News

A report published on the California State Auditor's website this morning appears to confirm the worst suspicions of state Sen. Mike McGuire and Assemblymember Jim Wood, who in June of 2017 requested an audit of skilled nursing providers and the state agencies that monitor them.

The audit focused on for-profit company Brius, which holds a virtual monopoly on skilled nursing homes in Humboldt County and has been the subject of several Journal  news stories about alleged patient shut outs, patient neglect and battles with regional MediCal provider Partnership HealthPlan of California. In 2016, the Journal broke the story that while the company had been claiming a $5 million shortfall due to staffing costs, it was simultaneously shunting roughly that same amount into related party transactions, purchasing services and goods from companies also owned by the company's founder, Shlomo Rechnitz. A link to full coverage of this issue can be found here.
These related party transactions were one aspect of the state's audit. The auditor's office reviewed the books for three of the largest private operators of nursing homes in California, Brius, Plum and Longwood. In the public letter that prefaced the report, state auditor Elaine Howle reports that such transactions are "common" and "legally allowable." Related party transactions have allowed operators to continue to profit even as average incomes statewide dipped or stagnated following the financial crisis of 2008.


"The net income of all three companies grew from less than $10 million in 2006 to between $35 million and $54 million by 2015," Howle states. "The owners of the three companies were also able to earn additional income when their nursing facilities obtained goods or services from other businesses that they or their family members owned or controlled, called related parties."

Most of the audit's censure appears to fall on the state, saying public health entities have not adequately addressed deficiencies in quality of care. After reviewing reports of skilled nursing facilities and comparing them to disciplinary actions, the report reveals that, while the number of substandard care deficiencies received by these facilities between 2006 and 2015 rose by 31 percent, state citations by the Department of Public Health decreased by 34 percent.

"Public Health’s licensing decisions appear inconsistent because of its poorly defined review processes and failure to document adequately its rationale for approving or denying license applications," the report states.

The report also quantified the seriousness of quality of care deficiencies, finding that out of all three of the companies, Brius Healthcare has the most serious deficiencies — more than twice the rate of all facilities in the industry.

In a press release sent out this evening, Wood refers to the auditor's finding as "a bitter pill."

"This extremely thorough audit of the industry and the agencies that oversee it shows that so much more needs to be done,” said Wood. “The watchdogs of this industry — our state agencies — need to work better together to reduce duplication of effort and that especially DPH needs to up their game when it comes to improving licensing review, increasing inspections and issuing citations in a much more timely manner to protect the residents and give families confidence that their family members are well taken care of.”

One of the auditor's office recommendations to address these issues is the repurposing of $330 million in quality assurance fees that it annually assesses on nursing facilities. This money is currently returned to facilities without condition; the auditor's office would like to leverage it into forcing facilities to prove quality of care. A full copy of the report can be found here.


From the Office of Sen. McGuire:

A scathing state audit released today confirms the concerns of Senator Mike McGuire and Assemblymember Jim Wood that significant deficiencies exist in the quality of patient care at audited skilled nursing facilities, specifically Brius Healthcare, owner of several facilities in the North Coast. The audit also reveals a considerable lack of oversight by state agencies which has significantly impacted patient care.

In 2016, McGuire and Wood worked together with the Humboldt community to successfully prevent two of three skilled nursing facilities, all owned by Brius Healthcare, California’s largest nursing home chain, from closing and displacing more than 100 residents. Last year, the two North Coast legislators worked together to receive approval from the Joint Legislative Audit Committee for their request that an audit be performed of skilled nursing facilities and the Department of Public Health (DPH), the Department of Health Care Services (DHCS) and the Office of Statewide Planning and Development (OSHPD).

The stinging findings, which were released to the public earlier today, revealed that the state has not adequately addressed ongoing deficiencies related to the quality of patient care that nursing facilities provide.

From 2006 through 2015, the number of substandard care deficiencies that nursing facilities received increased by 31 percent, yet at the same time, the number of state citations from the Department of Public Health decreased by 34 percent. The audit also showed that the Department of Public Health was slow to respond to potential patient care violations.

The State Auditor found that DHCS, OSHPD and, more specifically the Department of Public Health, should make necessary reforms to ensure its oversight results in nursing facilities improving their quality of care.

The audit also found that Brius Healthcare, which manages skilled nursing facilities on the North Coast and in Los Angeles and Marin County, has the most serious quality of care deficiencies out of the three audited companies – more than twice as high as the rate of all facilities in the industry.

“Validation of our concerns about Brius is a bitter pill. This extremely thorough audit of the industry and the agencies that oversee it shows that so much more needs to be done,” said Wood. “The watchdogs of this industry – our state agencies – need to work better together to reduce duplication of effort and that especially DPH needs to up their game when it comes to improving licensing review, increasing inspections and issuing citations in a much more timely manner to protect the residents and give families confidence that their family members are well taken care of.”

The report finds: "The State has not adequately addressed ongoing deficiencies related to the quality of care that nursing facilities provide. Public Health in particular has not fulfilled many of its oversight responsibilities, which are meant to ensure that nursing facilities meet quality-of-care standards.”

“This audit unfortunately proves what we have said all along, the quality of care by Brius must be greatly improved and their deficiencies are impacting the recovery and care of their patients. And at the state level, the agencies that are tasked with protecting patient care at skilled nursing facilities, have been slow to act and immediate reforms are needed,” Senator McGuire said. “Without adequate state oversight, the lives of skilled nursing patients in California are at risk, and we can no longer turn a blind eye. Assemblymember Wood and I will continue to work together to advance statewide reforms which will protect the livelihood of hundreds of thousands of patients.”