Among the issues plaguing delivery of care in Illinois skilled nursing facilities

Published

Part Two of the nursing home sales & ownership series; Part One is here.

Almost a year ago, in the cause of shedding the landlord collectively known as Hunter Properties, City of DeKalb signed a settlement agreement with them.

DeKALB – After a series of unresolved code violations, the City of DeKalb and Hunter Properties have reached a tentative agreement which will include a change of ownership of four complexes owned by Hunter Properties.

In the agreement, Hunter Properties is to sell Hunter Ridgebrook, 808-832 Ridge Drive and 832 Edgebrook Drive, Hunter Tri-Frat, 930-934 Greenbrier Road and 1024 W. Hillcrest Drive, Lincoln Tower, 1100 W. Lincoln Highway, and Hunter Hillcrest, 1011-1027 Hillcrest Drive, within 3 ½ years.

City of DeKalb scooped up the property of Hunter 1011-1027 Hillcrest, LLC in August 2021 in order to demolish it; and during a special meeting in December, the city council finalized a financial incentive to another group to purchase and renovate other Hunter properties.

But Hunter’s exit from our community doesn’t necessarily mean we’ll soon be seeing the last of them. One of the people who signed off on the sale of Hunter Hillcrest to the city was Eric Rothner, who’s not just a landlord of apartment complexes but also owns interests in skilled nursing facilities. So do other members of the Rothner family. DeKalb County is considering selling our local, publicly owned rehab and nursing facility, and if listed could conceivably appear on Rothner radar.

And just as Hunter amassed hundreds of building code violations associated with their properties in DeKalb — well, let’s just say a Hunter by any other name smells about the same.

As large as they loom in the nursing home business, however, the problem is bigger than any Hunter-Rothners, starting with the state. Illinois lags near the bottom of the list of states when it comes to ensuring quality skilled nursing care, and an exacerbating issue appears to be private-equity ownership generally.

Private equity firms often have an oversight role in managing their investments, typically maximizing profits incentives and exerting influence over operations. In the case of nursing homes, reported tactics to squeeze revenues include:

– Spinning off the real estate into separate companies to take advantage of tax benefits (g., via REITs) and/or to attempt to shield the most valuable assets from liability.

– Hefty leasebacks and other related charges to home operators for occupying and using the real estate.

– Forcing the nursing home business to buy – sometimes above fair value — products or services from companies owned by the investors, such as management services, transportation, pharmaceuticals, medical equipment, and payroll services.

– Active or direct involvement in operations, for example: claims for payment, power to hire and fire, board membership, and other efforts based on a firm’s industry expertise.

– Maintaining staggeringly high debt while distributing to investors the cash needed for operations reserves or to satisfy liabilities.

“Private Equity Ownership of Nursing Homes Might Have Made Everything Worse,” Constantine/Cannon Whistleblower Blog, May 15, 2020.

Chicago attorneys Levin & Perconti publish a list each year of Illinois’ worst nursing homes, facilities targeted by the Feds for continually getting cited for health and safety violations to the point where some of them score zero stars out of five on The Centers for Medicare & Medicaid (CMS) rating scale. For 2021, at least two private facilities on the list used to be county homes: Gardenview Manor in Vermilion County and University Rehab in Champaign County.

University Rehab is at least partially owned by the Rothner family and is used as an example in the above-cited article from Constantine/Cannon. Astoundingly, Champaign County was warned of the track record and still sold to them.

Additional Sources/Resources

Ordinance and agreement for City of DeKalb’s purchase of Hunter 1011-1027 Hillcrest, LLC Seller’s signature on page 140 of the PDF.

Illinois Nursing Homes Worst Offenders Facilities in the Aperion Care chain take up five of nine spots on this list from 2020. I thought it might be of interest because there’s an Aperion Care DeKalb now. Aperion might be a franchisor operation.

Does Ownership matter? An Overview of Systematic Reviews of the Performance of Private For-Profit, Private Not-For-Profit and Public Healthcare Providers