By Jordan Rau
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Leslie Adams holds a photo of his mother, Shirley, who
died after developing infected bedsores at a rehabilitation center,
according to a lawsuit he filed. A court awarded the family $17 million,
but they are still trying to collect it.
Taylor Glascock for KFF Health News
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By the time she was hospitalized in 2020, Pearlene Darby, a retired
teacher, had suffered open sores on both legs, both hips, and both
heels, as well as a five-inch-long gash on her tailbone. She died two
weeks later at age 81 from infections and bedsores, according to her
death certificate. Her daughter sued the nursing home, alleging it had
left Darby sitting in her own feces and urine time and again.
The
lawsuit, settled on confidential terms last year, blamed not only the
managers of City Creek Post-Acute and Assisted Living but also the
building's owner, a real estate investment trust, or REIT. In the year
Darby died, City Creek paid CareTrust REIT more than $1 million in rent,
while the Sacramento, California, nursing home ran a deficit, court
records show.
Federal tax rules ban REITs from running health care facilities, but
CareTrust was not an absentee landlord either, according to internal
records filed in the case. It chose the nursing home's management
company and required through the lease that the home keep at least 80%
of beds occupied. CareTrust granularly tracked how well the home kept to
its financial plan, down to the money spent monthly on nurses and food,
the records said. And the documents showed that the real estate company
kept tabs on government safety inspection findings and Medicare quality
ratings.
Both CareTrust and the nursing home operator denied
liability for Darby's death. CareTrust officials said in court papers
that it is not involved in day-to-day nursing home decisions or patient
care, and that it monitors facilities to ensure nothing jeopardizes rent
payments.
In a written statement, CareTrust Corporate Counsel
Joseph Layne told KFF Health News: "We are the property owners, not the
operators."
Pearlene Darby, pictured here with her grandson Caleb
Darby, was a resident of a Sacramento, California, nursing home. She
died two weeks after being hospitalized for bedsores and an infection.
The home denied liability and the case was settled out of court.
Shirlene Darby
Landlords with influence
Over the past
decade, real estate investment trusts have bought thousands of buildings
that house nursing homes, hospitals, assisted living facilities, and
medical offices. A KFF Health News examination of court filings and
corporate records shows that these landlords have more influence than
the health care facilities publicly acknowledge.
The documents reveal REITs often select the management who oversee
the operations and leave them in place even when they are aware of
threadbare staffing, floundering governance, repeated safety violations,
or other problems that hamper quality of care. A California jury in
March awarded $92 million in punitive damages against a former REIT over
the death of a 100-year-old resident with dementia who froze to death
outside her assisted living facility.
"The REITs are in charge," said Laraclay Parker, one of the lawyers who represent Darby's daughter.
Absence of oversight
Despite
their ubiquity, REITs remain invisible to state and federal health
regulators. Hospitals and nursing homes are not required to disclose
rent payments or landlord identities in the annual reports they submit
to Medicare.
Under President Donald Trump, the Centers for Medicare & Medicaid Services indefinitely suspended a Biden-era requirement that nursing homes disclose REIT involvement.
Catherine Howden, a CMS spokesperson, said in a statement that the
agency does not regulate facilities based on their tax status or
corporate form and instead focuses on the quality of the care they
provide.
REITs now own a fifth
of the nation's senior housing, which includes assisted living, memory
care, and independent living, according to an industry analysis. REITs
also hold investments in 1 in 6
nursing homes. Publicly traded REITs that focus on health care are
worth nearly a quarter of a trillion dollars, according to Nareit, an
industry association.
While one research study found REIT investments were associated with
higher spending on nursing wages, another concluded that after being bought by REITs, nursing homes frequently
replaced registered nurses with less skilled nurses and aides. A
third analysis concluded that health inspection results were worse after REIT investment.
Researchers also found that investor-owned hospital chains that sold buildings to REITs were more likely to close or go bankrupt, as happened in 2024
with Steward Health Care. Often, private equity investors kept the sale
proceeds as profits while the hospitals were burdened with new rent
costs. "There were no improvements in clinical outcomes," said Thomas
Tsai, an associate professor at the Harvard T.H. Chan School of Public
Health.
REITs are required to distribute most of their income
and don't have to pay the 21% federal corporate income tax on it. There
is a catch: A REIT that "directly or indirectly operates or manages" a
health care facility loses the tax break
for five years. Typically, a REIT leases the property to another
company that runs the nursing home or assisted living facility and
maintains its tax break. Nareit said health care REITs distributed more
than $7 billion in dividends in 2024.
Michael Stroyeck, head of health care analysis at Green Street, a
real estate research company, said "there's definitely a symbiotic
relationship" between REITs and facility managers because they have the
same goals. He said he has seen REITs replace operators that are having
difficulties or go bankrupt.
John Kane, a senior vice president
at the American Health Care Association and the National Center for
Assisted Living, an industry group that represents nursing homes, said
in a statement: "Given government funding often falls short, REITs have
been valuable partners in helping to invest in long term care without
influencing daily operations."
Low staffing at a chain
Strawberry
Fields REIT, which like CareTrust trades on the New York Stock
Exchange, owns or controls the buildings of 131 nursing home facilities.
The nursing home operations inside 66 of those facilities are owned by
Moishe Gubin, Strawberry Fields' chief executive, and Michael Blisko,
one of its directors, according to Strawberry Fields' annual report for last year.
Gubin and Blisko also jointly own Infinity Healthcare Management,
which manages their nursing homes; Blisko is Infinity's CEO. On
average, Infinity-affiliated nursing homes provided an hour and a
quarter less nursing care per resident per day than the national average
of four hours, a KFF Health News analysis of federal records found.
Infinity
and several of its nursing homes have recently settled 30 death and
injury lawsuits in Cook County, Illinois, totaling more than $4 million,
said Margaret Battersby Black, a Chicago lawyer. A jury last year
awarded $12 million in a lawsuit brought against Infinity and one of its
Chicago nursing homes over the 2023 death of Shirley Adams. A retired
candy factory worker, Adams died after developing infected bedsores at
Lakeview Rehabilitation and Nursing Center, according to the lawsuit.
"She had wounds that no one could explain," one of her adult children, Leslie Adams, testified at trial. Medicare gives Lakeview its lowest quality rating, one star out of five.
Leslie Adams lost his mother, Shirley, who died after
developing infected bedsores at Lakeview Rehabilitation and Nursing
Center, according to a lawsuit he filed. "She had wounds that no one
could explain," he testified.
Taylor Glascock for KFF Health News
Paul Connery, a lawyer for Adams' family, said they are still
trying to collect on the judgment against the nursing home and
management company, which now totals $17 million with interest and
attorney fees.
"If I get caught speeding and I went to court, they issue me a ticket
and I've got a fine to pay," Adams said in an interview. "How are they
able to still continue to move on with business like nothing has
happened?"
In a phone interview and an email, Gubin said Strawberry Fields,
Infinity, and the nursing homes are all legally distinct and that he has
not played an active role in Infinity in more than a decade. He said
nursing homes get sued all the time but that the verdict against
Lakeview is so large that it will force the home to declare bankruptcy
or shut down.
The owners and operators of Lakeview Rehabilitation and
Nursing Center in Chicago also are directors of the real estate
investment trust that owns the building, a securities filing shows.
Taylor Glascock for KFF Health News
"The whole thing is unfortunate," Gubin said by phone. "For 15
years they were a perfectly good guardian" and "a well-run building," he
said. "You wouldn't think it was fair to be judged on your worst day."
Blisko and an Infinity lawyer did not respond to requests for comment.
Strawberry
Fields, which owns 10 assisted living facilities and two long-term care
hospitals in addition to the nursing homes, earned net income last year
of $33 million from $155 million in rent, a 21% profit margin, securities filings show. Gubin said those weren't excessive returns.
A $110 million verdict
Traditionally,
REIT leases make the operating companies responsible for paying
property taxes, insurance premiums, and maintenance costs. In 2008,
Congress gave health care REITs a new option to make money: On top of
collecting rents, they could set up subsidiaries and take profits
directly from health care businesses. They still must have independent
management overseeing care decisions. Many REITs have embraced the role
even though the subsidiaries must pay corporate taxes and risk losing
money if the businesses do poorly.
Colony Capital was a REIT that through layers of shell corporations
owned both the building and the operation of Greenhaven Estates, a
Sacramento assisted living and memory care facility. In 2018 Greenhaven
paid Colony $1.4 million in rent, nearly a third of its $4.5 million in
revenue that year, according to financial records filed in court.
Greenhaven
also was on the verge of losing its license, according to a revocation
notice filed in November 2018 by the California Department of Social
Services. Greenhaven had racked up years of health violations, including
from letting untrained workers administer medications, lacking enough
employees to care for people with dementia, and neglecting a resident
who smeared feces over his body, bed, floor, and bathroom, the notice
said.
In February 2019, a few weeks after celebrating her 100th birthday,
Mildred Hernandez, a resident with Alzheimer's, wandered out of
Greenhaven in the middle of the night. Her assisted living wing had no
exit door alarms even though it housed several residents with dementia,
court records showed. Berta Lepe, one of Greenhaven's caregivers, found
Hernandez under a bush, wearing only a shirt and underwear. The
temperature was in the 30s.
Mildred Hernandez was 100 when she died of hypothermia
after wandering out of her assisted living facility in the middle of the
night. A jury awarded $92 million in punitive damages against the owner
of the home.
Ric Tapia
"She was talking, but I couldn't understand what she was saying,"
Lepe testified at trial over a lawsuit from Hernandez's family.
Hernandez died of hypothermia a few hours later, according to her death
certificate. Frontier Management, the company that Colony had hired
to manage Greenhaven, denied liability and settled the lawsuit on
undisclosed terms.
Since the lawsuit, Colony has changed its
name to DigitalBridge, which no longer owns Greenhaven and gave up its
REIT status. At trial earlier this year, DigitalBridge said resident
care was the responsibility of Frontier and that Colony "encouraged"
Frontier to address problems. Richard Welch, a former Colony executive,
testified that replacing management is disruptive. "I viewed it as a
last resort," he said.
In March, a jury awarded Hernandez's
family a total of $110 million: $10 million in compensatory damages, $92
million in punitive damages against DigitalBridge, and $8 million in
punitive damages against Formation Capital, an asset management company.
"REIT
money is very detached from knowing about or caring about patient or
resident outcomes, because it's not in their business model," Ed
Dudensing, a lawyer for the family, said in an interview. "Their
allegiance is to their investors."
DigitalBridge has asked the
judge to delay finalizing the judgment while its legal challenges to the
lawsuit and the verdict are evaluated. A DigitalBridge attorney and a
corporate spokesperson did not respond to requests for comment, a
Formation attorney declined comment, and a Frontier attorney and a
spokesman did not respond to a request for comment.
'Wet from head to toe'
When CareTrust bought
City Creek Post-Acute and Assisted Living in 2019, the Sacramento
nursing home where Pearlene Darby lived had a one-star Medicare rating
and was losing money. CareTrust leased the building to a management
company called Kalesta Healthcare Group based on the business plan
Kalesta submitted.
While CareTrust was not the operator, it
held periodic phone calls with Kalesta, which provided "a full update of
what's happening at the facility," including changes in leadership,
financial progress, and health inspection survey results, according to
deposition testimony by Ryan Williams, a Kalesta co-founder.
According
to a state inspection report, in 2020, the year Darby died, City Creek
left a resident in soiled linens "wet from head to toe lying in bed" for
more than eight hours. During a different visit, a health inspector
cited the home after watching a nurse put a dirty diaper back onto a
resident after caring for a wound. "It was just a small stool and it is
far from where the wound is," the nurse told the inspector, according to
the report.
James Callister, CareTrust's chief investment
officer, said in his deposition that CareTrust officials "review results
of regulatory surveys provided to us by the tenant. We review the
five-star rating." He said, "We evaluate results of care, but we do not
evaluate types of care given or how or when, no."
Darby had
been living in City Creek since 2011 after a stroke left her in a
wheelchair. She needed help getting in and out of bed. From September
through November 2020, Darby lost 30 pounds, her family's lawsuit
alleged. During those months, employees dropped her three times as one
worker rather than the required two operated the mechanical lift, the
lawsuit said.
The suit alleged City Creek failed to reposition
her every two hours in bed or her wheelchair, which is the clinical
standard for people at risk of bedsores, and to promptly order devices
to protect her skin.
In November, the nursing home sent Darby to the hospital. A blood
test found bacteria had entered her bloodstream from her feces' touching
open skin wounds, according to the lawsuit. The hospital diagnosed her
with sepsis. A surgeon said she needed an operation to redirect fecal
waste from her intestines but concluded she wasn't medically stable
enough for surgery, the suit said.
Darby began receiving
comfort care measures and was sent back to City Creek. She died two
weeks later. In court filings, CareTrust and Kalesta denied the
allegations.
In a phone interview, Williams, the Kalesta
co-founder, said Darby's death occurred during the most challenging
point of the COVID-19 pandemic, when California rules required any
nurses testing positive for the virus to be sent home and nurses were
quitting out of fear for their health. "It was the most herculean of
professional efforts to secure enough staff," he said.
While
expressing sympathy for Darby and her family, he said it was
"unconscionable" that personal injury lawyers sued nursing homes over
care failures during "the worst of times."
In court, CareTrust
petitioned Judge Richard Miadich to dismiss it from the lawsuit before
trial. "This case does not concern a property condition," CareTrust's
lawyers wrote. "CareTrust is simply a landlord." But the judge ruled
last year a jury should decide whether CareTrust "exercised actual
control over City Creek."
The case was settled out of court a few months later. All parties declined to reveal the settlement terms.
A 67% profit
As
recently as November 2023 — four years after its acquisition — City
Creek earned one star from Medicare. It was cited for failing to have
the minimum nursing home staffing required by California law during five
of 24 randomly selected days in 2022, according to an inspection
report. Williams said in the interview that Kalesta had increased
spending on nursing over the course of its ownership, including boosting
wages, but that it takes a year or two to turn around a troubled
nursing home. He said the home's star rating in 2023 was dragged down by
its poor inspection history from before Kalesta took over.
Full Article & Source:
Real estate investors are buying up long-term care facilities. Residents can suffer
