The Tennessean reported that the national for profit chain National HealthCare Corp. agreed to buy six nursing homes — including three in the Nashville area — for $21 million from a related entity and its biggest landlord, National Health Investors.  NHI was created in 1991 to own NHC properties and has since expanded to owning other medically-related facilities beyond those that the nursing home chain runs.

In addition, Murfreesboro-based real estate investment trust NHI has extended a lease with the company’s biggest tenant, NHC, for 41 facilities — 38 nursing homes and three independent living facilities.

Separately, NHI also sold a 148-unit senior living facility to that facility’s operator Sunrise Senior Living Inc. for $23 million.  NHI referred to the six nursing homes it has an asset purchase service agreement to sell to NHC as older facilities. NHC’s spokesman Gerald Coggin considers them well-operated with high occupancy rates in great markets.

 

Several media outlets have reported that national health spending has remained stable as a share of the economy since Obamacare was enacted.   Spending increased overall to $2.7 trillion in 2011, or an average of $8,700 for every person.  The rate of increase in health spending, 3.9 percent in 2011, was the same as in 2009 and 2010 — the lowest annual rates recorded in the 52 years the government has been collecting such data.   National health spending grew at roughly the same pace as the overall economy, without adjusting for inflation, so its share of the economy stayed the same, at 17.9 percent in 2011, where it has been since 2009.

Kathleen Sebelius, the secretary of health and human services, said that “the statistics show how the Affordable Care Act is already making a difference,” saving money for consumers. Medicaid spending grew less quickly in 2011 than in the prior year, as states struggled with budget problems. But Medicare spending grew more rapidly, because a one-time increase in Medicare payments to skilled nursing homes.

A sign that the effects of the recession have begun to fade is the percentage of people with private health insurance increased 0.5 percent in 2011 after losing ground the previous three years.
And the share of Americans with health coverage is expected to grow substantially in 2014, when some states will expand their Medicaid programs, and federal subsidies will be offered through insurance exchanges under the Affordable Care Act.  More people gained health insurance as a result of the health law’s requirement that young adults can stay on a parent’s plan until age 26.

 

Health care spending is highly skewed toward the sickest people. Five percent of patients account for nearly half the total spending in any given year.  Prevention and early treatment are the keys to keeping health care spending low.

See articles at The Washington Post, The N.Y. Times, The Wall St. Journal, and Politico.

The Commercial Observer had an interesting article on the recent litigation involving Sava owners and operators and how expert accountants were needed to explain the complex web of corporate shell games. Two top forensic accountants were retained in a decisive battle in a legal war for control of about 170 nursing homes.

The trial in New York Supreme Court had its origins eight years ago, when real estate investor Ruby Schron teamed up with his lawyer, Leonard Grunstein, in a labyrinthine $1.3 billion leveraged buyout that created SavaSeniorCare. At issue for the two expert witnesses: the exact whereabouts of $100 million.”  In the nursing home case, the accounting helped determine that Mr. Schron could acquire the company without any further investment by simply assuming the debt. On Mr. Schron’s side was Harvey R. Kelly. Providing expert testimony for Defendants was David S. Williams. The rival accountants’ task was to sort out transactions among some 30 people and entities involved in the buyout, as well as the movement of money through an escrow account from entities on Mr. Schon’s side of the deal to Mr. Grunstein and his companies, to establish whether, and how much of, the money was lent.  The case, which hinged on how much money from a $100 million loan by Mr. Schron actually found its way to Sava. The accountants in Schron v. Grunstein were more than $110 million apart in their estimates of how much money was lent.

“In 2004, Mr. Grunstein and investment banker Murray Forman approached Mr. Schron with a proposal to buy Mariner Health Care Inc., a public company that operated more than 250 nursing homes and owned real estate associated with about 170 of them.”  “Grunstein and Forman proposed a complex transaction employing a ‘PropCo/OpCo’ structure whereby Old Mariner’s real estate would be separated from the nursing home operations.”

A newly formed company, National Senior Care Inc., bought all of the shares of Old Mariner, then sold the real estate to one of Schron’s companies, SMV. That entity then leased the properties to another newly formed company, SavaSeniorCare, controlled by Mssrs. Grunstein and Forman. National Senior Care retained the operations of about 100 nursing homes located on properties that were leased from third parties.

While neither Mr. Grunstein nor Mr. Forman put any of his own money into the deal, Mr. Schron raised about $1.1 billion in financing, acquiring real estate valued at about $800 million. According to documents signed at closing, the financing included a $100 million loan to the owner of Sava that gave him an option to acquire the company, the judge wrote.

Mr. Kelly said a promissory note signed by both sides at the time of closing—and amended and restated in 2006 when a second, $20 million loan was made—was the best evidence that the loan existed. And he said documents showed that the nursing home company had made use of the money, including making a $65 million loan to the “New Mariner” entity on the day of the transaction.

Documents included “audited financial statements of SavaSeniorCare that an outside independent audit firm rendered the opinion that [an entity controlled by Mr. Grunstein] had contributed $100 million,” he said. “So, you’ve got years’ worth of very consistent documents demonstrating that. I find that the most credible evidence.”

The biggest problem Murray Forman and Leonard Grunstein had was their obvious lack of credibility.  “Apart from the fact that all of the documentary and non-party witness evidence contradict their testimony, their evasive answers and manner on the witness stand left the court with a firm belief that both gave testimony that was less than candid,” the judge wrote. He ordered the defendants to proceed with the transfer of control of the company “without further delay.”

 

MSNBC Business reported the fascinating story from Reuters about a house in Cheyenne, Wyoming that is used to protect corporations from paying their fair share of taxes.  More than 2,000 companies are registered at a 1,700-square-foot brick house at 2710 Thomes Ave. The story exemplifies the problem with American tax policy and how corporations including national nursing home chains evade liability.  Excerpts below:

A Reuters investigation found the house is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.

Wyoming Corporate Services will help clients create a company, and more: set up a bank account for it; add a lawyer as a corporate director to invoke attorney-client privilege; even appoint stand-in directors and officers as high as CEO. Among its offerings is a variety of shell known as a "shelf" company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity.

"A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy," the company’s website boasts. "A person you control… yet cannot be held accountable for its actions. Imagine the possibilities!"

All the activity at 2710 Thomes is part of a little-noticed industry in the U.S.: the mass production of paper businesses. Scores of mass incorporators like Wyoming Corporate Services have set up shop. The hotbeds of the industry are three states with a light regulatory touch-Delaware, Wyoming and Nevada.  The incorporation industry, overseen by officials in the 50 states, has few rules. Convicted felons can operate firms which create companies, and buy them with no background checks.

No states license mass incorporators, and only a few require them to formally register with state authorities. None collect the names and addresses of "beneficial owners," the individuals with a controlling interest in corporations, according to a 2009 report by the National Association of Secretaries of State, a group for state officials overseeing incorporation. Wyoming and Nevada allow the real owners of corporations to hide behind "nominee" officers and directors with no direct role in the business, often executives of the mass incorporator.

"In the U.S., (business incorporation) is completely unregulated," says Jason Sharman, a professor at Griffith University in Nathan, Australia, who is preparing a study for the World Bank on corporate formation worldwide. "Somalia has slightly higher standards than Wyoming and Nevada."

An estimated 2 million corporations and limited liability companies are created each year in the U.S., according to Senate investigators. The Treasury Department has singled out LLCs as particularly vulnerable to being used as shell companies, as they can be owned by anyone and managed anonymously. Delaware, Nevada and Wyoming had 688,000 LLCs on file in 2009, up from 624,000 in 2007.

Treasury and state banking regulators say banks have flagged billions of dollars in suspicious transactions involving U.S. shell companies in recent years. On June 10, a federal judge in Oregon ordered a company registered there to pay $60 million for defrauding a Ukrainian government agency through sham transactions involving shell companies. The civil lawsuit described a network of U.S.-registered shells connected to fraud in Eastern Europe and Afghanistan.

A growing niche in the shell business is shelf corporations. Like paper-only shells, which enable the secrecy-minded to hide real ownership of assets, shelf companies are set up by firms like Wyoming Corporate Services, then left "on the shelf" to season for years. They’re then sold later to owners looking for a quick way to secure bank loans, bid on contracts, and project financial stability. To speed up business activity, shelf corporations can often be purchased with established bank accounts, credit histories and tax returns filed with the Internal Revenue Service.

"They just slot in your names, and you walk away with the company. Presto!" says Daniel E. Karson executive managing director at investigative firm Kroll Inc. "The purpose is to conceal ownership."

On its website, Wyoming Corporate Services currently lists more than 700 shelf companies for sale in 37 states.  "If they’re signing a large contract, they may not want it to look like they’ve just formed a company," said Brett Melson, director of U.S. sales at Harvard Business Services. But he added: "Unsavory characters can do a lot of bad things with the companies."

Wyoming Corporate Services is run by Gerald Pitts, its 54-year-old founder and president. On paper, he is a prolific businessman. Incorporation data provided by Westlaw, a unit of Thomson Reuters, show that Pitts is listed as a director, president or principal for at least 41 companies registered at 2710 Thomes Avenue.  Another 248 firms name Edge Financial Inc., another incorporation service, as their "manager." Gerald Pitts is the president of Edge Financial, according to records on file with the Wyoming secretary of state’s office.

Companies registered at 2710 Thomes Avenue have been named in a dozen civil lawsuits alleging unpaid taxes, securities fraud and trademark infringement since 2007, a review of Westlaw data shows. State and federal tax authorities have filed liens against companies registered at the address seeking to collect more than $300,000 in unpaid taxes, according to Westlaw.

Among those registered at the little house in Cheyenne are two small companies formed through Wyoming Corporate Services that sold knock-off truck parts to the U.S. Department of Defense, according to a Reuters review of two federal contracting databases and findings from an investigation by the Pentagon’s Defense Logistics Agency. The owner of those firms, Atilla Kan, awaits sentencing on a 2007 conviction for wire fraud in a related matter.

Also linked to 2710 Thomes is former Ukrainian Prime Minister Pavlo Lazarenko who was once ranked the eighth-most corrupt official in the world by watchdog group Transparency International. He is now serving an eight-year jail term in California for a 2004 conviction on money-laundering and extortion charges. According to court records, that scheme used shell companies and offshore bank accounts to hide stolen Ukrainian government funds.

Court records submitted in Lazarenko’s criminal case and documents from a separate civil lawsuit, as well as interviews with lawyers familiar with the matter, indicate Lazarenko controls a shelf company incorporated in Cheyenne that owns an estimated $72 million in real estate in Ukraine through other companies including Capital Investments Group, registered at 2710 Thomes Avenue.  The dossier on Capital Investments Group claims that other directors of the alleged front companies include Lazarenko’s wife, son and mother-in-law.

Why use a shelf company? "To hide who they are and what they are doing.

The loopholes in U.S. disclosure of bank-account and shell-company ownership have drawn fire.

The U.S. was declared "non-compliant" in four out of 40 categories monitored by the Financial Action Task Force, an international group fighting money laundering and terrorism finance, in a 2006 evaluation report, its most recent. Two of those ratings relate to scant information collected on the owners of corporations. The task force named Wyoming, Nevada and Delaware as secrecy havens. Only three states – Alaska, Arizona and Montana – require regular disclosure of corporate shareholders in some form, according to the 2009 report by the National Association of Secretaries of State.

Shell companies remain a headache for law-enforcement authorities. An attorney can provide an extra shield. Cheyenne attorney Graham Norris Jr. tells prospective clients sent to him by WCS that he will create a company on their behalf. That way, he says, he can invoke attorney-client privilege-adding a layer of privacy anytime there is an inquiry about their identities.

The 2006 U.S. Money Laundering Threat Assessment, prepared by 16 federal agencies, devotes a chapter to the ways U.S. shell companies can be attractive vehicles to hide ill-gotten funds. It includes a chart to show why money launderers might like to create shells in Wyoming, Nevada or Delaware, which offer the highest levels of corporate anonymity.

 

Measures for Public Reporting and Quality Improvement to be Used in Nursing Home Compare

To improve the quality of care in nursing homes for the 1.4 million Americans who currently reside in facilities across the country, the National Quality Forum (NQF) has endorsed 21 measures to be used to care for both long-term residents and short-stay patients. The NQF-endorsed measures will be used in the Centers for Medicare & Medicaid Services’ Nursing Home Compare, an online database for consumers to compare the care provided in more than 17,000 nursing homes across the country.

In 2004, NQF endorsed an initial set of measures for publicly reporting care in nursing homes. With the completion of the current project, the 17 measures that were previously endorsed will be retired and, in some instances, replaced by the newly endorsed measures. These measures were recently retired in the transition to CMS’ updated data collection instrument, the Minimum Data Set 3.0 (MDS 3.0).

“Choosing where to go for long- or short-term care in a nursing home is an incredibly important decision,” said Janet Corrigan, NQF president and CEO. “Patients and their families need reliable information on the quality of care being provided in skilled nursing facilities so they can make informed decisions about the place they will receive care on a daily basis. The quality data derived from these measures will provide important information about infection rates, patient care experiences, and the general health of residents in nursing homes across the country.”

The 21 NQF-endorsed nursing home measures assess patient outcomes and the patient’s own experience of care for both long-term residents and short-stay patients. The measures address falls, infections, pressure ulcers, and the general health of residents and patients. Examples of endorsed measures include:

• percentage of patients who received influenza and pneumococcal vaccinations;
• percentage of residents with urinary tract infections;
• percentage of residents who need increased help with activities of daily living; and
• patient experience of care surveys for both long-term residents and short-stay patients.

NQF’s Steering Committee on Nursing Homes was co-chaired by David Gifford, MD, MPH, Director, Rhode Island Department of Health, and Christine Mueller, PhD, RN, FAAN, Associate Professor and Chair, University of Minnesota School of Nursing.

“These measures will help consumers better understand and compare quality of care when selecting nursing homes and will help them to monitor care once they or a family member is in a nursing home,” said Dr. Gifford. “Nursing homes can also use these measures to benchmark how they are doing compared to others in addressing important nursing home quality of care issues.”

NQF is a voluntary consensus standards-setting organization. Any party may request reconsideration of the 21 endorsed recommendations, in whole or in part, by notifying NQF in writing no later than April 1, 2011. (To access the appeals form, go to the Nursing Homes project page, then go to the section on appeals and click on the link to the standards directory.) For an appeal to be considered, the notification must include information clearly demonstrating the appellant has interests that are directly and materially affected by the NQF-endorsed recommendations and that the NQF decision has had (or will have) an adverse effect on those interests.

Endorsed Measures

• Physical therapy or nursing rehabilitation/restorative care for long-stay patients with new balance problem (RAND)
• Percent of residents experiencing one or more falls with major injury (long stay) (CMS)
• The percentage of residents on a scheduled pain medication regimen on admission who report a decrease in pain intensity or frequency (short stay) (CMS)
• Percent of residents who self-report moderate to severe pain (short stay) (CMS)
• Percent of residents who self-report moderate to severe pain (long stay) (CMS)
• Percent of residents with pressure ulcers that are new or worsened (short stay) (CMS)
• Percent of high-risk residents with pressure ulcers (long stay) (CMS)
• Percent of residents assessed and appropriately given the seasonal influenza vaccine during the flu season (short stay) (CMS)
• Percent of residents assessed and appropriately given the seasonal influenza vaccine (long stay) (CMS)
• Percent of residents assessed and appropriately given the pneumococcal vaccine (short stay) (CMS)
• Percent of residents assessed and appropriately given the pneumococcal vaccine (long stay) (CMS)
• Percent of residents with a urinary tract infection (long stay) (CMS)
• Percent of low-risk residents who lose control of their bowels or bladder (long stay) (CMS)
• Percent of residents who have/had a catheter inserted and left in their bladder (long stay) (CMS)
• Percent of residents who were physically restrained (long stay) (CMS)
• Percent of residents whose need for help with activities of daily living has increased (long stay) (CMS)
• Percent of residents who lose too much weight (long stay) (CMS)
• Percent of residents who have depressive symptoms (long stay) (CMS)
• Consumer Assessment of Health Providers and Systems (CAHPS®) Nursing Home Survey: Discharged Resident Instrument (ARHQ)
• Consumer Assessment of Health Providers and Systems (CAHPS®) Nursing Home Survey: Long-Stay Resident Instrument (ARHQ)
• Consumer Assessment of Health Providers and Systems (CAHPS®) Nursing Home Survey: Family Member Instrument (ARHQ)

The National Quality Forum (NQF) operates under a three-part mission to improve the quality of American healthcare by:
• building consensus on national priorities and goals for performance improvement and working in partnership to achieve them;
• endorsing national consensus standards for measuring and publicly reporting on performance; and
• promoting the attainment of national goals through education and outreach programs.

 
Consumer Voice Statement for House Hearing on Medicaid:

Preserve Protections for People Receiving Long-Term Care

 

 

The Consumer Voice released the statement below for today’s House Energy and Commerce Committee hearing on Medicaid. Governors Haley Barbour (R-MS), Gary Herbert (R-UT), and Deval Patrick (D-MA) will testify about "the burdens imposed by requirements [in the health care reform law] to maintain their Medicaid eligibility in return for federal dollars," according to the committee’s press release.

 

The Consumer Voice’s statement reflects advocates’ concern that budget deficits lead to state demands for Congress to give them more flexibility in how they administer Medicaid or even turn it into a block grant with few federal guarantees of coverage or protections for beneficiaries. The loss of federal mandates is partricularly threatening to consumers when combined with budget cuts and provider demands for less regulation. In 1995, Congress passed a Medicaid block grant that left only the shell of the Nursing Home Reform Law intact. The bill was vetoed by President Clinton.

 

 

 

Medicaid is not only a safety net but also a lifeline for more than 3 million people who have chronic, severe disabilities and incomes too low to pay for the supports they need to perform routine daily activities. Almost 1 million Medicaid beneficiaries receive long-term care in nursing homes.

 

The National Consumer Voice for Quality Long-Term Care (formerly NCCNHR, the National Citizens’ Coalition for Nursing Home Reform) has represented long-term care consumers for more than 35 years. We are deeply concerned about calls for flexibility in federal regulations as a solution to the budget problems now affecting many states, because historically, this budget "solution" has threatened access to home and community-based services and public oversight of nursing homes. When states reduce their Medicaid budgets, home and community-based services are usually the first to be cut, forcing recipients into more expensive nursing home care. But in 1995, deficit reduction also became a rationale for stripping Medicaid of rights and protections for those who live in nursing homes, including annual inspections; the minimum 75 hours of training for nurse aides, who provide most of the care; and the federal government’s authority to ensure compliance. Although that bill was vetoed, the nursing home industry is currently supporting a proposal to reduce thorough inspections in some nursing homes to as little as every three years.

 

In 2007, the Consumer Voice published "The Faces of Neglect: Behind the Closed Doors of Nursing Homes," which put a human face on the suffering that results from poor care. Shortly, we will release a new report called "The High Cost of Poor Care: The Financial Case for Prevention in American Nursing Homes." The report uses recent research to illustrate the high price paid for failure to prevent such common occurrences as pressure sores, falls, malnutrition, dehydration, incontinence, and avoidable hospitalizations and illustrates the savings generated by providing good, preventive care.

 

Consumers recognize the difficult position of federal and state officials as they wrestle with budget deficits and revenue shortfalls. However, we urge Congress to weigh the human and financial impact of reducing or even eliminating services and federal protections that took decades to put in place. The costs for America’s elderly and persons with disabilities and their families are simply too high to ignore.

The National Consumer Voice for Quality Long-Term Care (formerly NCCNHR) is a 501(c)(3) nonprofit membership organization founded in 1975 by Elma L. Holder that advocates for quality care and quality of life for consumers in all long-term care settings.

 

Boston.com reported a Rhode Island proposal to create a database to help conduct background checks on nursing home employees and other health care workers serving elderly patients.  The state has up to two years to establish the criminal convictions database and link it to a national listing.

Assistant Attorney General Jim Dube says Rhode Island was promised more than $1.3 million in the federal health care reform bill for the project. Nursing homes and other health care facilities for the elderly often work with the attorney general’s office for employee background checks — but those reviews disclose only arrests and convictions within Rhode Island. The proposed database would expand those reviews to convictions in other states.

 

Today I want to write about the people and entities involved in this kickback scheme. 

Murray Forman is the principal owner and decision maker for hundreds of nursing homes throughout the country including the Mariner, SavaSeniorCare, GranCare, and THI/Fundamental chains. Leonard Grunstein is a real estate lawyer and partner at Troutman & Sanders.  Rubin Schron is an owner of the Woolworth Building.

The Atlanta Journal Constitution had an article about the trio above.  Leonard Grunstein is a prominent attorney at Atlanta-based Troutman Sanders named in a federal complaint charging he and several other parties, including two companies with Atlanta ties, were involved in a $50 million kickback scheme to steer nursing home patients to OmniCare.  Leonard Grunstein, a New York-based partner at Troutman Sanders and leader of the firm’s real estate capitalization and investments practice groups, was named in the complaint.  In an e-mail statement, Troutman Sanders spokesman Mark D. Braykovich said Grunstein is taking a leave of absence until the matter is resolved.

Also named is Grunstein’s business associates Rubin Schron and Murray Forman, both of New York; Atlanta-based Mariner Health Care Inc. and SavaSeniorCare Administrative Services, which also is headquartered in Atlanta.

According to the detailed 32-page Complaint, Omnicare paid Mariner and Sava $50 million in 2004 to get them to sign long-term pharmacy contracts and steer nursing home patients — including those covered by Medicare and Medicaid — back to it for pharmacy dispensing services.

The scheme allegedly worked this way, according to the complaint:

Mariner, one of the nation’s largest nursing home operators with more than 263 assisted living facilities, announced in June 2004 it was selling itself to National Senior Care Inc. for $1 billion. National Senior Care, which is headed by Grunstein’s brother, Harry, was created solely for that transaction. It is an affiliate of SavaSeniorCare.

Forman and Leonard Grunstein subsequently proposed Omnicare purchase a Mariner subsidiary, Mariner Medical Supply, for $50 million. If Omnicare didn’t, it would lose the pharmacy services contract it had with Mariner after the sale to National Health Care.

Omnicare executives raised the concern about such a transaction being perceived as a kickback but agreed to the deal because it risked losing $155 million in revenue and $26 million in operating profit a year on the three years it had left in the contract with Mariner.

Crain’s New York Business had an article discussing the complaint and allegations.  The Complaint says the above men were part of a trio who received a $50 million payment from Omnicare Inc., the nation’s largest nursing home pharmacy, so it could continue to provide services to their nursing home companies, Mariner Health Care and Sava Senior Care. The government alleges the trio attempted to disguise the $50 million from Omnicare as a payment to acquire a business unit from Mariner that in fact only had two employees and was worth far less than $50 million.

The San Jose Mercury News had an article with a great quote from a DOJ official.  "Illegal conduct like this can undermine the medical judgments of health care professionals, lead to patients being prescribed medications they do not need, and drive up the costs of health care," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. The agency added that Omnicare specializes in providing drugs to homes caring for dementia and Alzheimer’s patients, who have little control over their medications.