Troubled Nursing Home Chain Owner Gets New Licenses Just Before State Reforms Take Effect

The state is moving forward with licensing two dozen nursing homes whose primary owner’s companies have a lengthy track record of problems — as uncovered by a CalMatters investigation — despite a new law designed to provide better oversight of the facilities.

The nursing homes in question are owned by Los Angeles businessman Shlomo Rechnitz, who owns dozens of California facilities through a web of companies.

One of his main companies, Brius Healthcare, has been scrutinized for poor quality care and inadequate staffing, according to federal and state inspection reports, plaintiffs’ attorneys and press accounts. By 2015, government regulators decertified or threatened to decertify three of Rechnitz’s companies’ California nursing homes, a rare penalty that strips facilities of crucial Medicare and Medi-Cal funding.

One of those facilities, Wish-I-Ah Healthcare & Wellness Centre near Fresno, was closed following the death of a 75-year-old resident from a blood infection after staff left behind in her body a foam sponge used in dressing her mastectomy wound. Investigators also found toilets brimming with fecal matter and other serious problems, according to the state’s accusation.

The State Auditor’s office in a May 2018 report spotlighted Brius for its higher rate of federal deficiencies and state citations, compared to the rest of the industry in the state.

It was via bankruptcy court that Rechnitz scooped up 18 Country Villa-branded nursing homes in 2014. Per state law, he then filed change-of-ownership applications seeking licenses to run those homes. The state didn’t approve or deny them, instead leaving them pending. In the meantime, Rechnitz continued to run the nursing homes for years without a formal license in his name – which isn’t technically illegal.

A new law was supposed to close that loophole. But that law, co-authored by Democratic Assemblymembers Al Muratsuchi of Los Angeles and Jim Wood of Santa Rosa, doesn’t go into effect until July 1 — and it focuses on new license applications, rather than those that have been operating in the legal gray area for years.

The California Department of Public Health, which oversees the state’s nursing homes, defended the new licensing settlement with Rechnitz, which includes tools for the state to monitor the nursing homes’ performance. The department noted the settlement allows the nursing homes to continue operating, instead of closing and forcing hundreds of residents from their homes.

“This settlement resolves longstanding issues we have had with this provider and provides our department stronger enforcement tools to ensure the provider is delivering reasonable and appropriate care to its residents,” Dr. Tomás Aragón, director of the Department of Public Health, said in an emailed statement. “With this settlement, we will continue to monitor the facilities involved with a focus on maintaining that level of care.”

Under the settlement announced this week, the state health department agreed to approve license applications for 24 skilled nursing facilities owned by Rechnitz – once the department receives all necessary documents to complete the process.

The settlement includes some oversight provisions, including a two-year monitoring period. The health department is to meet with each facility every six months to review the quality of care residents are receiving, and each facility is to provide a slew of documents before the meetings. Deficiencies in care are to result in heightened oversight, including daily phone calls. Failing to comply with those parameters is to result in a fine of $10,000 per failure.

An attorney representing Rechnitz’s company Brius did not respond to a phone call or an emailed request for comment.

Tony Chicotel, a staff attorney for California Advocates for Nursing Home Reform, called the state’s move to license Rechnitz’s nursing homes “sad.”

“There’s been longstanding, systematic problems in nursing homes run by this chain,” he said. “We think this is a message to residents of nursing homes in California that their welfare just isn’t all that concerning to the state.”

Not all of Rechnitz’s applications had been left pending – some were denied outright. In denying his licensing application for Windsor Healthcare Center of Oakland in 2016, the Department of Public Health said staff at the facility neglected to treat the skin ulcers and pain of six different residents — including a paralyzed resident who was left covered in feces and then hospitalized for sepsis.

That facility is now one of the 24 the state is moving toward licensing under the new settlement. The two-dozen facilities also include 13 of the 18 Country Villa properties Rechnitz purchased in 2014.

Another one of Rechnitz’s nursing homes was in hot water recently. Alta Vista Healthcare & Wellness Centre in Riverside, owned by Rechnitz, and its management company, Rockport Healthcare Services, agreed to pay the state and federal government some $3.8 million over allegations they provided kickbacks to doctors. According to the U.S. Justice Department, Alta Vista gave doctors extravagant gifts – including expensive dinners, limousine rides and massages – in exchange for referring patients to their nursing home between 2009 and 2019.

That facility is not included in the new licensing agreement.

Chicotel said he’s “disappointed but not surprised” the state is moving to license Rechnitz’s facilities. It was clear that the law taking effect July 1, which he opposed because he said it lacked teeth, would not take existing facilities away from bad operators, he said.

Assemblymember Wood’s spokesperson, Cathy Mudge, said he was not aware of the settlement and would not be able to comment on it yet. “This is an important issue to him and he will be asking CDPH for more information,” she said in an email.

Assemblymember Muratsuchi’s office did not respond to an email seeking an interview.

The new law still has value going forward because it will apply to new cases, said Dr. Michael Wasserman, a geriatrician and chair of public policy for the California Association of Long Term Care Medicine.

“I think (it) was meant to keep the type of licensing issues that have occurred in the past from ever happening again,” he said.