that the practice is “highly regulated by the Medi-Cal program and typically results in significantly lower costs to the state.” They cited government regulations that prohibit owners from skimming profits by transferring money to related parties.

Reagan, legal counsel for the industry trade group, said that concerns over related parties have been whipped up by trial lawyers. “The whole profit-over-people argument is a well-worn trial tactic,” he said.

Reagan said that management costs and payments to related parties are neither excessive nor inflated. The Department of Health Care Services conducts yearly audits of nursing homes that receive Medi-Cal money to ensure that expenditures are reasonable.

“There’s a lot of scrutiny,” he said, noting that state auditors are “very diligent about their work.”

The state is aggressively fighting Balisok’s Country Villa lawsuit, which specifically names Dr. Ron Chapman, director of California’s Department of Public Health. In a series of letters to Balisok before he filed the suit, department officials rejected the lawyer’s contention that management agreements are improper or contrary to state or federal law.

Balisok is pressing on. He has asked the Department of Public Health to disclose all such agreements. A victory with Country Villa, he said, could lead to legal challenges up and down the state against other companies using this business model – with the potential that money could be returned to facilities.

“This could be felt throughout the industry,” Balisok said.

COMING MONDAY: Holding government accountable.

Call The Bee’s Marjie Lundstrom, (916) 321-1055.