Advocates and
analysts are still wondering how Joseph Schwartz's empire was allowed to grow
so 30
July 19, 2019, 1:54 PM CDT By Laura Strickler,
Stephanie Gosk and Shelby Hanssen
NEW
BEDFORD, Mass. — Once a week for two years, police Lt. Jeannine Pettiford had
visited the nearby nursing home where her 52-year-old cousin with cerebral
palsy lived. But on their daily phone call in early May, her cousin had bad
news.
"I'm
getting kicked out," he told her.
In
disbelief, Pettiford asked to speak with a nurse, who told her there were
rumors of closure. Her alarm rose when she visited the facility and saw nurses
crying. The nursing home's owner, Skyline Healthcare, had told its staff there
was no more money.
Skyline's
four other nursing homes in
Massachusetts were facing the same crisis. Funds were so short, staff had begun
buying toilet paper with money from their own pockets, according to former
employees. Residents and their families discovered from local newscasts they
had just 30 days to find somewhere else to live.
"Nobody
from the nursing home ever
called me to tell me," Pettiford said. She was angry. And, she later
learned, so were many others.
At its
peak, Skyline Healthcare owned or ran more than 100 facilities in 11 states,
overseeing the care of more than 7,000 elderly Americans. But during the past
two years, the chain has collapsed, and more than a dozen Skyline-operated
nursing homes have shut their doors, throwing residents, vendors, employees and
state regulators into chaos.
Many
homes ran out of money. Others were shut down over neglect documented in
government records. Fourteen homes were forced to close permanently, displacing
more than 900 residents to new facilities, sometimes hours away.
The
story of Joseph Schwartz and Skyline Healthcare is one of swift expansion,
alleged mismanagement and catastrophic failure. An NBC News investigation
reveals the scale of the Skyline debacle, in which one man built an empire that
quickly crumbled, with painful consequences for vulnerable people.
It also
shows the failure of state and federal authorities to keep up with just who
owns and runs America's nursing home facilities, which house 1.3 million
elderly and disabled Americans — about three-quarters of them in beds paid for
by taxpayers via Medicare and Medicaid. The states are responsible for tracking
ownership and conditions at nursing homes within their borders, but only the
federal government can monitor the performance of firms that own or operate
facilities across the nation. The allegations of negligence at a major
nursing-home chain come as the Trump administration is moving to ease, not
increase, accountability for the industry, reducing penalties and terminating
fewer contracts with problem owners.
Schwartz,
meanwhile, still has ownership stakes in 53 nursing homes, according to federal
records. He has not returned multiple messages and emails requesting comment
from NBC News.
"I
just don't think I've ever seen anything like it," said Stephen Monroe, an
industry analyst of three decades who is the managing editor for the nursing
home trade magazine Senior Investor. "I have no idea what that family was
thinking. To go from 10 to 100 in two years with no real back office? I looked
at that and said from day one, 'Impossible."
A
Brooklyn, N.Y.-based insurance broker and landlord, Joseph Schwartz entered the
nursing home business more than 10 years ago after he sold a Florida-based
insurance company.
In a
2017 deposition for a malpractice lawsuit filed by a family alleging neglect at
one of his homes in Pennsylvania, Schwartz explained why he'd gotten into the
industry. ""Basically, I used to do a lot of servicing in selling
insurance policies to long-term care industry," he said, "and I felt
that I could, that I understand the quality care … and I will do a very good
job in doing the quality care for residents."
He
started with a half dozen homes, but after creating Skyline Healthcare he began
expanding rapidly in November 2015 with the purchase of 17 homes.
Schwartz
ran Skyline out of a tiny office above a New Jersey pizzeria. He was CEO, his
wife Rosie co-owned most of the properties and his two sons, Michael and Louis,
served as vice presidents. The company had a bare-bones website and a slogan,
"Skyline: The Home Life You Crave."
During
the 2017 deposition, he said, "Skyline is an entity that is me."
His net
worth is hard to compute but real estate records show he owns over $9 million
worth of real estate in the New York metropolitan area, including a gated house
in Suffern, N.Y.
Within
a year of his purchase of 17 nursing homes, Schwartz had taken on another 64,
and by 2017 was operating more than 100.
Schwartz
wouldn't provide a number when the plaintiff's attorney asked him repeatedly in
June 2017 how many homes he ran. He confirmed it was more than five, but asked
if it was more than 100, he said several times that he couldn't recall.
He told
the lawyers, "All our facilities are very, very, very, very compliant with
all clients. They all have every program that's necessary for patient
care."Ace Reporters
With
more than 100 facilities, experts estimate Schwartz would have been juggling a
few hundred million dollars a year in taxpayer money from Medicare and
Medicaid.
But
problems had emerged quickly. Within six months of Skyline's entry into the
Arkansas market in 2015, the state's attorney general was investigating reports
of neglect in Skyline facilities.
Marcela
Watkins, who visited her mother daily in Spring Place Health and Rehab in
Little Rock, said the food went downhill once Skyline took over. She recalled
staff serving raw vegetables and boxed pizza to elderly patients.
"It's
a money-making business," she said. "And guess who doesn't get the
care? Our loved ones."
Karen
Coats's 57-year-old brother Donny Owens fell at another Skyline Arkansas
facility in 2017, heavily bruising his face. She said he laid on the floor for
45 minutes before staff found him.
Coats
said staffing was a "revolving door" and that she frequently
complained, though little changed.
The
state attorney general later issued Skyline facilities more than $200,000 in
civil fines for neglect, preventable falls, failure to bathe residents and
maggots in a resident's personal medical equipment.
In
Massachusetts, staff say the Schwartz sons visited the properties before taking
over, promising new resources. But cuts started within a year.
Certified
nursing assistants were reduced from five to three, according to ex-employees.
Staff were told that disposable briefs would be rationed to two per patient per
shift, instead of as needed, meaning patients were left to languish in their
own body waste. One former head of nursing told NBC News that management
offered giveaways to smooth over the changes.
She
said she told them, "I don't want a [free barbecue] grill, I want to save
the staff I have on the floor."
As
problems mounted, Skyline continued to expand. In 2017, it entered South
Dakota.
Schwartz
reportedly leased at least half of the homes he operated around the nation from
Georgia-based Golden LivingCenters, according to local news reports and
property records, which acted as Schwartz's landlord.
Last
year Skyline released a statement to a South Dakota reporter blaming Golden for
problems in its South Dakota nursing homes. Skyline said the chain was
"dedicated to providing quality care" and meeting its obligations,
but that Golden had caused the issues.
Monroe,
the analyst, said landlords like Golden hold some responsibility. "How did
they not do their due diligence to [vet Skyline]? That is a mystery."
A
spokesperson for Golden LivingCenters conceded the company contracted with
Schwartz to run 17 homes in South Dakota but would not comment on other states.
The spokesperson also declined to answer if the company vetted Schwartz,
saying, "He convinced a lot of people in a lot of states. He ran a big
scam."
By
September 2017, Skyline had taken over Ashton Place, a nursing home in Memphis,
Tenn. Less than two months later, a resident with a recent leg amputation was
taken from the nursing home, where he was found lying in feces, to a hospital,
where nurses discovered maggots and gangrene in his leg, according to the
police report obtained by local NBC affiliate WMC. His death two days later
prompted a state investigation, which revealed the man had not had his dressing
changed for two days. Staff said problems arose in part when Skyline told
nurses to abandon electronic medical records and go back to paper record
keeping.
During
the investigation, the company's medical director told inspectors, "I have
no support, no direction."
A
spokesperson for the state agency that approved Schwartz's takeover of Ashton
Place said while Skyline had faced problems in other states, that did not
disqualify it from operating the Memphis nursing home.
A month
after the death, the Centers for Medicare and Medicaid Services (CMS), the
federal agency that oversees the nursing home industry, terminated Medicare
certification for the facility and another Skyline property in Tennessee. It
terminated a third in the state in 2018.
According
to a CMS spokesperson, "Each individual facility is separately certified
and held accountable for compliance with CMS minimum health and safety
standards." The spokesperson adds that "CMS has limited authority to
intervene when a facility is struggling financially.
The
government, and taxpayers, were paying for Skyline's rise.
Industry
analysts say nursing homes are on the decline as other options, like assisted living,
emerge. The number of residents has fallen from an estimated 1.5 million in
2010 to 1.3 million in 2015. But they also say a
"silver tsunami" of baby boomers in their 80's may be on the horizon.
For the
time being, residents in nursing homes are likely to be poor, vulnerable and on
Medicaid, which is paid for by federal taxes.
But
despite being subsidized by the government, as he took over more homes, Joseph
Schwartz was racking up debts.
Former
staff at Skyline nursing homes say Schwartz would bring in a vendor, let the
bills stack up, then find another vendor and do the same thing again.
During
the June 2017 deposition for a lawsuit alleging neglect at a Schwartz-owned
facility in Pennsylvania between 2012 and 2014, which he later settled,
plaintiff's attorneys asked about unpaid bills and bounced checks. Schwartz
insisted that he paid "everybody." But he also said there could be
reasons for not paying contractors, including unfinished work. "Because a
guy sends a bill in doesn't mean he needs to get paid," said Schwartz.
With
residents running out of food, several states began to take extraordinary
measures. Starting in March 2018, Nebraska and then Pennsylvania assumed
control of some Skyline facilities and assigned third parties to run them.
South
Dakota was next. In April 2018, Debbie Menzenberg, a local Skyline
administrator, sent a panicked email to the state agency
responsible for nursing homes, claiming Schwartz's son was telling her the
company had no money.
"I
just had a call from Louis Schwartz," she wrote in the email, which was
later produced in court, "there is no money — he told me to discharge
residents????" Later she wrote, "I need water paid at Bella Vista and
Prairie Hills today or it will be SHUT OFF – Skyline is SILENT!!!"
During
the 2017 deposition, Schwartz repeatedly defended the quality of care at his
nursing homes, saying he tried very hard to do "whatever is needed"
for residents, but seemed reluctant to talk about what he was doing with money
from the homes.
The
attorney for the plaintiff pressed Schwartz on whether he took cash from the
facilities. He said he did, but his lawyers objected to questions about how
often he took money and whether he made the decision. Schwartz then said he
would take the money as needed, and would listen to the recommendation of his
CFO, but would ultimately make the decision himself.
The
plaintiff's attorney then asked Schwartz how much money he took out of the
Pennsylvania home where the neglect was alleged.
"Those
draws, for example ... they could amount to over a million dollars over the
course of a year?"
"Could
be," answered Schwartz.
"Now,
when you're taking out draws," asked the lawyer, "that does take away
from some of the cash on hand at the facility to operate?"
Advocates
and analysts are still wondering how Schwartz's empire was allowed to grow so
large so quickly, without any state or federal authorities appearing to sound
an alarm bell.
The
nursing home industry is turbulent, with frequent ownership changes — one of
the homes Schwartz took over in Arkansas had five owners in just six years.
While
states are largely responsible for determining if a new owner is financially
suitable, the process varies dramatically state by state. In Arkansas the
process doesn't even require the new owner to submit financial statements.
The
federal regulator, CMS, is the only oversight agency with a birds-eye view.
Each time a nursing home anywhere in the country changes hands, the company has
to submit a form to CMS, a regulation introduced as part of Obamacare.
A CMS
spokesperson, however, told NBC News that the agency is not responsible for
assessing an owner's finances, "CMS authority over nursing homes relates
to compliance with health and safety requirements, not their well-being."
But CMS
staff can review ownership patterns, said Alice Bonner, who served as the
director of the division of nursing homes for CMS during the Obama
administration.
"We
would have conversations about the change in ownership," she said.
"We picked up on things like that."SEPT.
14, 201701:50
The
Trump administration has taken a different approach to oversight. While extreme
instances of neglect at Skyline facilities were stacking up, the administration
was reducing fines for troubled nursing homes.
In
early 2017, the nursing home industry's trade group sent President Donald Trump
a congratulations on his election victory and asked for a series of regulatory
changes. One request was a reduction in fines.
Six
months later, the administration began implementing a rollback in nursing home
fines. Regulators are now encouraged to use one time fines instead of daily
fines. That's led to a 34 percent drop in overall penalties for problematic
nursing homes between 2017 and 2018.
CMS
says the change was to make punishment "fairer, more consistent and better
tailored to prod nursing homes to improve care."
David
C. Grabowski, a professor of health care policy at Harvard Medical School,
disagrees. "For those more serious deficiencies it's important to hold
them accountable rather than a one-time fine," he said. "The idea
that a $10,000 fine will change their behavior, I don't believe that."
A CMS
spokesperson told NBC the agency "is committed to protecting nursing home
residents to the fullest extent within the agency's legal authority to set and
enforce safety and quality standards."
The
number of nursing home contracts terminated by CMS has also declined. Between
2014 and 2017 the agency stopped payments to 14-18 homes annually. In 2018,
that number dropped to just three. There have been four terminations so far
this year.
CMS
says the drop in terminations is not the result of a policy change.
Toby
Edelman is the senior policy attorney at the Center for Medicare Advocacy, a
non-profit that works to improved access to health care for the elderly and
disabled. Edelman says the collapse of Skyline is a warning. "We need to
have very strict rules about who's eligible to operate a facility, what the
standards are, what their financial backgrounds are," said Edelman.
"And if the facility did a bad job in one place, it's not likely to do a
good job in another facility. Why do we want to give them more?"
Today,
Schwartz is busy fighting more than a dozen lawsuits from residents' families
alleging neglect and claiming he siphoned money out of the nursing homes. His
lawyers have denied those allegations in court.
His
office above the pizzeria is shut down. Litigants in these cases have spent
tens of thousands of dollars attempting to serve him at his Suffern address,
but he's rarely home.
Nurses
have had to find other jobs. In late June the Massachusetts AG fined Schwartz
nearly $85,000 for withholding pay from employees.
Yet the
Skyline saga is not over. Last year a Skyline spokesperson told reporters the
company "had been working to transition out of the nursing home
industry" but a CMS spokesperson confirmed the family retains an ownership
stake in more than 50 homes.
In New
Jersey a home once owned by Skyline but now owned by a separate company run by
Joseph Schwartz's son, Louis, is facing accusations of neglect.
Louis
Schwartz did not respond to requests for comment about the facility, which is
called Andover Subacute Care II.
In
January, the facility was cited by the state for endangering residents after a
woman with dementia wandered out of a locked unit through two sets of broken
automatic doors. She was found in the parking lot at 4:30 a.m., sitting on
ice-covered ground without a coat, socks or shoes. It was four degrees below
zero, according to a police report, and she suffered from "severe
frostbite."
Her
daughter, Terri Thompson, said when she reached her mother's hospital bed that
morning, she could barely hear a heartbeat. Her mother's nails, which she used
to love to paint, have fallen off, as has much of the skin on her arms and legs
from the frostbite.
"I
never, ever imagined I would be betrayed like this," Thompson said.
"They didn't even look for her. Someone else saw a woman lying in the
snow, and it was my mom."
Laura
Strickler is an investigative producer in the NBC News Investigative Unit based
in Washington.
Stephanie
Gosk is an NBC News correspondent based in New York City. She contributes to
“Nightly News with Lester Holt,” “TODAY” and MSNBC.
Shelby
Hanssen is an intern with the NBC News Investigative Unit in Washington.
Emma
Davis and Adiel Kaplan contributed.
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