2005 Profitable Year for Whistleblowers

Evelyn Pringle October 6, 2006

The year 2005 was a very good year for Whistleblowers. According to a report by the Department of Health and Human Services, a grand total of $136,756,946 was awarded to Whistleblowers who filed qui tam lawsuits on behalf of the Federal government under the False Claims Act. By contrast, in 2004 Whistleblowers were awarded $82,867,287.

The Health Insurance Portability and Accountability Act of 1996 established a national Health Care Fraud and Abuse Control Program, under the direction of the Attorney General and the Secretary of the Department of Health and Human Services, acting through the HHS Inspector General, to coordinate federal, state and local law enforcement activities with regard to public and private health care fraud and abuse.

The Act requires that recoveries from health care investigations, including criminal fines, forfeitures, civil settlements and judgments, and administrative penalties, but excluding restitution, compensation to the victim agency, and Whistleblower’s shares, be deposited in the Medicare Trust Fund.

The Act appropriates monies from the Trust Fund to an expenditure account, called the Health Care Fraud and Abuse Control Account, in amounts that the Secretary and Attorney General certify as necessary to finance anti-fraud activities. The maximum amounts available are specified in the Act. Certain of these sums are to be used only for activities of the HHS/OIG, with respect to Medicare and Medicaid programs. In FY 2005, the Secretary and the Attorney General certified $240.558 million for the Account.

During FY 2005, the Federal government took in approximately $1.47 billion in judgments and settlements, and attained additional administrative impositions in health care fraud cases. In comparison, during 2004, the government won or negotiated less than half that amount at approximately $605 million, in judgments and settlements. Since the inception of the program in 1997, the HCFAC has returned over $8.85 billion to the Medicare Trust Fund.

In FY 2005, the US Attorney’s Offices (USAOs) were allocated $30.4 million to support civil and criminal health care fraud and abuse litigation. The 93 US Attorneys and their assistants, are the principal prosecutors of federal crimes, including those committed by health care providers.

In FY 2005, the Criminal Division was allocated $1.58 million to support criminal health care fraud litigation. The Fraud Section of the Criminal Division develops and implements white collar crime policy and provides support for the federal white collar enforcement community, which includes the Division’s health care fraud and abuse responsibilities.

In FY 2005, US Attorneys’ Offices opened 935 new criminal health care fraud investigations involving 1,597 potential defendants. Federal prosecutors had 1,689 criminal investigations pending, involving 2,670 potential defendants, and filed criminal charges in 382 cases involving 652 defendants. A total of 523 defendants were convicted for health care fraud related crimes during the year.

In one major case that ended a Department of Justice investigation that began in 1998, Boston Scientific paid $74 million to settle charges related to the company’s illegal distribution of the Nir ON Ranger with Sox coronary stent delivery system. Boston recalled the device less than two months after its commercial launch because of a defect that affected its safety and effectiveness.

The government alleged that Boston shipped more than 30,000 adulterated and misbranded devices to hospitals throughout the country and accused further Boston of continuing to ship the devices for weeks after an internal investigation had determined that a large number of the devices were not functioning properly.

Back on October 5, 1998, Boston notified the FDA that it was immediately stopping shipments of the device and was pulling the product off the market, but later that same day, Boston shipped an additional 833 units to hospitals across the country. According to the reports to the FDA, the defect was responsible for 26 injuries, including several surgeries to remove a dislodged stent.

Civil attorneys in the USAOs are responsible for bringing civil cases to recover funds that federal health care programs have paid as a result of fraud, waste, and abuse, with support designated by the Civil Division. USAOs also handle most criminal and civil appeals at the federal appellate level.

The USAOs use civil litigation to recover monies wrongfully taken from Medicare and other taxpayer funded programs, and to ensure that the federal programs are fully compensated for the losses and damages resulting from such thefts.

The False Claims Act is one of the most valued tools available for these purposes. The FCA subjects those who knowingly present false claims for payment to the government, to treble damages and civil penalties including $5,500 to $11,000 for each false or fraudulent claim filed.

USAOs receive civil fraud referrals from a variety of sources, including the federal investigative agencies that refer criminal cases, and qui tam complaints. Under the FCA, a qui tam plaintiff (a relator) must file his or her complaint under seal in a US District Court, and serve a copy of the complaint upon the USAO for that district, as well as the Attorney General. USAOs routinely assign civil assistant US attorneys to every qui tam case filed in their districts, as well as all cases referred by a law enforcement agency.

In order to maximize resources, Civil Division attorneys may become actively involved in qui tam cases that involve more than one district and potential recoveries substantially over one million dollars.

Qui tam cases often reap sizeable awards for the government and the Whistleblower. For instance, in FY 2005, as a result of a qui tam suit filed by Ven-A-Care of Florida Keys, a small home-infusion company, GlaxoSmithKline paid the federal government $140 million to settle allegations of fraudulent drug pricing and marketing that resulted in the submission of inflated claims to Medicare, Medicaid, and other federally funded programs.

The US alleged that Glaxo reported inflated prices for Zofran and Kytril, drugs used primarily to reduce the negative side effects of radiation and other cancer treatments, knowing that those prices would be used by federal programs to set reimbursement rates. Glaxo used the artificial spread between the inflated prices and its customers’ lower cost to purchase the drugs as a marketing tool.

In addition to the $140 million federal share of recovery, Glaxo also paid $10 million to reimburse state Medicaid funds.

In FY 2005, the DOJ opened 778 new civil health care fraud investigations, and had 1,334 civil investigations pending at the end of the fiscal year. In addition to these joint cases, USAOs are responsible in all other qui tam cases for investigating the relator’s allegations and, where appropriate, litigating and or settling the case. In FY 2005, the DOJ filed complaints or intervened in 266 civil health care cases.

In a case of hospital fraud, HealthSouth Corporation paid $327 million to settle allegations of fraud against Medicare and other federal health care programs. The US charged that HealthSouth, engaged in three major schemes to defraud the government.

The first, involving $170 million of the settlement, resolved false claims for outpatient physical therapy services that were not properly supported by certified plans of care, administered by licensed therapists, or for one-on-one therapy as represented.

Another $65 million resolved charges that HealthSouth engaged in accounting fraud which resulted in overbilling Medicare on hospital cost reports and home office cost statements.

The remaining $92 million resolved allegations of billing Medicare for various unallowable costs, such as lavish entertainment and travel expenses incurred for company’s annual administrators’ meeting at Disney World and other claims.

The government initiated claims accounted for $251 million of the settlement, with the remaining $76 million paid out in four qui tam lawsuits.

HealthSouth also entered into a corporate integrity agreement with the HHS to prevent future misconduct.

In FY 2005, the Civil Division was allotted $15.459 million in funds to support civil health care fraud litigation. Civil Division attorneys pursue civil remedies, working closely with the USAOs, the FBI, the HHS, and other federal and state law enforcement agencies involving providers of health care services, supplies and equipment, as well as carriers and fiscal intermediaries, that defraud Medicare, Medicaid, TRICARE, the Federal Employee Health Benefit Program, and other government programs.

In FY 2005, the Division opened or filed 306 new health care fraud cases. In addition, the Civil Division also pursued 642 existing cases that remained open at the end of FY 2004.

The Civil Division litigates cases involving overcharging by hospitals, and other Medicare Part A providers; similar claims against suppliers under Medicare Part B; allegations involving state Medicaid programs; claims that doctors and others have been paid kickbacks to induce referrals of Medicare or Medicaid patients; claims of overpricing and illegal marketing of pharmaceuticals; and allegations that nursing homes have failed to provide necessary care to residents.

Among these are multi-district cases involving large health providers and suppliers that typically require coordination among federal agencies, USAOs, state Medicaid Fraud Control Units, and various other investigative organizations.

In one such case, as a result of allegations made against the Eisenhower Medical Center in Rancho Mirage, California in a qui tam lawsuit by a former employee, the Eisenhower Center paid $8 million to settle charges that it fraudulently overbilled federal health insurance programs.

Specifically, the lawsuit alleged that Healthcare Financial Advisors helped its hospital clients seek reimbursement for non-allowable costs and helped clients prepare two cost reports, one inflated to submit to Medicare, and a second one for internal use only that accurately reflected the amount of reimbursement the hospital should have received.

In another case in FY 2005, a former Florida Medicaid employee filed a qui tam suit against the University of Miami alleging that it double-billed and overcharged Medicaid through several of its outpatient clinics. The employee charged that both the University and its outpatient clinics billed Medicaid under their respective provider numbers for the same services provided to the same patients on the same date.

The Federal government and the State of Florida also alleged that the University submitted claims for a facility fee in connection with primary care services provided to Medicaid patients in circumstances where the University knew that these fees were not a covered under the Medicaid program. The University paid nearly $3.9 million to settle the charges.

The Civil Division provides critical coordination in FCA investigations alleging pharmaceutical pricing fraud. These matters can involve hundreds of manufacturers and related entities, span multiple districts and present a myriad of legal and factual issues.

Since 1999, eighteen cases of fraud by drug makers against federal health benefit programs in the pricing or marketing of drugs have been settled for a combined total of criminal and civil recoveries of $4.2 billion.

In one such case, in FY 2005, the pharmacy benefit manager, AdvancePCS, paid $138.5 million to settle charges that it exacted kickbacks, disguised as administrative fees and sales and service agreements, from drug makers in exchange for marketing their drugs to providers reimbursed by federal health programs; accepted kickbacks in the form of cash payments and rebates from drug companies in exchange for marketing their drugs to providers reimbursed by federal programs; and paid kickbacks to providers reimbursed by federal programs to ensure that AdvancePCS was selected as the PBM for the plans.

In another case, a pharmacist and former owner of King Drugs in Kentucky pleaded guilty to illegally selling drug samples to the public through King pharmacies after repackaging the samples. The pharmacist obtained the samples from various doctors and purchased them from others and then led the public to believe that the drugs were obtained and dispensed as required by law.

In resolving both the criminal and civil actions, the defendant paid more than $10.5 million to the government, relinquished his pharmacy license, agreed to permanent exclusion from all federal programs, and will serve a sentence of home confinement and 48 months of probation.

Also in FY 2005, a California man was sentenced to serve 51 months in prison and to forfeit cash proceeds from one of the largest internet pharmacy schemes ever prosecuted. To obtain drugs, customers filled out a questionnaire and paid a $35 fee for a doctor’s consultation, after which the physician would issue a prescription and the customer would receive the drugs.

But as it turns out, there was no physician involved and the drugs dispensed without a prescription were labeled as “generic” forms of Viagra, Cialis, Levitra, Propecia, Celebrex and others but were actually counterfeit drugs illegally imported into the US. The individual pled guilty to conspiring to sell counterfeit drugs, mail fraud, and illegal smuggling of drugs into the US.

The Fraud Section is responsible for handling nationwide complex health care fraud litigation and also supports the USAOs with legal and investigative guidance and, in some cases, provides trial attorneys to prosecute criminal fraud cases.

In FY 2005, the Fraud Section was involved in the investigations of hospitals, vocational rehabilitation and healthcare management services, and other health care related entities.

In one such case, the USAO for the Southern District of Mississippi, along with attorneys from the Fraud Section, prosecuted 14 individuals who participated in a scheme to create bogus prescription histories and file fraudulent claims against a $400 million settlement fund established by the manufacturer of the diet drugs Redux and Pondimin, commonly known as fen-phen, for injuries caused by the inappropriate prescription of these products.

As of September 30, 2005, a total of 17 defendants were convicted in this multi-year ongoing joint investigation.

In FY 2005, the Civil Rights Division was allotted $1.98 million in funds to support Civil Rights litigation related to health care fraud. The Division pursues relief affecting public, residential facilities and has also established an initiative to eliminate abuse and substandard care in Medicare and Medicaid funded nursing homes and other long-term care facilities.

As part of the initiative, in FY 2005, the Special Litigation Section reviewed conditions and services at 44 health care facilities in 22 states to determine whether there is sufficient information supporting allegations of unlawful conditions to warrant formal investigation.

The Section reviews information pertaining to abuse and neglect, medical and mental health care, use of restraints, fire and environmental safety, and placement in the most integrated setting appropriate to patient needs.

The Section found that conditions and practices at 2 state operated facilities for persons with mental illness and one state-operated facility for persons with developmental disabilities violate the Federal constitutional and statutory rights of the residents. Those facilities include Napa State Hospital in Napa, California, the Vermont State Hospital in Waterbury, Vermont, and the Woodbridge Developmental Center in Woodbridge, New Jersey.

The Section entered into settlement agreements with two publicly-operated nursing homes and two state-operated facilities for persons with developmental disabilities which include the Nashville Metropolitan Bordeaux Hospital in Nashville, Tennessee, the Mercer County Geriatric Center in Trenton, New Jersey, the Glenwood Developmental Center in Glenwood, Iowa and the Woodward Developmental Center in Woodward, Iowa.

In addition, the Section continued its investigations of the residential facilities for persons with developmental disabilities at the Agnews, Sonoma, and Lanterman Developmental Centers in California; Holly Center in Maryland; Fort Wayne Developmental Center in Indiana; Rainier Residential Rehabilitation Center and Frances Haddon Morgan Centers in Washington; Conway Developmental Center in Arkansas; Lubbock State School in Texas; and Bellefontaine Developmental Center in Missouri.

The Section also continued its investigations of facilities for persons with mental illness including the Metropolitan State Hospital in California; Broughton, Cherry, Dorothea Dix, and John Umstead Hospitals in North Carolina; and St. Elisabeth’s Hospital in the District of Columbia.

Finally, the Section continued its investigations of publicly operated nursing homes including the A Holly Patterson Nursing Home on Long Island, New York; the Charlotte Hall Veterans Home in Maryland; and the Laguna Honda Hospital and Rehabilitation Center in San Francisco, California.

The FBI is the main investigative agency involved in cases of health care fraud that has jurisdiction over both the Federal and private insurance programs. In FY 2005, the FBI was allocated $114 million for health care fraud enforcement and its investigations resulted in 500 criminal fraud convictions and 589 indictments and informations being filed in state and federal courts.

In addition to actively participating in the majority of investigations listed above, the FBI also launched the “Outpatient Surgery Center Initiative” to combat the growing problem of fraudulent surgeries performed at outpatient surgery centers in the Southern California area.

This nationwide scheme has drawn participants from 48 of the 50 states to have unnecessary surgery in exchange for a cash kickback or plastic surgery, and has resulted in billings to insurance companies in excess of $750 million, according to the Annual Heath Care Fraud and Abuse Control Program Report for FY 2004.

To collect intelligence on this scheme, the FBI partnered with other agencies and to date, nationwide there are pending outpatient surgery investigations in 11 field offices and more than 60 subjects have been identified.

In the latest major Whistleblower case, on September 11, 2006, the DOJ announced that the US has intervened in a qui tam suit filed in the US District Court for the District of Massachusetts against Dey Pharmaceuticals, a unit of Merck, alleging that the company violated the False Claims Act.

In its complaint, the government alleges that Dey engaged in a scheme to report fraudulent and inflated prices for several pharmaceutical products, knowing that Federal healthcare programs established reimbursement rates based on those reported prices.

The complaint alleges that Dey, from at least on or before January 1, 1993, reported prices that were more than 500% the actual sales prices on many of the drugs and that Medicare and Medicaid have reimbursed Dey’s customers in excess of $500 million for the drugs.

The investigation began after the filing of the FCA suit by the Florida home-infusion company, Ven-A-Care of the Florida Keys discussed above. The lawsuit includes additional claims originally filed in the Southern District of Florida and transferred to the District of Massachusetts.

The investigation leading to the government intervention in the case was conducted by the DOJ, the USAOs for the District of Massachusetts and the Southern District of Florida and the Office of Inspector General of the HHS.

If successful, the government can recover treble damages and $5,500 to $11,000 for each false claim filed and the Whistleblower who initiated the action can receive between 15% to 25% of the amount recovered.

Beverly Enterprises – Poster Child Of Fraud And Neglect In Nursing Home Industry

June 1, 2006 Evelyn Pringle

Nowhere in the nursing home industry is the corruption, patient neglect and abuse and Medicare and Medicaid fraud more blatant than within the giant nursing home chain of Beverly Enterprises. Based in Fort Smith, it reportedly operates more than 400 nursing facilities, assisted living centers and hospices in 23 states and the District of Columbia.

The chain was supposedly sold a few months back, but a little digging under the layers of the conglomerate would probably find Beverly in there somewhere.

As far back as October 18, 1986, the New York Times reported a Beverly settlement with the State Department of Health Services, with an agreement to pay more than $600,000 in civil penalties as the result of an investigation of several of the company’s California facilities. The agreement stated that no new licenses would be issued to Beverly for a 14-month period.

However, this comment by Beverly CEO, Robert Van Tuyle, at the time is comforting. He told the Times, “the state allegations of deaths related to patient care had not been proved,” and that “the incidents were isolated cases.”

Jumping forward to February 2001, the US Justice Department’s San Francisco office and the Inspector General of the Department of Health and Human Services, announced the largest settlement ever for fraud in a nursing home case.

It said Beverly Enterprises Inc., the parent company of Beverly Healthcare, the nation’s largest nursing home chain, has agreed to pay a civil settlement fine of $170 million and to relinquish control of 10 nursing homes in California. Their subsidiary, Beverly-California, will pay a $5 million criminal fine settlement.

Beverly-California pleaded guilty to one criminal count of fraud and 10 counts of making false statements to Medicare.

A point should be made that the settlement included a corporate integrity agreement that provided for a reporting and compliance program to be overseen by the Office of Inspector General. As part of the agreement, Beverly agreed to insure that its nursing homes complied with all federal regulations including the regulations under the Omnibus Budget Reconciliation Act of 1987 (OBRA)

These OBRA regulations impose numerous requirements on Beverly in its resident care including requirements regarding the following:
(a) Reporting resident injuries of unknown origin to state authorities;
(b) Resident assessment and care planning;
(c) Food services and nutrition;
(d) Diabetes and wound care;
(e) Infection control;
(f) Abuse and neglect policies and reporting procedures; (g) Staffing;
(h) Appropriate drug therapies;
(I) Appropriate mental health services;
(j) Provision of basic care needs;
(k) Incontinence care;
(l) Resident rights and restraint use;
(m) Activities of daily living care;
(n) Therapy services;
(o) Quality of life, including accommodation of needs and activities; and
(p) Assessment of patient competence to make treatment decisions.

A review of the continuous train of charges against Beverly in the years following the signing of the integrity agreement proves that the document was a complete waste of tax dollar funded clerical resources.

Five months after it was signed, in July 2001, the Associated Press reported that the nation’s largest operator of nursing homes will pay $1.2 million to settle a racial discrimination lawsuit. Nine former workers claimed that black employees were harassed and subjected to discrimination and racial slurs at the Bridgeton Nursing Center in north St. Louis County, which Beverly owned at the time.

About a year after that, on August 1, 2002, in California’s Santa Barbara County Superior Court, Deputy District Attorney Tracy Grossman filed a two-count felony criminal complaint against Beverly.

The two felony counts involved former patients, Laura Simmons, a 102-year-old woman who died in July 2000, and William Marthai, an 86-year-old man who died a year later.

In addition to the two criminal complaints, a civil complaint was filed alleging more than two dozen violations of state and federal codes involving patient care.

Although Ms. Simmons’s death certificate said she died from congestive heart failure and extremely high blood pressure, the investigation found that at the time of her death, she suffered from malnutrition, anorexia, bed sores, body tremors, open wounds and a maggot infestation of her foot.

Mr. Marthai died after a feeding tube was improperly inserted into his stomach by a vocational nurse and by the time he was finally taken to the hospital, the report stated, his stomach had swelled to the size of someone seven or eight months’ pregnant and was as hard as a rock.

Mr. Marthai’s death certificate listed peritonitis with septic shock, infection of the abdominal cavity with blood poisoning, and gastrostomy tube dysfunction as the causes of death.

The California Department of Health Services determined that the Beverly staff failed to check whether the feeding tube was inserted and working properly and issued Beverly an AA citation, the harshest penalty a nursing home can get.

California Attorney General Bill Lockyer and Santa Barbara District Attorney Thomas Sneddon announced that the civil and criminal enforcement actions against Beverly and its subsidiaries would result in “court-enforceable improvements in the quality of care for elderly Californians at 60 facilities statewide.”

Mr. Lockyer said: “The settlement takes direct aim at the criminally negligent care found at the Beverly La Cumbre nursing home in Santa Barbara that led to the deaths of two frail and elderly residents.”

In the criminal enforcement action, Beverly entered a “no contest” plea to the felony elder abuse of Ms. Simmons and Mr. Marthai and agreed to pay the statutory maximum $54,000 in fines and penalties; reimburse investigation costs of $532,927; and allow victims to seek restitution from the court.

In the civil action, Beverly agreed to chain-wide improvements to ensure quality care and paid $2 million in civil penalties. A court-ordered permanent injunction was issued to “cover all sixty California facilities owned or operated by Beverly Enterprises, Inc.”

The injunction stemmed from more than 90 citations and deficiencies found in Beverly facilities statewide in the previous three and a half years. Among the citations were patients suffering from major bed sores, dehydration, malnutrition, poor personal hygiene and improper medication.

And here is the great news. Beverly also agreed to notify the Attorney General’s Office of any injury, death or accident that may have been caused by inadequate care.

In reading about Beverly’s failed inspection, keep in mind that nursing home administrators usually know when surveyors are coming.

In addition, Indianapolis Attorney George Gray says that in many of the cases handled by his firm, former staff members say that the nurses and administrative staff are trained to race into the hallways and into the patients’ rooms to provide care whenever the state surveyors are in the building.

“This way it appears that there is plenty of staff to meet the needs of the patients,” he explained.

“In one case,” he said, “the nursing home had a code to alert all of the staff that the surveyors were in the building. It was announced over the intercom for all of the staff to hear.”

“In another case,” he noted, “even the bookkeeper would put on a white nurse’s smock and would look like she was helping with patient care when the surveyors were in the building.”

Some nursing homes will pad their staffing schedules to fool the state surveyors into thinking they have more staff by scheduling nursing staff when they are on vacation, or in one case, he said, with staff who have quit, to look as if the nursing home has plenty of staff.

Following right along on Beverly’s path of nursing home abuse and neglect, on December 12, 2003, LTC Daily Analysis Briefs reported on a Honolulu investigation of Beverly’s Hawaii operations that led to a $1.2-million settlement against “the state’s largest long-term care provider.”

Here the state’s attorney general investigated Beverly for a “number of questionable practices, including falsification of records, problematic prescription practices and kickbacks involving medication and pharmacy services,” LTC said.

According to Irvine California Attorney James Daily, just as in this case, nursing home abuse can include over-sedation, poor medical care, or wrong medication.

“Prescribing drugs unnecessarily is a great example of a profit motive in many forms for all sorts of reasons,” he says.

“Let’s say a drug makes people lazy, lethargic and “comfortable,” he says. “What a great drug that would be for a nursing home – without people complaining, they are calm as Hindu cows – easy to take care of and unlikely to complain.”

“Thus they are like an annuity check for the nursing home,” he explains, “because the people are less active, you can cut staffing – you don’t need so many people planning activities when they are all in their rooms.”

“The checks just keep on flowing,” he adds.

“The nursing home benefits, the drug companies benefit and the doctors,” he said, “the doctors who only have to visit like once a month – they can have 9,000 patients.”

Attorney Daily said, “I have a defendant right now who has 9,000 patients.”

“I wonder how much time you can spend with someone if you have 9,000 patients?” he pointed out.

In the Hawaii settlement, Beverly was required to pay $619,000 to the state and $250,000 to be shared by two former employees who helped with the investigation and to bring its operations into compliance or pay another $500,000 penalty.

On July 23, 2005, Northwest Arkansas New.com reported that a Saline County Arkansas judge ordered Beverly to post a $20 million bond after the company intentionally delayed releasing discovery documents to plaintiffs in a nursing-home care case.

But that’s nothing. The month before, Judge Phillips threatened Beverly executives with jail when he found the company in contempt of court for failing to release e-mails and other electronic data.

The new order filed was based on a status hearing “as a sequel” to the contempt order, Judge Phillips said in the ruling.

The lawsuit was filed on behalf of former residents and alleges that Beverly executives maximized profits by failing to provide enough staff to properly care for residents.

The litigation that Rapid City, South Dakota Attorney Mike Abourezk handles involves the cost-cutting incentive programs that nursing home companies often implement, which predictably results in shoddy care of the elderly residents.

“For instance,” he says, “companies like Beverly Enterprises typically put an administrator in charge of each home.”

That administrator is paid based on a formula. The formula includes a number of factors, but one of the critical factors is always keeping costs as low as possible. If the administrator is successful in doing that, the administrator is paid more in salary.

“With these incentives,” Mr Abourezk says, “it goes without saying that the administrator is encouraged to reduce staff and payroll as much as possible, and to pay the remaining staff as little as possible.”

When fewer, less well-trained staff members are forced to care for the same number of elderly residents, he says, their ability to do so becomes difficult. However, he notes, that job gets easier if residents sleep a lot and don’t ask for much.

“Noisy, demanding residents make it hard for these already struggling staff members,” Mr Abourezk said. “Medication helps tremendously.”

According to the Northwest article, Beverly was already facing its “first class-action lawsuit after another Arkansas judge grew impatient last month with the company’s release of documents and issued a default judgment in favor of the plaintiffs.”

Bradley County Circuit Judge Robert Bynum Gibson granted the class-action status and the default judgment after he said Beverly had practiced a shell game throughout the discovery process in a lawsuit involving the company’s Warren nursing home.

The lawsuit, filed on behalf of former residents, also alleges that Beverly executives gained profits by not providing enough staff.

On January 28, 2005, Judge Robert Bynum Gibson ordered Beverly to provide plaintiffs with a list of residents in the Warren nursing home from August 1999 to when the facility closed in September 2003.

Although Beverly provided 171 names, at a March 7, 2005 hearing, plaintiffs’ attorneys reported that they found six more names by searching obituary listings and the total number had grown to more than 240.

On October 4, 2005, the Attorney General of Arkansas, Mike Beebe, announced that Beverly had agreed to pay $1.5 million to settle 26 investigations involving 12 of its Arkansas nursing homes.

In this deal, Beverly paid $1 million to the state Medicaid Program and $500,000 to better train nursing home staff at the facilities. But this settlement agreement is really a joke considering we’re talking about one of the largest nursing home chains in the country. The settlement required Beverly to establish programs to recognize, treat and prevent pressure sores and other patient-care injuries, to reduce falls, and to prevent narcotics abuse by staff members, according to a press release issued by the attorney general’s office.

Does this mean 20 years after its first known arrest in 1986, it still does not know what a bed sore is?

Attorney Philip Thomas is a lawyer practicing civil litigation in Mississippi. He and attorneys John Giddens and Pieter Teeuwissen recently filed two lawsuits against Beverly Enterprises and its related companies in federal court Mississippi.

One is a breach-of-contract class-action on behalf of residents who were not provided adequate care in compliance with federal and state regulations and their contracts with the Beverly facilities. And the second involves severe abuse and neglect where a woman suffered bed sores, scabies (lice) and had a feces-covered bandage rot into her skin because it was not changed.

Mr. Thomas says he believes that understaffing is the root of all evil in nursing homes. “The number one priority of the corporation,” he said, “is to increase profits.”

“The biggest expense in running a nursing home is labor,” he explains, “so the easiest way to lower expenses and increase profits is to cut labor.”

Not having enough caregivers, he says, is tragic for the residents. “Nearly everyone living in a nursing home is there because they require assisted living.”

“Many have had strokes and have to be fed their meals,” Mr. Thomas said. “When there aren’t enough caregivers some residents may not be fed until their food is cold and inedible.”

“In addition,” he said, “food is another expense for the nursing home that is sometimes cut to increase profit.”

Mr. Thomas says it is not unusual to see a resident lose 60 pounds or more in just a few months while they are in a bad nursing home. “Some residents are literally starving,” he said. “When moved to a better nursing home these people regain their lost weight.”

This corporation has no doubt cut a lot of corners to pay the salaries of the company big-wigs. Chairman, CEO, and President, William Floyd’s annual salary is $2.23 million, according to court filings. In addition, Mr. Floyd is the individual owning the most shares of company stock with approximately 803,972 shares at a market value of about $9,326,075.20.

David Devereaux is the Chief Operating Officer of Nursing Facilities and Executive Vice President. His annual pay is approximately $854,000 and he is the individual owning the second most shares of BEI stock with approximately 255,204 shares at a value of approximately $2,960,366.40.

Indianapolis Attorney George Gray agrees that it boils down to profits. “Most neglect and abuse that we see in our law practice,” he said, “can be traced to the corporate owners and management companies understaffing their nursing homes, in other words, putting their profits over the proper care of the elderly patients who have been entrusted to them.”

However, according to Mr. Gray, the top dogs in a company rarely face consequences. “The corporations that run nursing homes are faceless, money-making machines,” he said, “and it is hard for prosecutors to prove and trace the criminal culpability of nursing home abuse up the chain of command to the managers and owners.”

According to Attorney Thomas, another understaffing concern at Beverly relates to residents who require assistance going to the toilet who become incontinent because there is not enough staff to always assist them. “Obviously,” he notes, “it is humiliating to these residents to soil themselves.”

One of the lawsuit complaints alleges that understaffing “in Beverly facilities causes the facilities to be dirty, constantly smell of urine and feces, serve as breeding grounds for lice and other problems caused by unsanitary conditions, and to generally deprive residents of a dignified existence.”

“I have yet to find a Beverly facility that does not always smell like urine and feces,” Mr. Thomas said. “The reason is that there are not enough caregivers to keep the residents clean.”

He recently deposed a doctor treating patients in a Beverly facility, he said, who testified that the facility always smelled like a men’s urinal at a park, and at 3:00 a.m. there would be many patients screaming. “The doctor (who was retired military) compared the nursing home to Auschwitz,” Mr. Thomas said.

Pressure sores are a painful skin condition also referred to as ulcers and bed sores and are most often caused or made worse by individuals having to lie in urine and feces for long periods of time and not being turned over often enough.

As a result of the understaffing at Beverly, the plaintiff in this case was not kept cleaned and turned enough and developed pressure sores so severe that they required hospital treatment. On one occasion, the doctor at the hospital treated the sores, applied bandages, and dated the bandages.

Despite the doctor’s orders and multiple requests by the plaintiff’s children, the staff did not change the bandages for over a week following the hospitalization, and the bandages had rotted into her body with the date written by the hospital doctor still visible.

Scabies is a contagious skin disorder caused by a very small wingless insect that burrows into the skin and lays one to three eggs daily. It is a form of lice, and infestation can spread by skin to skin contact or by sharing of clothing, towels and bedding and causes intense itching and is painful.

The plaintiff in this case also contracted a severe infestation of scabies that was neglected and not treated or diagnosed for over a month while she endured severe physical pain.

Her condition was worse than it otherwise would have been because her paralysis prevented her from scratching when she itched, and she was permanently scarred from the scabies infestation.

During the last six months of her residency at Beverly, the plaintiff lost more than 60 pounds because the facility was understaffed and did not feed her and also because the facility ran out of food and medical supplies on one occasion.

As hard as it is to believe, this kind of neglect and abuse is actually happening to our elderly citizens in 2006.

On March 15, 2006, Northwest Arkansas News reported that Beverly closed on a deal to sell itself to a subsidiary of Fillmore Capital Partners LLC on March 14, 2006.

Beverly operates 342 nursing homes across the country, including 16 in Arkansas, according to NAN.

Fillmore President Ron Silva apparently has given a lot of thought to solving Beverly’s financial woes. To start off on the right foot, NWN reports that he said, “Arkansas needs a specific tort reform for nursing homes to limit the number of lawsuits filed.”

According to court documents filed in December 22, 2005, as part of the sale, Mr. Floyd, Mr. Devereaux and other executives and board members will personally receive payments totaling $109 million. Mr. Floyd’s severance package will be $40 million.

But on May 16, 2006, in a 10-year-old case, McKnight’s Long-Term Care News reported a decision representing a win for organized labor, when the National Labor Relations Board ruled that Beverly violated federal labor law when it retaliated against employees following a three-day strike in the mid-1990s at some of its Pennsylvania facilities.

The board ordered Beverly to post notice of its violations at all of its nursing homes and to reinstate eight employees with back pay and benefits, and ordered the company to recognize the Service Employees International Union at two of its Pennsylvania facilities.
Citing previous rulings against the company, the NLRB said Beverly’s actions indicate it “continues to have a proclivity to violate the act and that its widespread misconduct demonstrates a general disregard for its employees’ Section 7 rights.”

In a previous decision in 2001, the NLRB found the company committed numerous unfair labor practices during contract talks with SEIU locals that resulted in a three-day strike at 15 of the 20 homes operated by two subsidiaries in Pennsylvania.

Whatever happened to the corporate integrity agreement? This next case involving a resident’s death took place on March 2, 2002.

On May 4, 2006, the Lexington Herald Ledger reported that a jury awarded $20 million to the estate of Loren Richards, 84, who died on March 2, 2002, at Beverly Health and Rehabilitation of Frankfort.

Mr. Richards’ daughter sued the home, claiming that nurses had ignored her father’s repeated calls for help with abdominal pain. With an impacted bowel,” the Ledger said, “he later died of a heart attack.”

The attorney for the estate told the jury the 100-bed facility was severely understaffed due to a companywide effort to cut expenses and raise the stock price.

“They are building profitability on the backs of people like Loren Richards,” he said.

But a May 26, 2006 article by Northwest Arkansas News beats all. Beverly has hatched a scheme that will send injured nursing home residents on a wild goose chase.

NAN reported that nursing homes owned by Golden Gate National Senior Care Holdings LLC, formerly Beverly, have been reorganized as separate foreign limited liability companies, including 13 facilities in Arkansas.

“As part of the corporate restructuring, the nursing homes have been split up into separate companies,” Golden Gate spokesman Blair Jackson said. “The LLC process is completed.”

“The move limits the liability of the parent company,” NAN noted.

And Beverly is not completely out of the picture. “While Golden Gate is still based in Fort Smith,” NAN said, “the headquarters of Beverly Enterprises, which now controls only leased facilities, moved to Folsom, Calif.”

“The 80 nursing homes we lease will retain the name Beverly Healthcare, and the other nursing homes are operating under the new name of Golden Gate National Senior Care,” Jackson said.

It would no doubt take top-notch attorney to figure out this next part of the scheme.
“As part of that process,” Jackson told NAN, “a new separate company was created to own the real estate, Geary Property Holdings.”

“That company now owns the buildings and the land of those 262 [facilities],” he said, “and Golden Gate National Senior Care is the operating company that runs the nursing homes.”

Bottom line: with this maze in place, how many layers will plaintiffs have to weave through to hold the company accountable and reach Beverly’s billions?

Inside America’s Nursing Homes

September 28, 2006 Evelyn Pringle

Residents in nursing homes are some of the most vulnerable and helpless citizens in the US, with nearly 1.7 million elderly and disabled persons residing in about 17,000 facilities. And as difficult as it is to believe in this day and age, there is indisputable evidence to show that many nursing home residents are being neglected and abused on a daily basis.

Legislation was passed by Congress in 1987, with a goal to improve nursing home care. However, following an in-depth investigation, a recent report released by Consumer Reports, found inadequate care in nursing homes is still very common, particularly in the large for-profit corporations that run nursing home chains all across the nation.

In order to receive funding from public health care programs like Medicare, the Nursing Home Reform Act requires the nursing home industry to comply with federal regulations related to the quality of care of the elderly in nursing homes and requires that “a nursing facility must care for its residents in such a manner and in such an environment as will promote maintenance or enhancement of the quality of life of each resident.”

The revelations in recent cases about abuse and neglect in nursing home, prove that those requirements are not being met. One of the worst examples of documented harm to the nation’s elderly began in February 2006, during an annual review by state inspectors in Kentucky that found an extremely high number of serious health and safety violations at the Lakeside Heights Nursing Center in Highland Heights, Kentucky’s largest nursing home with 286 beds.

According to a report by the inspectors, obtained in April 2006, by the Cincinnati Post through an open records request, the inspectors found 10 residents had been placed in what the state termed “immediate jeopardy” because of substandard practices and procedures, including one patient who died in November 2005, after the staff failed to respond with proper treatment to a health problem with which he was diagnosed.

The report said the facility was often critically understaffed and that on 24 occasions only one licensed nurse was assigned to the entire facility and at times, the nurse on duty was not trained to administer intravenous fluids which placed three residents in jeopardy.

According to the report, the residents often could not get services or supplies from outside vendors because of bills that the nursing home had not paid. The inspectors documented one case in which a patient who was frequently choking on solid food could not get to an appointment with a doctor because the home was in arrears to the cab company.

The report said the local water district threatened to shut off service to the facility if the nursing home did not make immediate payments on an overdue bill of $40,000.

Those and many other problems in the report led Kentucky’s Inspector General, Robert Benvenuti III, to tell the Cincinnati Post, that this was the worst case he had seen in his 26 months on the job. Mr Benvenuti said a major source of the problems was too few workers, which kept basic care from being performed.

In one instance, a state inspector saw a resident sitting, urine-soaked, in a wheelchair and two new pressure sores were identified on the patient’s buttocks and the patient was not being checked every 2 hours as required by law.

In another case, an inspector saw a resident moving about the home in a wheelchair with an open, uncovered wound to the big toe and observed dirt and pieces of hair stuck to the wound, according to the report.

The resident reported having asked for new dressing at 7 am that morning, and when nobody responded, removed the old dressing. The report noted that a new dressing was not provided until 5:30 pm that day.

With not enough staff to get patients out of bed or turned in bed, inspectors found that residents developed new bed sores, or sores that they already had had worsened and that 31 residents did not receive doctor-ordered sore treatment.

One patient died of an electrolyte imbalance after the nursing home failed to follow the instructions of doctor ordered treatment. The report said, that nursing home staff failed to notify doctors of changes in the patient’s condition, failed to properly assess the patient’s condition, and failed to establish a plan to care for that person.

According to the Cincinnati Post, another resident did not receive treatment for blood coming from his mouth for eight hours, during which time bleeding also started in a chest wound and his rectum.

In another case, a resident left the nursing home unsupervised without permission several times and once walked to a nearby store, bought alcohol and was later found sitting in a puddle of urine, wreaking of alcohol, in a nursing home room. Another time the police returned the patient to the facility and staff had not even realized that he had left.

Inspectors found that one resident fell from a shower chair and sustained a skull fracture and that a plan to move the patient to and from the shower had not been developed.

Three residents did not receive doctor ordered intravenous antibiotic medications and the nurse in charge told the inspectors that nursing home officials knew she was not trained in intravenous administration, but continued to schedule her as the only nurse in the facility.

On March 29, 2006, the Centers for Medicare and Medicaid notified Lakeside that it would terminate funding for residents paid for by Medicare or Medicaid in 30 days because of health and safety violations that put patients at risk.

But the lead inspector says cutting funding is not enough. “I believe the standard of care was at such a low level that it constituted fraud,” Mr Benvenuti said.

“You have money flowing into that facility from the federal government and state to provide services,” he explained. “If those services are not provided, that is fraud.”

In April 2006, Kentucky Attorney General, Greg Stumbo, announced that his office was investigating charges of abuse and neglect at Lakeside and whether the nursing home committed Medicaid fraud. In a statement, he said that accepting payment for care and services that are not delivered can constitute fraud.

The inspection report, he noted, shows that therapists had stopped giving services in the wake of huge unpaid bills, and that nursing home employees’ checks had bounced and utility bills went unpaid.

The state also alleges that Lakeside did not perform proper background checks on all employees and according to the report, some employees had criminal records. In fact, one nurse hired had previously pleaded guilty to felony theft of a controlled substance and theft by unlawful taking.

According to Barbara Becker, who became a staunch advocate for elderly citizens in nursing homes after her mother-in-law was murdered in a nursing home, there are also the problems created by “the failure of many nursing homes to adequately protect residents from other abusive residents.”

In her mother-in-laws case, she notes, the male resident who committed the murder had a criminal record, a history of over 50 instances of abusive behavior, and was described by a psychiatrist as “an accident looking for a place to happen.”

According to the April 14, 2006, Kentucky Post, “Inspector General Robert Benvenuti III notified the Highland Heights nursing home that its state operating license will be revoked in 30 days and the center, the largest nursing home in the state, will be closed.”

Attorney, Philip Thomas, who practices civil litigation in Mississippi, says there are similar cases of neglect, abuse and fraud in nursing homes all over the country.

Mr Thomas and attorneys, John Giddens and Pieter Teeuwissen, recently filed two lawsuits against the giant nursing home conglomerate Beverly Enterprises in federal court Mississippi.

One lawsuit is a breach-of-contract class action on behalf of residents who were not provided adequate care in accordance with current state and federal regulations and the other involves severe abuse and neglect of nursing home residents.

Beverly operates 342 nursing homes across the US and it remains the poster child for patient neglect, abuse and fraud in the nursing home industry.

On the top of the list of problems with policing nursing homes, critics say, is that surprise inspections are in reality seldom random and their level of predictability allows nursing homes to conceal the evidence of abuse and neglect.

This lack of surprise is very common in Mississippi, according to Mr Thomas, who says nursing home employees have told him that they always know when an inspector is coming and they are instructed to clean up the facility in time for the inspection.

“In Mississippi,” he says, “inspectors visit at around the same time every year and if there has been no inspection for 12 months, then the inspectors can be expected to arrive soon.”

According to elderly advocate, Suzie Bergland, of Moline IL, “The main problem with helping people who have problems at nursing homes, is that the industry corruption seems to be well ingrained.”

“The nursing homes even seem to have purposely seen to it that people at the oversight agencies, are people who are loyal to the nursing home industry,” she says, “like former nursing home Administrators.”

All critics agree that the number one problem in nursing homes that leads to all others, is understaffing, and try as they might, regulators can not get the for-profit agencies to comply with mandatory staffing requirements. Instead they go to great lengths to con the inspectors when it comes to staffing.

For instance, according to Attorney Thomas, “When an inspection is due, Beverly facilities increase staffing to make sure they comply with state staffing minimums.”

They also keep two separate work schedules he says. One to show inspectors with names of people who do not work at the home, and the true schedule that shows understaffing is rampant.

Attorney Thomas points the finger of blame for the gross abuse and neglect of the elderly in nursing homes due to understaffing, directly at the top management officials. “I believe that most nursing home employees are doing the best that they can,” he states, “but have been put into a position to fail by the corporations running the homes.”

Nursing assistants, he says, are the least trained, lowest paid, and most over worked employees in nursing homes. Their job description requires them to feed and bathe residents, assist them in and out of bed, help continent residents to the bathroom, clean and change the diapers of incontinent residents, reposition those who are at risk of developing bed sores, perform range of motion exercises on residents to prevent painful contractures of the hands and feet, help residents in walking, and provide other personal assistance to the residents in regard to their everyday living.

A major problem as far as believing complaints made directly by residents, Mr Thomas says, is that they are sick to begin with, making it difficult for family members to identify what problems are caused by the progression of their underlying conditions and what problems are caused by inadequate care.

“And of course,” he notes, “in lawsuits the nursing homes blame everything on the underlying medical conditions and, without saying it, ask juries to buy into the notion that sick people do not deserve good care from companies that are getting paid to care for them.”

Mr Thomas says unnecessary prescription drug use is also very common with residents in Beverly facilities. “Psychotropic drugs sedate residents and make them sleep more,” he notes.

According to Mr Thomas, “caregivers in understaffed nursing homes need as many residents as possible to be asleep because there is not sufficient staff to adequately care for all the residents when they are awake.”

“The downside for residents,” he points out, “is that it damages their health because they are less likely to get out of bed, ambulate and otherwise move around, which is vital to staying healthy.”

According to the lawsuits filed by Attorney Thomas, reimbursement for this inadequate care comes through several sources including private pay, Medicare, and Medicaid. In many instances, the complaint alleges, “residents’ entire social security checks are signed over to Beverly to pay for the residents’ stay.”

The federal and state governments usually pay for a portion of the care, the lawsuit notes. However, reimbursement paid through Medicare pays a significantly higher amount than reimbursement by Medicaid, so the complaint alleges that Beverly makes it a “corporate policy” to attract residents who are Medicare eligible.

The typical Medicare resident at a Beverly facility, the lawsuit explains, is admitted directly from a hospital and is eligible for Medicare for only the first 100 days; so Beverly provides Medicare residents with more and better care than non-Medicare residents including physical therapy, occupational therapy, speech therapy, and a greater amount of hands on nursing care and charting, the complaint alleges.

Then, before the 100 days is up and the Medicare eligibility expires Beverly takes steps to have orders for therapy withdrawn because the therapy will soon no longer be paid for by Medicare.

As a result of Beverly’s system of providing therapy only to Medicare residents and only restorative care to non-Medicare residents, Beverly provides differing levels of care to residents based on pay source in direct violation of federal law, according to Mr Thomas.

When nursing assistants become over worked due to understaffing, he says, one of the first duties that they eliminate is restorative care, which causes many residents to not receive this much needed, beneficial care.

Beverly’s system of acquiring Medicare eligible residents, the complaint alleges, requires a regular influx of new residents from hospitals and the emphasis on acquiring these new residents can be potentially devastating to other residents. “Existing residents receive less care than the Medicare residents causing or potentially causing a general decline in their overall health,” the complaint states.

“When the residents’ health declines severely they either die or must be hospitalized, which frees up bed space to admit a new Medicare resident,” it charges. According to Mr Thomas, this creates a vicious and improper cycle of substandard care that monetarily benefits Beverly.

William Glass is a plaintiff in the lawsuit filed by Mr Thomas. In the fall of 2004, Mr Glass was placed in the Beverly Healthcare Eason Boulevard facility in Tupelo, Mississippi because he had episodes of violent behavior, which were triggered by medication interactions.

During the entire time that Mr Glass was a resident, a foul odor that smelled like urine and feces, was present in the facility and children and grandchildren say they did not know that it was not acceptable for a nursing home to constantly smell of urine and feces.

Mr Glass alleges that the foul odor was a direct result of understaffing and that Beverly did not provide enough nurses and certified nursing assistants to meet the residents’ bowel and bladder needs. As a result, incontinent residents who had urinated or defecated in a diaper were not cleaned or changed in a timely fashion. The soiled linens and bed pads were also not replaced in a timely manner, which further contributed to the foul odor.

In addition, for many residents who were originally continent but needed assistance getting to the toilet, Beverly’s understaffing resulted in there not being sufficient staff to assist residents to the toilet and residents became incontinent who otherwise would not have.

When he entered the Beverly facility Mr Glass was continent of both bowel and bladder.
But despite the fact that he was continent, employees at Beverly put diapers on him and encouraged him to urinate and defecate in diapers.

After putting him in diapers, the complaint states, employees did not regularly change him or keep him clean. On one occasion, family members found Mr Glass with his diaper so full of urine and feces that it was around his knees and on another, family members found him and another resident eating a meal with feces on their hands and wearing soiled diapers.

The lawsuit charges that Mr Glass was not properly bathed and was left in the same clothes for weeks at a time and that as a result of his unclean condition, Mr Glass smelled bad when his family visited. Virtually the only time that Mr Glass was bathed, the complaint charges, was when his family took him home and bathed him.

According to the complaint, Mr Glass lost between 50 to 60 pounds while a resident of Beverly as a result of substandard care and inadequate provision of food and hydration.

John Dobbs, another plaintiff in the lawsuit, was admitted to the Beverly facility in Ripley, Mississippi on August 16, 2002, because he had decreased mobility from a prior stroke. Due to his stoke, Mr Dobbs could not communicate well with people including his family members.

Mr Dobbs’ experiences at the Beverly nursing home in Ripley are similar to the experiences of Mr Glass in Tupelo. During his residency, the Ripley facility was chronically understaffed.

In fact in this instance, employees of Beverly themselves, told the Dobbs’ family members that the nursing home was understaffed and that there were times when one person had to cover two wings of the facility.

As a result of the understaffing, Mr Dobbs was not placed on a bedpan so that he could relieve himself and was forced to lay in his own urine and feces for long periods of time. He told his family members that he was soiling himself because nursing home staff would not respond to his call light.

Like Mr Glass, Mr Dobbs lost about 60 pounds while he was in the facility as a result of substandard care and inadequate provision of food and hydration. The food served in the facility, the lawsuit complaint alleges, was not tasty or nutritious as required by law.

The complaint charges, that a “sample supper at Beverly Ripley ­ according to a facility employee ­ consisted of one unheated slice of bologna, two pieces of bread, and some potato chips.”

“This “meal” did not even include condiments such as mayonnaise or mustard,” the complaint alleges.

During his stay, Mr Dobbs’ developed bedsores as a result of the inadequate care and in the end, had to undergo a foot amputation due to those bedsores.

Betty Coggins is also a plaintiff in the lawsuit, who was placed in the Beverly Tupelo nursing home after suffering a stroke and becoming paralyzed on one side of her body.

During her last 6 months at Beverly, Ms Coggins also lost between 60 and 70 pounds due to understaffing and not being fed.

Because of understaffing, the lawsuit alleges Ms Coggins was not turned enough and pressure sores developed that were so severe that they required hospitalization several times. Because she was not kept clean and was left lying in her own urine and feces for long periods, during one hospital visit, an emergency room physician reported that the unchanged bandages on her pressure sores had rotted into her body.

As a result of the inadequate care, according to the complaint, “The plaintiff in this case also contracted a severe infestation of scabies that was neglected and not treated or diagnosed for over a month while she endured severe physical pain.”

“Her condition was worse than it otherwise would have been,” the lawsuit states, “because her paralysis prevented her from scratching when she itched and she was permanently scarred from the scabies infestation.”

Adding to the understaffing and resulting substandard care, the lawsuit alleges that Beverly maintains a bonus program tracked by a document known as the “Beverly Scorecard.” The program awards bonuses to Administrators and Directors of Nursing whose facilities meet the budget and to executives who’s managed facility segments meet or exceed budget.

This bonus program contains a scale so that the more a facility undercuts its budget the greater the bonuses are for the Administrator and Director of Nursing. “This gives Administrators and Directors of Nursing,” the complaint alleges, “financial incentives to understaff, not request more than the budgeted staff, not provide adequate food to residents, and ignore caregivers’ complaints about understaffing and inadequate care.”

Mr Thomas reports that he was happy to see the New York attorney general recently criminally prosecute employees of a nursing home for abuse and neglect of residents. “I wish more prosecutors would do the same,” he states, “including prosecution of the corporate executives who put the systems into place.”

“Unfortunately, although it is a crime to abuse and neglect nursing home residents,” he says, “it is not the type of traditional crime that prosecutors usually prosecute.”

“Prosecution” he points out, “would require prosecutors to leave their comfort zone and shift resources away from other areas of law breaking.”

It seems as if prosecutors in some states have at least begun to chip away at abuse and neglect that amount to crimes against the elderly because on May 19, 2006, the Indy Star reported that, “A grand jury has indicted two former nursing home officials on neglect charges, alleging they allowed a resident to lie in his own waste for days with back sores and maggot-covered clothing.”

As for private lawsuits, legal experts say they accomplish little when it comes to stopping abuse and neglect of the elderly. For instance, in October 2005, Beverly agreed to pay $18.9 million to 800 residents in nursing homes in Arkansas to settle two class action lawsuits, and yet the giant chain is facing more lawsuits this year for the exact same type of misconduct.

In another case, on May 4, 2006, after a 6-week trial, a jury awarded $20 million to the estate of a man who died at a Beverly facility in Frankfort, Kentucky after nurses failed to respond to his cries for help.

Twenty million is chump change to Beverly. On August 18, 2006, the US Department of Justice issued a press release to announce that Beverly Enterprises “has agreed to pay the United States and the State of California $20 million to settle allegations that its former wholly owned subsidiary, MK Medical, violated the civil False Claims Act.”

The government charged that MK Medical submitted false claims to the Medicare and Medi-Cal programs from 1998 until 2002, while Beverly owned the company.

Beverly was permitted to settle the case by paying $14,487,278 to the United States and $5,512,722 to the state of California, and as usual, no company executive was charged or jailed for criminal wrongdoing.

Unfortunately, the prospect of prosecuting the for-profit nursing home chains and the culprits at the top, as well as obtaining justice in private civil actions, seems to be growing dimmer each year. To insulate themselves from liability, the largest nursing home conglomerates are going to great lengths to restructure their businesses. The latest stunt, according to Consumer’s Reports, is where; “A nursing-home chain splits itself into little pieces, called “single-purpose entities.”

“Some of these entities own the individual nursing homes,” Consumer explains, “while others lease and operate the facilities, effectively putting the company’s major assets–its real estate–beyond reach of a lawsuit.”

Legal experts say the only truly effective tool for rooting out fraud, abuse and neglect in the nursing home industry falls under the False Claims Act. The Qui Tam provision in the Act allows persons with knowledge of fraudulent claims being submitted to federal programs like Medicare or Medicaid to bring a lawsuit against the facility on behalf of the government.

According to Lou O’Reilly, Founder of Texas Advocates for Nursing Home Residents, “We need more lawsuits filed against providers using the False Claims Act and have them pay back the government for abuse and neglect of residents.”

“Maybe it would clean up the bad nursing homes,” he says.

FCA charges can result in substantial penalties. According to cases compiled by the watchdog group, Taxpayers Against Fraud, in 2001, Vencor Inc paid $104.5 million to settle charges that it had submitted false claims to Medicare, Medicaid, and other government programs. $20 million of that amount, the Department of Justice said, was for false claims submitted related to failure to provide care, including inadequate staffing, improper care of decubitus ulcers, and failure to meet residents’ dietary needs.

Critics say it should be mandatory for nursing homes to post a notice informing employees that under the provisions of the False Claims Act, whistleblowers can earn between 15 and 30% of money recovered from a nursing home that submits fraudulent claims to a federal program for inadequate care or services never rendered.

Nursing Home Industry – Breeding Ground for Whistleblowers

June 6, 2006 Evelyn Pringle

One of the most effective weapons the government has for unearthing fraud against Medicare and Medicaid in the nursing home industry is the False Claims Act. The fraud is so rampant in that industry that it should be officially designated as a breeding ground for whistleblowers.

A provision in the FCA, called Qui Tam, allows persons with evidence of fraud in federal programs or contracts to bring a lawsuit on behalf of the federal government. A notice should be posted in every nursing home broadcasting the fact that under the provision, whistleblowers are entitled to 15-30% of monies recovered in the lawsuit and maybe if enough lawsuits were filed, the industry would start cleaning up its act…

The roughly 16,400 nursing homes in the US house approximately 1.7 million residents. But despite years of evaluations, investigations, and more recently lawsuits, in 2006, the state of America’s nursing home system, entrusted to provide care to the country’s most vulnerable citizens, is every bit as shameful as it was 10 years ago.

Of the 16,437 certified nursing homes nationwide, just 314, or fewer than 2 %, were found to be violation-free during a four-year period, according to an analysis of federal inspection and complaint investigation reports by Gannett News Service.

Where a nursing home is located and who owns it was found to be critical when evaluating the care provided to its residents. Nearly 75% of severe and repeated violations of patient care between 1999 and 2003 were found at nursing homes in 12 states, including Texas, Illinois, Arkansas, Washington, New Jersey, Kansas, Missouri, Indiana, Oklahoma, North Carolina, Mississippi and Tennessee.

During its investigation, GNS interviewed dozens of people and analyzed 4 years of federal data on inspections and patient care and found that for-profit nursing homes accounted for 83% of the more than 500 nursing homes with repeated, serious violations, even though the for-profits accounted for only 65% of all Medicare and Medicaid certified nursing homes.

“Patients at for-profit homes had, on average, higher rates of infections and pressure sores than those the government and nonprofits own,” GNS said. “Other violations found included failing to protect patients from mistreatment, hiring staff without running criminal background checks, and allowing patients to be abused and physically punished.”

In the real world, running criminal background checks on staff or residents is a waste of time to nursing homes that fail to protect residents against known criminals.

A case in point is Barbara “Bee” Becker, who has been a tireless advocate for nursing home residents since 1999 when her mother-in-law, Helen Straukamp, became a victim of a homicide at a nursing home in Evansville, Indiana when she was assaulted by a male resident.

Not satisfied with an inadequate investigation conducted by the facility, Bee began her own investigation of her mother-in-law’s death and discovered that the perpetrator of the crime had a violent criminal record and the nursing home knew it.

The facility told the attending hospital that Mrs. Straukamp had been injured when she had suffered a fall. However, an employee later told the family that she had been assaulted, and an eyewitness described how Mrs. Straukamp was picked up by her arms from a standing position, lifted off the floor and slammed into a wall and handrail, and fell to the floor unconscious.

Mrs. Straukamp died 22 days later. The coroner ruled her death a homicide but the crime was never prosecuted.

On March 4, 2002, after listening to Bee describe how her mother-in-law had been a victim of a crime but there was no prosecution because it took place in a nursing home, at a hearing before the Senate Select Committee on Aging, Committee chairman, Senator John Breaux, announced that “a crime is a crime wherever it is committed.”

Bee says she looks forward to the day when all crimes against elderly citizens in nursing homes will be prosecuted in the same manner as they are when they occur elsewhere.

According to Indianapolis Attorney, Kennard Bennett, “there are some straightforward reasons why crimes in nursing homes are often not prosecuted.”

First, he says, the victim is most likely unable to be their own witness as to what happened because of their dementia. “Nursing home residents are extremely vulnerable to predators for this very reason,” he explained. “There may be no other witnesses to the crime.”

Mr. Bennett also says cases of neglect and abuse, whether civil or criminal in nature, can be expensive to prosecute with numbers of witnesses, thousands of pages of exhibits, and oftentimes complicated medical issues involved. “I think this discourages many over-worked prosecutors from taking such cases on,” he advised.

Combined, the Medicaid and Medicare programs spend more than $67 billion a year on nursing home care. The Centers for Medicare & Medicaid Services (CMS) define standards that facilities must meet to participate in the programs and contracts with the states to assess whether facilities meet the standards through annual surveys and complaint investigations. However, CMS is responsible for monitoring the state survey activities.

But as years goes by, instead of getting better, the inadequate policing of the industry through the survey process is getting worse. Between 1997 and 2003, the proportion of homes with no deficiencies declined from 21.6% to 9.5%, and the average number of deficiencies increased from 4.9 to 6.9 per home, according to a May 2005 report by Bernadette Wright, of the AARP Public Policy Institute, titled Enforcement of Quality Standards in Nursing Homes.

Yet, enforcement actions have declined in recent years. Between 2000 and 2003, “Barriers to Effective Nursing Home Enforcement,” presented at April 19, 2004 CMS Leadership Summit, found (1) the number of homes penalized for any violations declined by 18%, from 2,622 to 2,146, (2) the number of civil monetary penalties declined 12%, from 2,242 to 1,979; and (3) the number of nursing homes denied Medicare or Medicaid payment for new admissions fell 47%, from 1,312 to 698.

An April 2005 report by the Office of Inspector General on the use of civil monetary penalties found most fines were imposed at the low end of their allowable range, and they took an average of 6 months to collect for cases not appealed and an average of 14 months for appealed cases.

Of the $81.7 million in penalties imposed in 2000 and 2001, less than half (42%) had been paid by December 2002.

Year after year, surveyors continue to understate deficiencies and quality care problems. Between June 2000 and February 2002, the Government Accountability Office determined that federal surveyors found actual harm or higher-level deficiencies in 22% of homes where state surveyors had documented none.

In a March 2003 study, the Office of the Inspector General reported that states varied widely not only in the average number of deficiencies cited per home, but also in which particular deficiencies the surveyor would cite for the same problem.

A July 2003 study by the GAO reviewed 76 state surveys and found understated actual harm or higher-level deficiencies in 39% of the surveys.

So who is to blame? The state surveyors or the Feds? Or both?

According to a July 7, 2004 letter to the CMS from Senator Charles Grassley (R-Iowa), corruption in the surveying process is rampant.

During a 2004 review of the state survey process by the staff of Senator Grassley, chairman of the Senate Committee on Finance, which has oversight responsibility for the Medicaid and Medicare, a large number of surveyors said that their superiors instructed them to overlook or understate deficiencies.

He told the CMS, “that the Oklahoma Board of Health member Ron Osterhout said, ‘he received tips during the past six months from sources inside and outside the state Health Department alleging that surveyors are being pressured to go easy on long-term facilities… Among those allegedly pressuring surveyors are state lawmakers acting on behalf of facility administrators.'”

“It is apparent from our review,” Senator Grassley wrote, “that the survey and certification process upon which we rely for accurate, objective and independent data on the operation and activities of facilities, is just plain broke.”

“It has been corrupted by unscrupulous individuals,” he said, “and we need to restore the integrity of the system in every state and locale.”

The surveyors described a bleak and dismal picture of America’s nursing homes system. They themselves were demoralized, they said, when blatant quality of care deficiencies and findings were watered down, altered, or ignored or dismissed.

“These surveyors have raised enormously disturbing issues,” Senator Grassley reported in the letter, “for anyone who cares a wit about the very health and safety of frail nursing home residents.”

Surveyors said that they were “instructed” by their superiors to downgrade citations or not write up facilities for certain high level deficiencies.

Some surveyors said that if a high level deficiency was cited, most of the time it would be reduced to a lower level deficiency or completely deleted from the final report by management without consultation with the reporting surveyor.

Others said that they were told to “rewrite” or “change” survey findings to make the facility “look better” than it really was. And still others described how multiple violations were sometimes bundled and cited as one violation instead of several.

Some former surveyors even told Senator Grassley’s staff that they resigned or retired out of “sheer disgust” at how their hands were tied while doing their jobs.

The majority of surveyors interviewed complained that surveys remain too predictable. The predictability of surveys has been a major concern for many years and the reality is that most nursing home administrators know when a surveyor is coming. In fact, the GAO reported in July 2003, that one-third of the most recent surveys nationwide occurred on a predictable schedule.

Indianapolis Attorney Kennard Bennett agrees that surveyors are too predictable in their patterns of annual surveys. If it occurred the second week of March one year, he says, it’s most likely to occur the second week of March the next year.

“I have also known too many residents and their family caregivers,” he adds, “who are able to see patterns of “sprucing-up” activity that just happen to come right before a survey.

Some surveyors said that they were told to rewrite survey findings to make facilities look better than they really were.

But then, none of these charges are new. The GAO has documented these and other serious problems throughout the nursing home industry repeatedly since 1998.

In one instance, the GAO reviewed a sample of nursing homes with a history of problems, but showed no actual harm deficiencies in their most recent inspections and determined that 40% of these homes had documented incidents of serious harm including avoidable pressure sores, severe weight loss, and multiple falls resulting in broken bones and other injuries, despite the fact that none were listed by the surveyors.

In the recent study released in December 2005, the GAO listed the exact same problems, that while the CMS’s survey data shows a decline in the number of nursing homes with serious deficiencies since 1999, it said, the trend masks two continuing problems: (1) serious inconsistency in how states conduct surveys; and (2) the understatement of negative findings.

Inconsistency in states’ surveys, it noted, is evidenced by vast interstate variability in the proportion of homes found to have serious deficiencies. For instance, from 2003 to 2005, the report said, California cited only 6% of its nursing homes for serious violations, while Connecticut cited 54% of its facilities.

The investigators found pervasive understatement of “serious deficiencies that cause actual harm or immediate jeopardy to patients,” and includes severe weight loss, “multiple falls resulting in broken bones and other injuries, and serious, avoidable pressure sores,” the report said.

In five large states that had a decline in deficiencies, federal surveyors determined that between 8% and 33% of the comparative surveys identified serious deficiencies that state surveyors missed. This finding is the same problem identified in earlier reports by the GAO showing that state surveyors missed serious care problems.

“Continued understatement of serious deficiencies,” the GAO said, “is shown by the increase in discrepancies between federal and state surveys of the same homes from 2002 through 2004, despite an overall decline in such discrepancies from October 1998 through December 2004.”

To ensure the safety of residents, the federal government adopts fire safety standards that all homes must meet, and state survey agencies conduct periodic inspections, to determine whether the standards are met.

Two deadly nursing home fires occurred in 2003 and brought considerable attention to the safety of nursing home residents. The enforcement of fire safety standards in nursing homes is critical because many residents have conditions that restrict their ability to escape if a fire breaks out.

According to data published by the National Fire Protection Association, about 2,300 nursing homes reported a structural fire each year for 1994 through 1999, and the average number of fire related deaths nationwide was about five each year. During this same time period, one multiple-death nursing home fire resulted in three fatalities.

In contrast, the fire related death toll in 2003 was 31, with nursing home fires in Hartford, Connecticut with 16 deaths, and Nashville, Tennessee with 15 deaths. Neither of these nursing homes was required to have a sprinkler system.

The results of CMS’s federal fire monitoring surveys conducted during fiscal year 2003 found that state surveyors either missed or failed to cite an average of more than two deficiencies per home, such as inadequate construction to contain fire and smoke or missing or improperly maintained sprinkler systems.

In turn, the GAO determined that CMS provided insufficient oversight of state survey activities to address fire safety concerns and did not comply with the requirement to conduct monitoring surveys in at least 5% of facilities in each state or a total of over 800 federal surveys annually.

The GAO found that only 40 federal surveys conducted in fiscal year 2003 covered fire safety. In fact, the GAO said, no federal assessments of fire safety were conducted in 27 states.

The Omnibus Act established the survey and certification process to maintain standards in nursing homes and lists several remedies that may be applied when a facility is not in “substantial compliance.”

A facility is not in substantial compliance if the survey finds deficiencies that pose immediate jeopardy, actual harm, or potential for more than minimal harm to patients. When facilities are found to be having deficiencies that put residents in immediate jeopardy, states are required to refer the case information to CMS for enforcement action.

Mandatory remedies are actions that CMS is statutorily required to take to address egregious or extended cases of noncompliance and include termination of the facility’s Medicare contract and the denial of payment for new admissions.

CMS is required to terminate contracts with facilities that fail to return to “substantial compliance” within 6 months, or have unabated immediate jeopardy deficiencies for 23 days.

CMS is required to apply the denial of payment for new admissions (DPNA) remedy for facilities that fail to return to substantial compliance within 3 months.

Once the state refers a case, CMS determines what actions are warranted. In addition to mandatory remedies, CMS may choose to apply discretionary, or optional, remedies such as civil money penalties.

If, within 23 days of the initial finding, a facility fails to eliminate a deficiency deemed to pose immediate jeopardy or fails to reduce the deficiency to the point that it no longer poses a threat, CMS must either terminate the facility’s Medicare contract or appoint a temporary manager to remove the immediate jeopardy and correct the deficiencies.

For all facilities that fail to reach substantial compliance within three months after the initial deficiency, CMS must apply the mandatory DPNA remedy.

For all facilities that fail to reach substantial compliance within 6 months, CMS is required to terminate the Medicare contract. This type of case arises when the facility still has not reached compliance after application of the required DPNA at 3 months.

For all facilities found to have provided substandard quality of care on 3 consecutive standard surveys, CMS must apply the remedies of DPNA and state monitoring of the facility and the state must notify the attending physician of each affected resident and the state licensing board.

CMS must notify nursing homes prior to applying a mandatory remedy. For immediate jeopardy cases, notice must occur at least two days prior to applying the remedy and for all other cases, notice must be sent 15 days prior to applying the remedy, erg, on day 75 for three months of noncompliance.

In April 2006, in a repeat performance of his July 2004 letter, Senator Grassley was writing to his pen pals at the CMS again, citing the exact same problems complained of in 2004.

He once again wrote, “the GAO discovered two consistent and longstanding problems: serious inconsistencies in the results of state surveys and the continual understating of negative findings.”

“In addition,” he said, “it has been reported that there is an imbalance in the effectiveness of CMS oversight initiatives.”

“It is evident that there is questionable data resulting from state surveys in terms of both its accuracy and consistency,” Senator Grassley wrote. “Often, the information is understated, misconstrued, or just plain inaccurate.”

“A chronic and serious problem in the process has been the understating of negative findings by state surveyor agencies,” he said.

“Random” nursing home surveys are many times not random at all, he said. “The level of predictability of these visits are sometimes all too predictable,” he told the CMS, “and this permits nursing home staff to conceal instances of poor quality care.”

Bells are going off in my head. Duh – where have I heard all of this before?

Then in May 2006, the Office of Inspector General released a report on a study that determined the extent to which the CMS applied the required “mandatory remedies” for nursing homes not in compliance.

Of the 55 cases requiring termination during 2000-2002, the study found, CMS did not apply the mandatory remedy as required in 30 cases or 55% of the time.

CMS is required to terminate nursing homes that fail to return to “substantial compliance” within 6 months, or have unabated immediate jeopardy deficiencies for 23 days.

The study found that 23 cases that required termination were not terminated and these facilities returned to compliance on average 17 days after the termination should have been applied. Seven cases with unabated immediate jeopardy deficiencies were not terminated.

Of the 706 cases requiring DPNA in 2002, 28% percent were never applied and 14% were applied late, largely due to late referral of cases by state survey agencies, the report said.

In those instances for which the remedy was never applied, the facilities were out of compliance on average 19 days past the required date to begin denying payments. In those instances in which the remedy was applied late, the facilities were out of compliance on average 40 days past the required date. In both situations, the report said, facilities were allowed to receive payment past the required date.

In 95% of cases for which mandatory DPNA was handled inappropriately, states did not refer cases to CMS on time. In 2002, the State Performance Review data showed that 38 of the 48 states that had cases requiring the DPNA did not meet the standard of referring 95% of the cases on time.

Through a review of surveys following the study period, the OIG determined that in subsequent surveys, all of the facilities not terminated had new cases of noncompliance serious enough to again require referral to CMS for enforcement action.

The report said, that after CMS eased the standard in 2003 and again in 2004, states still did not meet the performance standard regarding timely completion of referral in 2003, and 10 states did not meet the standard of referring 80% of their cases on time in 2004.

While the states and the feds continue to point the finger at each other, one thing is for sure, news reports and the watchdog group Taxpayers Against Fraud, have documented a consistent pattern of ongoing illegal activities all over the country in the nursing home industry and nothing seems to slow it down.

For instance, in September 2004, the US Attorney’s office for the Eastern District of Pennsylvania reached a civil settlement of $143,000 with Green Acres Rehabilitation and Nursing Center after it had submitted false claims to Medicare and Medicaid, providing inadequate services related to nutrition, medications, falls, and pressure ulcer care.

In November 2004, a Chicago nursing home paid $1.9 million to settle Medicaid fraud charges in which the state and federal government and a whistleblower charged that residents were “routinely abused, neglected, mistreated, sexually assaulted, medicated as a form of punishment, unsupervised and otherwise untreated for their mental health, physical disability, and substance abuse problems.”

On May 18, 2005, Hillcrest Healthcare of Connecticut paid $750,000 in civil penalties to settle federal and state charges that it had not provided care required by Medicare and Medicaid.

Hillcrest had already paid a $10,000 fine after pleading no contest to a manslaughter charge related to the death of a resident from a septic infection caused by improperly treated bedsores. The US Attorney said the resident who died was also suffering from anemia, malnutrition, and dehydration, problems he said were suffered by “many” other residents because the facility was inadequately staffed and failed to follow plans of care.

Connecticut’s Attorney General said Hillcrest had “gross disregard for human life and the law—fatally neglecting patients, while at the same time billing the state for the very services it failed to provide.”

On October 24, 2005, according to Taxpayers Against Fraud, Illinois Nursing Home Companies and Owners: Robert D. Wacther, R. William Breece, American Healthcare Management, Inc. (AHM) and three nursing facilities managed by AHM; Claywest House HealthCare LLC, Lutheran HealthCare LLC and Oak Forest North LLC, settled a false claims action for $1.25 million.

The Illinois case involved fraudulent billings to public health care programs for substandard care where nursing homes residents suffered from dehydration and malnutrition, were left for extended periods of time without being cleaned or bathed, and contracted preventable pressure sores.

The Associated Press reported another case on May 18, 2006, where a North Idaho jury awarded $18 million in a nursing home abuse lawsuit for the death of an elderly man where the nursing home staff committed “more than 700 violations of federal nursing home regulations.”

On May 19, 2006, the Indy Star reported: “A grand jury has indicted two former nursing home officials on neglect charges, alleging they allowed a resident to lie in his own waste for days with back sores and maggot-covered clothing.”

In February 2001, the Justice Department’s San Francisco office announced the largest settlement ever for fraud in a nursing home case. Beverly Enterprises Inc, agreed to pay a civil settlement fine of $170 million and to relinquish control of 10 nursing homes in California and the subsidiary, Beverly-California, paid a $5 million criminal fine.

The company pleaded guilty to one criminal count of fraud and 10 counts of making false statements to Medicare.

A series of False Claims Act lawsuits that began in the 1990s prove that they are the most effective weapon against nursing homes when they include heavy fines, monitors, and stringent quality of care standards.

The first was filed in February, 1996 by the US Attorney for the Eastern District of Pennsylvania against the owner and former manager of Tucker House, a 180-bed facility in Philadelphia. The complaint alleged inadequate nutrition and wound care for 3 former residents and that the facility had violated the FCA by submitting claims for services provided when the residents had not received adequate care. The defendant signed off on a $600,000 settlement agreement with orders imposing stringent quality of care standards on the Tucker House.

In January, 1998 the same Assistant US Attorney who handled the Tucker House case filed similar lawsuits against 3 Philadelphia area nursing homes who quickly agreed to pay $500,000 and implement a comprehensive corporate integrity program to settle allegations that they billed Medicare and Medicaid for inadequate care provided to residents.

The complaint specifically identified 5 residents who were not adequately cared for by Chester Care Center, Bishop Nursing Home, and Manchester House Nursing and Convalescent Center. One resident died of injuries received when she was placed in a scalding tub of water by a nurse’s aide and three other residents died of receiving inadequate diabetes care. Another resident died due to a failure to respond in a timely manner to the resident’s progressive weight loss and failure to treat his pressure sores properly.

The reach of these enforcement efforts was further increased by a FCA action filed against Extendicare-owned Greenbelt, Nursing & Rehabilitation Center in Baltimore in August, 1998, which ended up settled in a month.

In this case, state officials had surveyed Greenbelt in January, 1998, and warned the facility in February that it was providing substandard care. Another survey in April, 1998 found that Greenbelt had lied in a report that claimed it was now in compliance.

The exact same pattern was repeated in July and August of 1998, but by then Greenbelt was being fined over $20,000 a month, and state surveyors were asking federal officials to double that amount.

Within a month, the government got Greenbelt to agree to a detailed court order under the FCA that included strict standards for quality assurance, staffing, staff training, medical care, nursing care, wound care, nutritional needs, psychiatric services, and resident safety.

In addition, the company had to hire a monitor and an interim manager, who had to be approved by the government but paid for by Extendicare and allow the government to interview Greenbelt staff without supervisors or company lawyers present.

Thus, the FCA action achieved outstanding results in a month, when more than seven months of surveys, warnings, and fines had accomplished nothing.

In 2001, Vencor Inc agreed to pay $104.5 million to settle a case with allegations that it had submitted false claims to Medicare, Medicaid, and other government programs and according to the Department of Justice, $20 million of the false claims were related to failure to provide care, including inadequate staffing, improper care of decubitus ulcers, and failure to meet residents’ dietary needs.

Attorney Kennard Bennett believes that civil litigation has raised the awareness of the public about poor care in nursing homes.

“Litigation can hold corporations accountable for poor care,” Mr. Bennett explains. “Over time, the goal of this type of litigation is to make it cost more to provide bad care than to provide good care.”

Virginia Attorney John Harris III agrees and says, “the way to clean up nursing homes is to make it more expensive to neglect the residents than it is to take proper care of them.”

Since there is no provision for fining offending nursing homes in Virginia, he says, the health department is helpless because they can only do one of two things, send the nursing home a dunning letter or close the nursing home.

“If the nursing home is closed,” he points out, “where do you put 100 old folks?”

“If a dunning letter is sent,” he advised, “the nursing home promises not to do it again and after a month or so goes right back to business as usual.”

According to Irvine, California Attorney, James Daily, the situation is not getting better. “Quite the opposite,” he says, “people either need to not get old, or have lots of money – don’t grow old poor.”

Records are created, lies are told, he says, and the only way anyone can win an elder abuse case is by finding former employees who will tell the truth about their employers – unless they themselves are licensed – then they will be afraid of speaking because they fear the nursing home making them lose their license.

He also believes litigation is the only effective weapon available to end the abuse and neglect. “My sworn goal as an elder abuse attorney,” Attorney Daily advised, “is to make it more expensive to give poor care than it is to give good care.”

“I want business to know you have to do it right,” he warns, “or I am going to come after you.”

“I want juries to understand that only hitting a company in their pocket book will they ever change,” Mr. Daily notes. “Otherwise it is just a cost of doing business.”

“The families that pursue civil cases for the neglect and abuse of their elderly parents,” Indianapolis Attorney George Gray says, “do so for two main reasons: 1) they want accountability for the unnecessary harm that was done to their mom or dad, and, 2) they hope that by pursuing a legal action, they are going to help prevent some other family going through the same tragedy with their mom or dad.”

According to Attorney, Robert Rikard, nursing home abuse cases should enrage the public, where companies caring only about their bottom line create conditions in their facilities where our most vulnerable citizens are abused and neglected and the only remedy these people and their families have is the legal system.

I for one am enraged. After just one week of investigating the nursing home industry and recognizing the total inability to police it for whatever reasons, I agree with the legal profession, the only way to stop the fraud, and neglect and abuse of our most vulnerable citizens, is to sue the bastards.

Nursing Home Inspection Process Full Of Corruption

September 6, 2006 Evelyn Pringle

Nursing home companies invest heavily in local politicians to ensure the failure of efforts to pass legislation unfavorable to the industry and to buy protection against fines and penalties levied by state officials charged with investigating and monitoring the industry.

According to a September 2006 report by Consumer Reports, “they wield considerable clout in state capitals, where their $500, $1,000, and $3,000 contributions count with gubernatorial, state legislative, and judicial candidates.”

For example, in Arkansas the nursing home industry was a top contributor for state candidates in 2004, according to Followthemoney.org, a nonpartisan database of campaign contributions. The Arkansas Health Care Association, which represents for-profit nursing homes, gave almost $100,000 to state politicians.

The Association also maintains an office near the Arkansas Capitol in Little Rock, Consumer says, where lawmakers can stop in and get a free lunch 3 times a week during legislative sessions.

In return, Consumer Report states, “messages from legislators, subtle and not so subtle, filter down to regulators, who have learned that nursing homes will challenge them if they press too hard.”

Grachia Freeman, a former nursing home inspector in Arkansas, said supervisors “would not let me write deficiencies I wanted to write” for a facility. “They were angry with me,” she said, “for investigating and told me not to complete the survey.”

According to the Consumer Report, this pressure “gives facilities the confidence to push back in so many ways, like appealing citations and sanctions because they know that state legislators tend to be very protective of homes in their districts,” says Iris Freeman, principal consultant with Advocacy Strategy, a Minneapolis firm that works with community groups on behalf of the elderly and disabled.

The Omnibus Budget Reconciliation Act of 1987 established a survey and certification process for states and CMS to verify that Federal standards are maintained in Medicare and Medicaid certified nursing homes.

CMS contracts with state agencies to certify compliance with Federal standards no less than once every 15 months. Additional surveys are also used to investigate complaints. The state uses information from the surveys along with a nursing home’s past record to determine what action to take or recommend.

Critics claim that the inspection process has been corrupted by the industry and as a result the large for-profit chains are escaping punishment for blatant violations of federal laws set in place to ensure the proper care of nursing home residents.

A December 2005, Government Accountability Office Report on the quality of nursing home oversight lists 2 consistent and longstanding problems: (1) serious inconsistencies in the results of state surveys; and (2) continual understating of negative findings by state surveyor agencies.

One of the major problems critics say, is that nursing homes are being tipped off about the dates of inspections so that random surveys are seldom random and the predictability allows the nursing home staff to conceal the home’s poor quality of care.

Elder abuse Attorney, Phillip Thomas, says, “honest nursing home employees will tell you that the facility knows when the inspectors are coming.”

“The most honest employees on this issue,” he explains, “are low-level employees who do not know that inspections are supposed to be without notice, so they do not know that they are revealing a secret.”

“I have had CNA’s flat out tell me that they “always” knew when the inspectors were coming and the facility cleaned up and broke out things like special linens for the occasion,” he said.

Attorney Thomas, and attorneys, John Giddens and Pieter Teeuwissen, recently filed 2 lawsuits against the Beverly Enterprises nursing home chain and its related companies in Mississippi.

One case is a breach of contract class-action on behalf of residents who allege they were not provided adequate care because the homes were grossly understaffed and the other involves severe abuse and neglect where a woman suffered bed sores, scabies (lice) and had a feces covered bandage rot into her skin because it was not changed.

Rapid City, South Dakota Attorney, Mike Abourezk, handles cases involving cost-cutting incentive programs that nursing home companies use to reduce employees labor costs, which he says, predictably result in shoddy care. “When fewer, less well-trained staff members are forced to care for the same number of elderly residents,” he explains, “their ability to do so becomes difficult.”

However, he points out that the job gets easier if residents are given medication to make them sleep a lot because then they don’t ask for much. “Noisy, demanding residents make it hard for these already struggling staff members,” he says. “Medication helps tremendously.”

State law enforcement agencies are finding ways to investigate nursing homes that provide substandard care and the inspection process that allows it to continue. On June 2, 2006, California Attorney General, Bill Lockyer, announced that the Bureau of Medi-Cal Fraud and Elder Abuse (BMFEA) had arrested the owner of 6 California nursing homes in connection with the bribery of a nursing home inspector from the LA County Department of Health Services (LADHS).

Marlene Zerna Robertson, owner of MZR, Inc, was charged with 5 counts of bribery and one count of conspiracy to commit bribery. BMFEA also arrested two co-conspirators: Isidra Abacan Agulto, the corporate administrator of MZR, and Josemar Aberin Mercado. Agulto was charged with 5 counts of bribery and one count of conspiracy to commit bribery, and Mercado was booked on one count of conspiracy to commit bribery.

The BMFEA criminal probe began with its September 2005 “Operation Guardians” inspection of MZR’s Huntington Healthcare Center in Los Angeles according to the press release. Established by Mr Lockyer, Operation Guardians is a task force that conducts surprise, on-site inspections of California’s 1,400 skilled nursing facilities.

Operation Guardians inspectors called MZR’s center “the worst they have seen in a skilled nursing facility,” according to the September 2005 report by the inspection team. The more than 40 violations at the facility included:

Residents wearing filthy clothes, soiled with urine and feces; a resident with an open head wound left unattended; rodent droppings in the pantry where residents’ food was stored and improperly exposed; pigeon droppings in the residents’ dining room; medication improperly stored and administered; inadequate medical record-keeping; and highly irregular practices regarding use of residents’ trust accounts.

Following their inspection, the BMFEA launched an investigation into possible criminal elder abuse, and the LADHS was called in to clean up the conditions at the nursing home and protect the residents.

LADHS then conducted its own inspection and the inspector asked Agulto about reports that MZR hired LADHS employees as “consultants” to perform work outside the scope of their government job and Agulto asked the inspector if he was interested in becoming a “consultant.”

Shortly before Christmas in 2005, Agulto contacted the inspector and said Robertson wanted to give him a holiday card, and Agulto delivered the card with $500 inside on December 24, 2005.

According to the criminal complaint, the inspector then contacted the BMFEA and agreed to work as a confidential informant. The inspector subsequently met with Robertson, Agulto and Mercado at various times and was offered a job as a “consultant,” according to the complaint.

While acting as an informant, the inspector received an additional $6,500 in bribes from January 2006 through April 4, 2006. In addition to the money, Robertson gave the informant an $800 Prada purse, and offered to provide him with paid vacations to Europe, as well as a Lexus or Mercedes.

In return for payments, the complaint says, the inspector was told to alert the defendants of any upcoming Health Department or the BMFEA inspections. Robertson and Agulto told the inspector not to worry about being caught because Robertson had other Health Department employees, including managers, on the payroll.

In his press release, Mr Lockyer said, “I hope the owner’s claims of having a cadre of public employees secretly on her payroll prove to be false bravado.”

“But if they are not,” he warned, “we will apply the full force of the law.”

All total, MZR operates 6 nursing homes in California and combined, the six facilities have 530 beds. “From 2004 through the present,” the press releases said, “Robertson and MZR have received $44.26 million in payments from Medi-Cal.”

“In my seven years as Attorney General,” Mr Lockyer stated, “I have seen few more disturbing cases of public trust betrayed and gross abuse of the elderly who cannot defend themselves.”

“The owner of these homes,” he said, “lived in luxury on the taxpayers’ dime while the senior citizens she was paid to care for lived in squalor.”

And this is not isolated case. Serious elderly neglect and abuse is happening in nursing homes all over the country. In the fall of 2004, the Indiana state Department of Health inspected the Northgate Healthcare nursing home after it was reported that a man, who had open sores on his back, was taken to Marion General Hospital in October 2004 wearing clothing covered in excrement and fly maggots, according to state reports.

“It was the most horrible thing I have ever seen,” a report quoted one emergency room employee as saying.

On May 19, 2006, the Indy Star reported that a grand jury had indicted Zanna Paul, a former director of nursing at Northgate, and Sandra Andersen, the facility’s former administrator, with one count each of neglect of a dependent resulting in bodily injury, for allowing the resident to lay in his own waste for days with back sores and maggot-covered clothing.

Advocates for nursing home reform are outraged over these recent cases. “These examples of egregious behavior should always be treated as what they truly are – criminal neglect and or abuse,” says Barbara “Bee” Becker, an ardent advocate for senior citizens in nursing homes since 1999, when her mother-in-law, Helen Straukamp, was assaulted and killed by a known violent, convicted criminal patient in a facility in Evansville, Indiana.

“When a vulnerable, disabled person is found in such conditions in a private home in the community,” she points out, “the caregiver is criminally investigated, criminally charged and, if found guilty, answers to a criminal court.”

“However,” she continues, “when this inexcusable lack of basic humane care occurs behind the doors of a long-term care facility, provided by professionals who are hired by and answer to corporate entities which cower behind shell company shenanigans, it is usually treated as nothing more than a negotiable regulatory infraction.”

“Profiting from these inhumane conditions, some of which are reminiscent of prison camps,” Ms Becker says, “is also Medicaid and Medicare fraud.”

“The providers are profiting from not providing mandated care, and doing so at primarily taxpayer expense,” she notes.

“If the providers don’t know what constitutes providing even minimal human necessities, they should never be licensed, or entitled to keep a license, to participate in the business,” she contends.

Civil monetary penalties are one of 8 remedies that may used to address deficiencies in quality of care or safety standards. The fines can be assessed per day of noncompliance or per instance of noncompliance, and dollar ranges are to correspond with the seriousness of harm to the patients.

However, fines and civil penalties, Ms Becker states, often fall victim to the industry’s “negotiations” with oversight agencies. “The actions may disappear entirely,” she says, “or they may be reduced or, even if they stick, they may not ever even be collected.”

To verify this assertion, she points to an April 2005 reported titled: Nursing Home Enforcement: The Use of Civil Money Penalties, that describes reduction, assessment, and collection patterns for civil money penalties imposed by the Centers for Medicare & Medicaid Services in 2000 and 2001, published by the Office of Inspector General after conducting an investigation.

During the investigation, the OIG analyzed 100% of the data from CMS’s regionally based Long-Term Care Enforcement Tracking System for enforcement actions beginning in 2000 and 2001, in which a CMP was imposed. The LTC database is a compilation of each CMS region’s nursing home enforcement case files.

The analysis found that while $81.7 million in CMPs was imposed during 2000 and 2001, only $34.6 million, or 42% was paid by December 2002. The difference is primarily attributable, the reports notes, to reductions authorized by regulation and delays in making and collecting payments.

Although CMPs were used in about 51% of the cases, the report states, the amounts originally imposed were often substantially decreased before payment was due. Under current regulations, the investigators found, systematic reductions, appeals, settlements, and bankruptcies to be the main factors contributing to this decrease.

Many of the worst culprits never get fined to begin with. In 2003 and 2005, Consumer Reports examined whether states were levying fines against their sample of poorly performing nursing homes and determined that the states that could impose fines were not always using that authority.

An earlier study found that in states with the power to impose fines, only 55% of the facilities that could have received a monetary penalty actually did. In their most recent analysis, Consumer found that the states fined just 50% of such homes.

The report said, that 8 of the 12 five-time repeaters on this year’s list of poorly performing homes had not received state fines between 1999 and 2004, and that the others received minimal penalties.

According to Irvine, California Attorney, James Daily, nursing home abuse can include over-sedation, poor medical care, or wrong medication, but says in private litigation, cases of elderly abuse and neglect are next to impossible to prove.

“Records are created,” he says, “lies are told, and the only way anyone can win is by finding former employees who will tell the truth about their employers.”

“Unless they themselves are licensed,” he adds, “then they will be afraid of speaking because they fear the nursing home making them lose their license.”

Abuse And Neglect Rampant In Nursing Home Industry

September 18, 2006 Evelyn Pringle

In 1987, Congress passed landmark legislation aimed at improving nursing home care for the nation’s vulnerable elderly population. However, a recent investigation by Consumer Reports found poor care in nursing homes is still extremely common, especially in the for-profit chains that have become the dominant force in the industry.

The Nursing Home Reform Act requires nursing homes to comply with federal regulations for quality of care and specifically states that “a nursing facility must care for its residents in such a manner and in such an environment as will promote maintenance or enhancement of the quality of life of each resident.”

However, Consumer conducted an analysis of state inspections for some 16,000 homes nationwide and reported that “two decades after the passage of a federal law to clean up the nation’s nursing homes, bad care persists and good homes are still hard to find,” in a September 2006 report.

When nursing home facilities are found to be out of compliance or have deficiencies that put residents in immediate jeopardy, states are required to refer case information to Centers for Medicare & Medicaid Services (CMS) for enforcement action.

Once the state refers a case, CMS determines what enforcement actions are warranted. Mandatory remedies are actions that CMS is statutorily required to take to address egregious or extended cases of noncompliance and include termination of the facility’s Medicare contract and the denial of payment for new admissions (DPNA).

In enforcement actions, CMS is required to apply the denial of payment remedy for facilities that fail to return to substantial compliance within 3 months and is required to terminate Medicare contracts with facilities that fail to return to substantial compliance within 6 months, or have unabated immediate jeopardy deficiencies for 23 days.

CMS is required to terminate the Medicare contract when the facility still has not reached compliance after application of the required DPNA at 3 months.

For all facilities found to have provided substandard care on three consecutive surveys, CMS must apply the remedies of DPNA, state monitoring of the facility, and the state must notify the attending physician of each affected resident and the state licensing board.

As part of the Office of Inspector General’s (OIG) evaluation of the quality of care in nursing homes, an analysis was recently conducted to determine the extent to which the CMS applied the “mandatory remedies” for nursing homes not in compliance.

The OIG released a report in May 2006, that found that in 55 cases requiring the termination of the Medicare contract during 2000-2002, the CMS did not apply the remedy as required in 30 cases or 55%.

The review found that 23 cases that required termination because they were noncompliant for 6 months were not terminated and through reviews of surveys following the study period, the OIG found that all of the facilities not terminated had new cases of noncompliance, serious enough to again require referral to CMS for enforcement action.

Of the 706 cases in 2002, requiring DPNA remedies, the report said 28% were never applied and 14 percent were applied late.

No doubt tired of waiting for the Federal government to act, state law enforcement agencies are cracking down on abuse and neglect of patients in the nursing homes. On January 6, 2006, New York Attorney General, Eliot Spitzer, announced the arrest of 19 employees at two separate nursing homes where hidden cameras produced evidence of serious patient neglect.

In addition to the prosecution of criminal charges, the Attorney General’s office also filed a civil lawsuit against the corporations that control one of the nursing homes, including the primary owner and operator of the facility, Anthony Salerno, and a consulting company he owns known as Healthcare Associates.

“The residents of our state’s nursing homes are among our most vulnerable citizens,” Mr Spitzer stated in the press release. “My office is committed to doing all it can to protect these individuals, who are sometimes without friends and family to protect their interests.”

“With these cases,” he said, “we are trying to send a message that law enforcement is watching to ensure that appropriate standards of care are met.”

The first case involves the Jennifer Matthew Nursing Home in Rochester and was developed through the use of secretly recorded videotapes of a bedridden patient, referred to in the court filings as “Patient A.” The patient’s family permitted the Medicaid Fraud Control Unit to install a hidden camera to monitor interaction between the patient and nursing home staff.

The criminal complaint describes evidence of how Patient A and other residents were not turned and repositioned to avoid the risk of pressure sores, and were often left for hours to lie in their own urine and feces, and alleges that medications and treatment were not provided as prescribed.

The court filings describes how the staff would move call bells away from patients and stop doing their rounds so that they could socialize, sleep, watch movies, or even leave the building.

Staff members are also accused of falsely claiming in required paperwork that proper care had been provided to the patients.

The second case involves the Northwoods Nursing Home and again, the family of a resident consented to the installation of a hidden video camera.

According to criminal complaint, the camera revealed that licensed professionals repeatedly failed to provide care or treatment to the resident, and then falsified records to report that proper care had been administered.

Five employees were charged with Falsifying Business Records in the First Degree, a class “E” felony, and misdemeanor neglect and endangerment in the Northwoods case.

These and other patient neglect cases prompted a report by the Attorney General’s office that gives the details of staffing levels at nursing homes throughout the state to assist the public in choosing an appropriate nursing home.

Government studies have shown a strong relationship between staffing levels and quality of care, and have identified a threshold, referred to as hours per resident day or “HPRD,” below which the quality of care suffers.

On the basis of these studies, some states have set minimum staffing levels for nursing homes. In its report, the Attorney General’s Office lists each nursing home in the state, its HPRD ratio, and states whether that home would meet the standards set in other states or a threshold described in a 2001 federal study.

The report urges consumers to visit homes, actively monitor the level of care being delivered, and talk to others with family members or friends in the home.

In another Medicaid fraud case, on May 26, 2006, Attorney General Spitzer announced that a grand jury had indicted former nursing home owner Abe Zelmanowicz for stealing more than $3 million from the Medicaid program.

Zelmanowicz, and the entities which formerly owned the two homes, were arraigned on a 21-count indictment with one charge of Grand Larceny in the First Degree and 20 counts of Offering a False Instrument for Filing in the First Degree. If convicted, Zelmanowicz could face up to 25 years in prison.

According to the indictment, from January 1, 1997, to August 27, 2003, Medicaid payments were made to the homes based on submissions by Zelmanowicz, which claimed that the facilities were properly reserving or “holding” a resident’s room when the resident was temporarily hospitalized.

Under New York law, nursing homes are only allowed to temporarily bill for “bed holds” when the home is 95% occupied and when the hospitalized residents had lived in the nursing home for at least 30 days prior to hospitalization. Zelmanowicz is accused of billing for “bed holds” when he knew that he was not entitled to receive payments under these regulations.

The indictment further alleged that Zelmanowicz submitted false claims for payment, which showed Medicaid patients were receiving ventilator treatment when the patients were not. Medicaid pays significantly more for patients who receive ventilator care.

The complaint charges that Zelmanowicz took an $800,000 annual salary from the nursing homes, and ignored the repeated warnings of his accountants to end his wrongful billing practices and repay the Medicaid program and that Zelmanowicz was warned by his staff that he was violating Medicaid rules but that he nonetheless instructed the staff to continue submitting the fraudulent claims.

In addition to criminal charges, the Attorney General filed a civil lawsuit against Zelmanowicz and his partner, Rebecca Rich, as the former owners of two homes, which they sold in September 2002.

The civil suit seeks asset forfeiture from Zelmanowicz and Rich and repayment by Zelmanowicz of three times the amount he fraudulently billed. Altogether, the civil complaint seeks more than $12 million.

Attorney General Spitzer says that this case illustrates how Medicaid fraud is not only a matter of phantom patients and fly-by-night operations. “In this case,” he said in the press release, “two substantial facilities, in business for many years, with real patients, were used as a means to extract money from Medicaid by hiding crooked billings among the mass of real services.”

According to the Attorney General’s office, New York’s Medicaid program pays $11 billion a year for nursing home care. The federal government pays for half, with state and local governments picking up the rest of the tab.

Mr Spitzer’s dogged investigations have paid off well for New Yorkers. In 2005, his office recovered $274 million in Medicaid fraud, compared to $63 million in 2004.

In recent years, the nursing home industry has lobbied hard to make it difficult for private individuals to sue nursing homes. Some states have already passed laws to limit damage awards. “Generally,” Consumer Reports says, “that means legally imposed caps, typically $750,000 on punitive damages and $250,000 on noneconomic damages for pain and suffering.”

Nursing homes claim they need caps to predict operating costs, particularly for liability-insurance premiums. However, according to Consumer, “caps make it more difficult for victims to find a lawyer willing to take the financial gamble of representing them.”

Critics say litigation is the only method available to make the large nursing home conglomerates clean up their act. “Litigation can hold corporations accountable for poor care,” according to Attorney Kennard Bennett. “Over time,” he says, “the goal of this type of litigation is to make it cost more to provide bad care than to provide good care.”

Virginia Attorney, John Harris III, also says “the way to clean up nursing homes is to make it more expensive to neglect the residents than it is to take proper care of them.”

Cases involving gross abuse and neglect that do make it to a jury are seeing large awards. The May 18, 2006, Associated Press reported a case where a North Idaho jury awarded $18 million for the death of an elderly man where the nursing home staff committed “more than 700 violations of federal nursing home regulations.”

The staff eventually caused the man’s death with repeated dosages of Haldol, a powerful anti-psychotic drug they used to control him after he tried to leave the home, said Richard Eymann, the attorney for the man’s son.

“This jury verdict sends a message to the entire nation,” Mr Eymann told the Associated Press. “Nursing home abuse, including the use of sedating or mind-altering drugs to profit off senior citizens, will not be tolerated. It is our hope that the verdict will help change the culture in nursing home care.”

The large for-profit chains are erecting other barriers to shield themselves from lawsuits. For instance, some facilities now require families to sign binding-arbitration agreements before a family member can be admitted.

Some chains have come up with ways to restructure their businesses to insulate them from liability. Consumer’s Report explains how it works:

“A nursing-home chain splits itself into little pieces, called “single-purpose entities.” Some of these entities own the individual nursing homes, while others lease and operate the facilities, effectively putting the company’s major assets–its real estate–beyond reach of a lawsuit.”

In Mississippi, Special Assistant Attorney General, Scott Johnson, told state legislators last year, that if a home’s license holder does not own the facility or any assets, legal action is pointless. “You can’t collect money from someone who doesn’t have any,” he said.

Earlier this year, Beverly Enterprises Inc, the nation’s second-largest for-profit nursing home chain, was sold to an affiliate of Fillmore Capital Partners, a private equity firm. The operating company, called Golden Gate National Senior Care Holdings LLC, will operate 262 nursing homes, and a new company, Geary Property Holdings, will own the land and the buildings.

According to the May 26, 2006, Northwest Arkansas News, Fillmore paid $12.50 a share to acquire Beverly in a $ 2.29 billion deal that closed in March 2006.

“As part of the corporate restructuring, the nursing homes have been split up into separate companies,” Golden Gate spokesman Blair Jackson told Northwest News.

“The 80 nursing homes we lease,” he explained, “will retain the name Beverly Healthcare, and the other nursing homes are operating under the new name of Golden Gate National Senior Care.”

As part of that process, Mr Jackson said, Geary Property Holdings, a new separate company was created to own the real estate.

Geary Property now owns the buildings and the land, he said, and Golden Gate is the operating company that runs the 262 nursing homes.

“The move limits the liability of the parent company,” Northwest News notes.

Judging from the salaries of its top executives, Beverly was surely not broke when it decided to implement this elaborate liability protection scheme. As company Chairman, CEO, and President, William Floyd earned $2.23 million a year, according to court filings. He was also the largest Beverly shareholder with approximately 803,972 shares of stock at a market value of about $9,326,075.

As the Chief Operating Officer of Nursing Facilities and Executive Vice President, David Devereaux, was paid a salary of about $854,000, and he was the second largest shareholder with approximately 255,204 shares at a value of about $2,960,366.

According to court documents filed on December 22, 2005, as part of the sale, Mr Floyd, Mr Devereaux, and other executives and board members, will receive payments totaling $109 million. Mr Floyd’s severance package alone was $40 million.

In 2003, Lisa O’Bradovich was an administrator at a Beverly owned nursing home in Tekamah, Nebraska. She says her job was short lived because Beverly’s Regional Director of Operations continually badgered all area administrators to cut costs even as patient care became compromised under budget constraints.

On one occasion, Ms O’Bradovich was reprimanded for allowing labor hours to go over budget by $400 during a flu outbreak even though with the extra help they were able to contain the outbreak in a few days. “At the time,” she says, “I felt that patient care was vitally more important than saving costs.”

When she first arrived at the facility, she says, there was hardly any regulatory compliance at all. “I literally had to drag the limited amount of existing files,” she recalls, “out of a restroom that had been closed off for storage and that should have been in use for regulatory compliance.”

In her 6 months at the nursing home, Ms O’Bradovich established policies and procedures to bring the facility back into compliance but as she soon found out, that was not Beverly‘s goal. “Patient care improved,” she says, “but the only thing that corporate cared about was saving costs and increasing revenue.”

“We were not losing money at the facility level,” she explains, “but raising the census was difficult as not many people in the community wanted to place their relatives there due to the facility’s negative reputation.”

Throughout the 6 months, she also upset her superiors when she continued to bring up problems such as why they were not properly treating the mold in the building and why they were not fixing the faulty plumbing, until she ended up fired.

Since 2003, Ms O’Bradovich has kept her administrator’s license active but says she has not been able to secure another position as an administrator. “My career has virtually been ruined by my association with Beverly,” she says.

The problem of understaffing at Beverly facilities is legend. A lawsuit recently filed by Attorney Phillip Thomas in a federal court in Mississippi, alleges that understaffing “in Beverly facilities causes the facilities to be dirty, constantly smell of urine and feces, serve as breeding grounds for lice and other problems caused by unsanitary conditions, and to generally deprive residents of a dignified existence.”

The class action lawsuit, filed on behalf of former residents of the nursing home, alleges that Beverly executives maximized profits by failing to provide enough staff for proper care for residents who stayed in the Regional Nursing Center of Bryant in Saline County from December 16, 1998, to June 30, 2004.

The lawsuit alleges that many residents of Beverly facilities require assistance in eating meals due to loss of the use of their hands and understaffing results in there being insufficient caregivers to assist residents in eating causing residents to go hungry and lose weight from starvation.

The complaint alleges that one resident lost 60 to 70 pound in a 6 month period because the staff did not feed her and says the failure to feed the resident was due to understaffing of the facility.

Mr Thomas has come across all kinds of tricks used by Beverly to hide the understaffing of its facilities from government inspectors. For instance, he found that they keep two sets of work schedules; one real and the one that inspectors see which is fake.

The fake schedule, he explains, includes the names of former employees who the facility knows will not be working. But for inspectors looking at the schedule, it appears that the facility is fully staffed. The real schedule shows the facility is not adequately staffed.

According to Mr Thomas, to make the residents easier to manage for understaffed nurses and nurse’s aides, facilities use drugs to sedate residents to make them sleep more.

“Caregivers in understaffed nursing homes need as many residents as possible to be asleep,” he explains, “because there is not sufficient staff to adequately care for all the residents when they are awake.”

“The downside for residents,” he says, “is that it damages their health because they are less likely to get out of bed, ambulate and otherwise move around, which is vital to staying healthy.”

In recent years, Beverly has constantly been under the scrutiny of state and federal investigators for ripping off Medicare and Medicaid. In the most recent case, on April 19, 2006, the LA Times reported that “Beverly Enterprises Inc. has agreed to pay $20 million to settle allegations that it defrauded federal and California healthcare programs,” the Justice Department announced.

This time around Beverly will pay $14.5 million to federal agencies and $5.5 million to California, according to the Times.

Back in 2002, the company settled charges of elderly abuse brought by the California attorney general’s office and paid more than $2 million in penalties and fines and pleaded no contest to felony elder abuse charge involving the death of two patients.

And two years earlier in 2000, Beverly settled a case with the US Department of Justice by paying a $175 million settlement and $5 million fine to resolve civil and criminal charges for defrauding Medicare.