WKRC out of Cincinnati reported the guilty plea of Judith Ney, a manager for Meadowbrook Care Center nursing home for stealing more than $311,000 from the business.  Ney pleaded guilty to an aggravated theft charge. Ney was the payroll administrator for Trinity Health Care, which owns the Meadowbrook Care Center.  From 2007 though 2010, Ney would keep employees on the payroll for a couple of weeks, even after they left their jobs. She then deposited the paychecks into her own bank accounts.


The Palm Beach Post News recently reported the whistleblower lawsuit alleging Medicare fraud at Boca Raton Regional Hospital.  The former employee accuses the hospital of bilking Medicare of at least $2 million.  Jeannette Lavoie claims hospital administrators intentionally used the wrong billing code to collect far more federal money for treating patients with heart problems than regulations allow. 

Lavoie was director of case management at the hospital when she became concerned that the health care facility wasn’t properly reporting whether patients who received pacemakers, cardiac stents, angioplasties or other heart procedures were being treated on an inpatient or outpatient basis.  In a random review of 30 patient charts, the department found 27 errors.  The lawsuit was filed under the False Claims Act, which allows citizens to sue to recover money for the government.

Under the act, the hospital could be forced to pay three times the amount it overbilled Medicare. Lavoie could recover as much as 30 percent of whatever damages the hospital is forced to pay.

When she brought her findings to hospital administrators, she claims they expressed confidence auditors wouldn’t uncover the fraud.


"We look forward to showing there was no violation of the law in court," he said.

Ken Connor has written another excellent article on elder care for the Center for a Just Society

GOP presidential hopefuls – most notably Newt Gingrich and Rick Perry – have been attempting to derail Golden Boy Mitt Romney’s campaign momentum by attacking his background as a venture capitalist, deriding as “vulture capitalism” the practice of acquiring businesses through leveraged buyouts and attempting to increase their value through cutting costs, laying off workers and stripping out assets. For many staunch, laissez-faire loving Republicans these criticisms have been deemed an attack on capitalism itself. The free market is all about competition, after all, and when a company ceases to be effectively competitive the choice is to either shut the doors and call it quits or do what needs to be done to right the ship. For a self-professed economic conservative to smear a man’s professional reputation by painting him as an unscrupulous “vulture” is at best a political cheap shot, at worse an act of ideological blasphemy.

Or is it?

Though few people are aware of it, the nursing home industry is a classic example of a sector where “vulture capitalism” is destroying lives. With the graying of America, Wall Street is finding the nursing home sector to be increasingly attractive. Private equity firms are displacing public corporations and mom-and-pop operators and moving into the ownership and operation of nursing homes. This trend has proven disastrous for nursing home residents, resulting in poorer quality care and increased violations of health and safety regulations.

These private equity investors cum “health care providers” seek to improve profitability by cutting costs, most notably labor costs. And since nursing staff represents the biggest expense in a nursing home’s budget, that’s where most of the cuts come from. The obvious problem with this tactic is that the nursing home industry is a service intensive industry. You can’t turn and reposition immobile residents without staff, and if you don’t turn and reposition these folks every two hours they develop festering bed sores. You can’t feed or provide fluids to dependent residents without adequate staff, and when you don’t they become malnourished and dehydrated. You can’t provide incontinence care without staff, and when you don’t residents develop painful and embarrassing infections. The evidence shows an increase in all of these problems with the advent of private equity capital in the nursing home industry.

There is nothing wrong with making a profit of course, and there’s nothing inherently wrong about trying to make a profit in the eldercare industry. But it is wrong to secure those profits at the expense of the clientele. Part of being a responsible corporate citizen, after all, is following through on your professional commitments in a conscientious and ethical manner. This is particularly important when your “business” consists of providing an environment of care, comfort, and dignity for men and women in the twilight of life.

The irony is that few people have been enablers of these practices more than Gingrich and Perry, who under the guise of “tort reform,” have fostered policies that ensure that corporate predators are not required to fully account for their wrongdoing. Governor Perry’s Texas is home to some of the nation’s more draconian tort reform measures and Gingrich has long been a champion of similar policies, though recently he’s attempted to distance himself from this position.

But principle doesn’t seem to stand in the way of these fellows. That was then and this is now. Given the bitter attitude that most Americans feel for Wall Street and Big Business in the wake of the financial meltdown and subsequent recession, their calculus seems to be that there is more political advantage to be gained by demonizing their former benefactors. That Wall Street has clearly cast its lot with Romney at this point might also play a role in their decision to play the populist card despite their Blue Blood roots.

As for those who are quick to label as heretics those conservatives with the nerve to question the ethics of “vulture capitalism” it is important to understand that merely calling into question unethical business practices does not equate to an attack on the merits of capitalism. Business is no less subject to the rule of law and ethical scrutiny than any other aspect of life. To suggest that capitalism is not subject to either law or ethics invites predatory and destructive practices. Wasn’t the Wall Street meltdown, fueled by the unscrupulous practices of enterprises like Fannie Mae, Freddie Mac, Lehman Brothers, and others all the evidence we need of the destruction wrought by practitioners of “vulture capitalism?” How quickly we forget.

Meanwhile, the practices of predatory capitalists in the nursing home arena continue to harm our institutionalized elderly. Who will speak up for them?

Ken Connor is an attorney and co-author of “Sinful Silence: When Christians Neglect Their Civic Duty” He is also Chairman of the Center for a Just Society.


MSNBC had a great article on Reuter’s investigation into the use of shell companies to steal taxpayer funds from Medicare.  The story had many examples including a fake AIDS clinic in Miami which had bilked Medicare of more than $4.5 million. The scheme involved forming at least 29 other shell companies — paper-only firms with no real operations. The shells functioned as a vital tool to hide the Medicare deceit. Hundreds of others have used the veil of corporate secrecy to help steal hundreds of millions of dollars from one of the nation’s largest social service programs, a Reuters investigation has found. Basic checks by Reuters of Medicare providers show shell companies remain prime tools in perpetrating fraud. Simply by reviewing the incorporation records of Medicare providers in two buildings there, reporters uncovered information that one government official said could prompt "a serious criminal investigation" of some of the companies.
The fraud rings merge stolen doctor and patient data under the auspices of a shell company and then bill Medicare as rapidly as possible. Other shell companies are often layered on top to camouflage the fraud. Some of the shells purport to be billing companies; they form a buffer between the sham entities and Medicare. Others pay kickbacks to doctors and patients who sign off on bogus medical claims or sell their Medicare ID numbers to enable the shell company to bill the government. Still other shells act as fronts to launder the profits.
The key to this kind of fraud, known as a "bust-out" scheme, is for each of the fake companies to bill as much as possible before authorities catch on.
Last year, "improper payments" resulted in $48 billion in losses to the Medicare program, nearly 10 percent of the $526 billion in payments the program made, according to a Government Accountability Office report last March. Exactly how much of those payments moved through shell companies remains unclear. That’s because neither Medicare nor law enforcement agencies systematically track how often such companies are used in the frauds. And not until 2007 did the federal government form task forces to exclusively target Medicare fraud rings.
But recent indictments issued by those task forces indicate that shell-perpetrated fraud is pervasive. Reuters examined indictments issued since 2007 in the eight states that have Medicare fraud task forces in place. The examination found that shell companies were involved in more than a third of the fraudulent Medicare claims identified by the task forces — $1 billion of the $2.9 billion uncovered.
The indictments and other cases indicate that at least 300 shell companies posed as legitimate Medicare providers and billing firms, or laundered payments from Medicare. Shell companies remain a significant tool of deception to swindle hundreds of millions of dollars from taxpayer-supported Medicare.
In one of the largest cases of Medicare fraud ever charged, the operation was enabled by shell companies. In October 2010, federal prosecutors indicted 44 members of an Armenian organized crime ring. Their network, which stretched from Los Angeles to Savannah, Ga., used 118 shell companies in 25 states to pose as Medicare providers, billing more than $100 million, according to federal indictments in three states.
The difficulty of spotting — and stopping shell-perpetrated Medicare fraud is compounded by incorporation laws that vary from state to state and make forming fake businesses easy.
Intentionally submitting false corporate information constitutes fraud in every state. But none check the validity of corporate records when a company incorporates or collect information on the "beneficial owners" — those with a controlling interest in the corporations.
In Florida, FBI agents say almost every Medicare fraud scheme involves shell companies.
As part of their investigation, Reuters asked analysts from the Recovery Accountability and Transparency Board to use its software programs to examine the companies. The board monitors $787 billion in stimulus funds for fraudulent activity using sophisticated computer systems; last year, it had worked with Medicare officials to look for patterns of fraud.
Devaney, who is also the inspector general for the Department of the Interior, says the board’s analysis of the 26 Medicare providers led investigators to another 15 Medicare entities associated with those providers. He believes the findings could prompt a "serious criminal investigation."
CMS, which runs Medicare, says it doesn’t have the resources to analyze incorporation records for each of its 1.5 million providers and suppliers. Those records are separately maintained by each state. Medicare claims filed by each of the fake clinics were accompanied by all the right doctor, patient and treatment codes, say law enforcement officials and fraud investigators.
CMS says it has been handcuffed in combating shell companies that posed as legitimate providers because it lacked the resources to extensively review the backgrounds and addresses of providers. Less than 5 percent of all payments were subjected to audits.
The healthcare reform law passed in March 2010 allocates $350 million over the next 10 years to fight fraud in Medicare and Medicaid, its sister program for the poor. The law also imposes stiffer sentences for the scam artists. CMS is installing new fraud-fighting computer analytics to check the backgrounds of doctors and providers to ensure, for example, that Medicare ID numbers aren’t being stolen. The programs may help connect the people to the corporations they’re running about 75 percent of the time, says Peter Budetti, deputy administrator and director of program integrity at CMS.
New providers also will be subject to automated enrolment screening. Their names will be checked against databases that include the federal government’s banned contractor lists, state and federal criminal dockets, and state licensing records. Although the new screening system will have access to state incorporation records, CMS acknowledges it will still struggle to pierce the shell-company veil because states don’t collect information on the real owners when corporations are formed or sold.

The July 2011 edition of the Insurance Forum shows that insurance executives were paid hundreds of milions of dollars.  The findings were from the SEC, Nebraska and NY Insurance Dept. 114 executives received more than $5 million.  30 reported more than $10 million. 116 made between 1 to 5 million.  Ridiculous.

Americans for Insurance Reform (AIR), a coalition of nearly 100 consumer and public interest groups representing more than 50 million people, has produced a major new study called “Repeat Offenders: How The Insurance Industry Manufactures Crises And Harms America.” The study exposes how the property/casualty insurance industry creates periodic crises where insurance becomes unaffordable or unavailable for everyone from doctors to small businesses to local governments. These crises are known as “hard markets.”

Written by J. Robert Hunter and Joanne Doroshow , Repeat Offenders finds that in the last few months, industry executives have been pushing the industry, including pressuring their own competitors, to start raising rates again for businesses and professionals, setting the stage for a new liability insurance crisis in America.

“We have asked insurance regulators to stop earlier crises but they have balked and not acted. This time, they must act to stop unwarranted price gouging,” said Hunter.

Repeat Offenders finds that hard markets, when premiums suddenly skyrocket as they have done three times in the past 35 years, are caused by “a combination of the industry’s own boom and bust economic cycle, anti-competitive (yet legal) underwriting practices, unique and opaque accounting policies, and virtually unchecked power when it comes to regulation of insurance rates.” Moreover, say the authors, “while the existence of this self-made cycle is clear to insurance industry insiders, insurers often publicly deny the cycle’s existence while their lobbyists try to take advantage of skyrocketing rates to push for so-called ‘tort reform.’” However, they say, “these cycles are national in scope and occur in every state irrespective of a state’s ‘tort’ law. Because the legal system is not responsible for creating hard markets, enactment of so-called ‘tort reform’ has done nothing to prevent them.” The authors quote numerous insurance insiders freely discussing this cycle and never referencing lawsuits or tort system costs as a cause for rate hikes.

Co-author Joanne Doroshow said, “Businesses in this country have paid and will continue to pay dearly for this industry’s mismanagement and lack of unaccountability. Insurance executives get away with pointing their fingers everywhere but at their own actions. This country has had enough of the insurance industry blame game and the endless cycle and the periodic crises that accompany it. Remedies that do not specifically address the insurance industry’s practices will fail to stop these volcanic price jumps, which are threatening the country once again.”

Repeat Offenders also finds that:

This country has been in a “soft” insurance market since 2006, with rates stable and dropping in every state whether or not “tort reforms” have been enacted. However, since early 2011, the insurance industry has been trying to push the country into a new hard market.

Hurricane Irene in late August 2011, which was greatly hyped by the Weather Channel but wasn’t nearly the catastrophe that was expected, has been used by insurance industry representatives to push the country into a new hard market. This is despite the fact that the industry is perfectly able to handle those claims in addition to having stored away excess profits for decades so that today, it is in an all-time safe position. Creation of a hard market now would be purely for the purpose of price-gouging buyers of insurance, particularly commercial lines insureds.

Over the last few months in particular, industry executives – including unregulated foreign reinsurers – have been boldly declaring to the entire industry that it is time to end the soft market (including pressuring their own competitors to start raising rates), setting the stage for a new liability insurance crisis in this country.

Doroshow said that the group is sending the report to all 50 state insurance commissioners, the new Federal Insurance Office and key members of Congress, hoping for urgent action. AIR is asking for:

–Meaningful insurance data disclosure to state authorities, allowing officials to substantiate or refute allegations about the financial health of the industry and the civil justice system.
–States to enact stronger regulation and oversight of the industry and to repeal anti-competitive laws.
–Congress to repeal the federal anti-trust exemption under the McCarran-Ferguson Act and at a minimum, the new Federal Insurance Office (FIO) to review the impact of the McCarran-Ferguson Act on consumers.



ABC News had an article about new report released by the inspector general of the U.S. Department of Health and Human Services found that more than 80 percent of hospital errors go unreported by hospital employees.  Hospital incident reporting systems captured only an estimated 14 percent of the patient harm events experienced by Medicare beneficiaries. Hospitals investigated those reported events that they considered most likely to lead to quality and safety improvements and made few policy or practice changes as a result of reported events. Hospital administrators classified the remaining events (86 percent) as either events that staff did not perceive as reportable (61 percent) or as events that staff commonly report but did not report in this case (25 percent).   In order to be paid by Medicare, hospitals are required to track and analyze medical errors. But organizations that inspect hospitals loosely regulate hospital tracking records, the study said.

Also, many hospital employees may not recognize "what constitutes patient harm," or they may not realize that particular events harmed patients and should be reported, according to the report.

All of the hospitals  reviewed had incident reporting systems designed to capture events; hospital administrators we interviewed indicated that they rely heavily on the systems to identify problems. Hospital accreditors reported that they do not investigate event collection methods, such as incident reporting systems, unless evidence of a problem emerges through the survey process.

The report, which looked at data from hospitalized Medicare patients, also found that most hospitals where errors were reported rarely changed their policies and practices to prevent repeat errors.  The errors included overused or wrong medications, severe bedsores, hospital-based infections and even patient death.

The national report looked at nearly 300 adverse patient events acquired from medical records and traced the records back to its respective hospitals to see whether the hospitals had identified medical error. The report found very few hospitals did.

The study is one of many finding similar results. In April 2011, a study released in the journal Health Affairs found that one third of hospital visits will lead to hospital related injuries, and as many as 90 percent of hospital errors are missed by current surveillance systems.  Forty-four percent of the errors identified were preventable, Dorrill said.

But beyond staff education, family members and patients themselves should be educated too, said Ehrenclou, who authored the book, "Critical Conditions: The Essential Hospital Guide to Get Your Loved One Out Alive."


Senior Housing News reported that many SNF operators are finding ways to stay profitable and mitigate the effects of Medicaid cuts.  "Earnings conference calls for senior housing operators and health care real estate investment trusts (REITs) revealed focused action to diversify portfolios, increase private-pay ratios, reduce costs and cut down on all unnecessary expenses."  I wonder how much of these "unnecessary expenses" are for patient care and quality of life.

Many operators felt the strain of the cuts, and some, like Five Star Quality Care, based their strategy on reducing Medicare dependency.

“As we’ve been very active in growing the company in the private pay space, the EBITDA we expect to receive from our 2011 acquisitions will help to offset majority of the Medicare rate cut,” said Bruce Mackey, Jr., president and CEO of Five Star.  Less than 15% of Five Star’s senior living revenues come from Medicare, and the company says this will continue to decline as it grows its private pay portfolio.

Some operators have reacted to the cuts by lowering their revenue outlook, like Sun Healthcare Group.

“Our analysis demonstrates that the rate reductions imposed by the CMS final rule have far exceeded the stated goal of parity with prior Medicare rates, and we remain concerned that these reductions may have serious consequences for our entire industry,” said William A. Mathies, chairman and CEO of Sun Healthcare Group, in a statement. “That said, we are moving expeditiously to mitigate the impact of the rule on our operations while retaining our focus on our primary mission of providing quality care.”

In terms of REITs, many spoke of the need for careful underwriting, planning ahead, and diversified portfolios.

“To protect against the uncertainty of SNF Medicare reimbursement we are underwriting with 13% cuts from the CMS fiscal year 2011 Medicare run-rate,” said Justin Hutchens, CEO and president of National Health Investors REIT, in an interview with the National Investment Center (NIC). “This takes into account the 11.1% cuts that have occurred and a potential 2% more which we believe should be contemplated in underwriting, though this is not a certain outcome.”

At HCR ManorCare, operators wasted no time in making efforts to mitigate the effects of the rate change once they were announced in August, according to James Flaherty, the president and CEO of HCP, Inc., which acquired the nursing home nearly a year ago.

“They had their action plan set up, and depending on the outcome of that CMS directive and when it was communicated, they went into implementation mode immediately,” said Flaherty in an earnings call. “I think all those measures were put in place with an effective date of Sept. 1, so they were all over this.”

For its part, Ventas CEO Debra Cafaro said in an earnings call that the REIT has “strategically invested with a goal of diversifying its portfolio and increasing its private-pay revenues. We continue to believe that our skilled nursing rates are well covered and should provide sustainable cash flow to Ventas,” she said.

Going forward, Ventas president Raymond Lewis stated the REIT’s intention to remain involved in the skilled nursing industry and make acquisitions despite recent headwinds, as it’s going to be “an important part of the healthcare system.”

“I think people are very internally focused on making sure that they… focus their efforts on mitigating the cuts, that they are working on their operations rather than thinking about monetizing their portfolio in a relatively less certain environment,” said Lewis. “As this plays out, there may actually be some good buying opportunities, and we’re going to keep our eyes peeled for that.”


The Philadelphia Inquirer had an article on the profitability of the senior housing sector driven by investment companies.  In the third quarter of 2011 alone, 39 senior housing deals worth $5.5 billion were completed, primarily by real estate investment trusts that specialize in housing for the elderly. That figure includes independent-living and assisted-living communities, but not nursing homes.

The total value of senior housing deals in the quarter ended Sept. 30 was greater than the combined total in the previous two full years, according to the National Investment Center for the Seniors Housing & Care Industry in Annapolis, Md.

Driving the consolidation in senior housing is the ability of real estate investment trusts to borrow cheaply in conjunction with the resilience of senior housing during the recession, giving investors confidence that strong returns will continue.

Steve Monroe, editor of the trade newsletters SeniorCare Investor and Senior Care Acquisition Report in Norwalk, Conn., cited the relatively small drop in the senior housing occupancy rate during the real estate collapse of recent years as reason for its attractiveness to investors.

Senior housing includes independent living and assisted living, which is for the elderly who can no longer live safely on their own but who do not need the more intense level of care provided in nursing homes.  For investors and operators, assisted living has an advantage over nursing homes in that it is not very dependent on government funding.  Assisted-living residents typically use private resources to pay rent.



Press Release from Cambridge Realty.

The process of applying for an FHA-insured HUD 232 loan may get easier for operators of nursing home and assisted living facilities in many areas of the country, healthcare funding expert Jeffrey A. Davis reports.

Davis says the House Subcommittee on Transportation, Housing and Urban Development (THUD) has inserted language into an appropriations bill that would eliminate the need for Real Estate Assessment Center (REAC) inspections when this requirement effectively duplicates state and local health and safety code inspections.

“This is good news for those who will benefit from efforts to further streamline the process that qualifies borrowers for popular HUD 232 financing,” he said.

Davis is Chairman of Cambridge Realty Capital Companies, one of the nation’s leading FHA-approved HUD 232 lenders. According to a report by the Committee on Healthcare Financing, a healthcare industry lobbying group, the Congressional subcommittee concluded that REAC inspections “may be duplicative and at times even contradictory.”

In recommending the change, subcommittee Chairman Tom Latham (R-Iowa) noted that healthcare facilities with mortgages insured under Section 242 of the National Housing Act, which funds acute care hospital facilities, are not subject to REAC inspections. Instead, the HUD agency has access to inspection reports on the facilities made by state and local authorities.

The Congressional Subcommittee is seeking a similar approach for FHA-insured HUD Section 232 loans, Davis said.

According to the report, the Subcommittee has directed the Department to issue regulations limiting REAC inspections for facilities insured under Section 232 of the National Housing Act. But the change would not apply when state or local government “does not provide for sufficient inspections in accordance with the guidance of the Centers for Medicare & Medicaid Services (CMS) or applicable state or local law.”

THUD has directed FHA to report back to Congress by December 31, 2011 with a status report on efforts to limit REAC inspections.

Davis said the Committee on Healthcare Financing report addresses REAC’s long history in the Section 232 program and suggests implementation of the directive could take time. But the HUD staff should be receptive to the change, he believes.

“Section 232 loans already are inspected and regulated far more than the multifamily rental properties REAC was originally designed for,” he noted.

Cambridge is one of the nation’s leading senior housing/healthcare lenders and one of the top FHA-approved HUD 232 lenders in the country. The company’s principal investment strategy involves direct property acquisitions, joint ventures and sale leaseback transactions through its Cambridge Investment and Finance Co. business unit.

Cambridge is the creator of The Signature Experience™, a four-step process designed to transform the traditional lender/borrower relationship and identify “ideal” capital solutions for worthy projects. The company has a national origination office in Los Angeles, and numerous correspondent and brokerage relationships nationwide.

Cambridge publishes the bi-monthly e-PULSE!(R) electronic newsletter, which delivers company news and feature stories via e-mail to corporate friends and clients. Additional information is available on the Cambridge website, www.cambridgecap.com, and Cambridge can be reached at (312) 357-1601 or via e-mail to info@cambridgecap.com.