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Senior-care placement companies scramble to cash in


Original source:
http://o.seattletimes.nwsource.com/html/localnews/2013650485_seniors12.html

Seattle Times
By Michael J. Berens, Seattle Times staff reporter
December 11, 2010

Senior-placement companies, which rely on commission-only sales people, funnel the aged only to facilities that have agreed to pay thousands of dollars in finders' fees. In addition, most placement companies do not screen homes for past violations. As a result, many have referred seniors to facilities with documented histories of substandard care, including fatal neglect.

For the elderly, it happens unexpectedly and all too often: They suffer a stroke or break a hip and find themselves unable to live safely in their home. Suddenly, their family must scramble to find them care and a new place to stay.

Dozens of private agencies in Washington state promise to guide families through the labyrinth of options to an adult family home or assisted-living facility that best fits their needs — all for free.

"Don't make this important decision alone," Seattle-based A Place for Mom, the nation's largest senior placement service, urges in an online pitch.

But behind these free offers can lurk a hidden cost.

Placement companies, which rely on commission-only sales people, funnel the aged only to facilities that have agreed to pay thousands of dollars in finders' fees.

In addition, most placement companies do not screen homes for past violations. As a result, many have referred seniors to facilities with documented histories of substandard care, including fatal neglect.

In 143 cases over the past three years, seniors were victimized after companies placed them in adult family homes, or other long-term- care facilities, that had a record of serious violations, a Times analysis of Department of Social and Health Services documents reveals. The documents did not identify placement companies by name.

Cases include residents with dementia locked in rooms to prevent wandering; mentally ill adults drugged into submission to control behavior; and bed-bound seniors abandoned without assistance for up to 16 hours.

Nationally, elder placement is a rapidly expanding, multimillion-dollar industry that serves the nation's growing aged population. In the Puget Sound area, about 40 companies are spread across King, Pierce and Snohomish counties.

Many have stellar records and serve as an important bridge between seniors who need care and the facilities with open beds.

But the lure of making fast money has also attracted dozens of profiteers to this little-examined industry. They face no licensing, education or training requirements, and can quickly set up shop.

Competition is so fierce that last year a bed broker repeatedly trolled a parking lot of a Bellevue rehabilitation center for visiting families, said its director, Kelly Callahan, of Mission Health Care. The salesman left only after Callahan threatened him with a restraining order.

At stake are commissions worth thousands of dollars for every senior. To fill an empty bed, adult-home owners pay placement agencies the equivalent of one month's rent, on average about $3,500. Large placement companies adopt strict quotas on employees to maintain speed and volume.

The sales mantra for the industry: "Put the head in the bed."

Many eldercare advocates are dismayed by this pay-to-play system.

"We need to find a way to protect seniors from exploitation," said Louise Ryan, who heads Washington's ombudsman program. "Right now there are no rules, no standards. Some companies seem more interested in making money than helping seniors."

"Who are these guys?"

Six years ago, Janet Rhode, owner of several adult family homes in Seattle, began to be inundated with unsolicited faxes that touted seniors for sale.

Page after page showcased a roster of seniors who were looking for board and care. The faxes included such details as financial situation, medical condition, date of birth and even Social Security number.

"I was shocked," said Rhode, an advanced registered nurse practitioner. "I couldn't believe that private information could just be faxed to dozens of places at the same time."

The company sending the faxes, Rhode said: A Place for Mom.

A Place for Mom hoped that Rhode would contact these seniors to try to persuade them to move into one of her homes. If that happened, Rhode would have to pay A Place for Mom the equivalent of one month's rent for each person.

Rhode currently charges $7,100 a month — far higher than most homes — because she specializes in dementia care, which requires more staff.

Adult family homes are promoted as a cozier, less-expensive alternative to nursing homes. Owners provide spare bedrooms and care for up to six adults. The number of state-licensed homes has more than tripled over the past two decades to 2,975.

This unchecked growth, the battered economy and the business inexperience of many owners have led to high vacancy rates. Profit margins are often so thin that even one empty bed can be the difference between profitability and going out of business, Rhode said.

Additionally, unlike corporate-owned assisted-living facilities, mom-and-pop adult family home owners typically lack the business savvy and funds to mount marketing campaigns to attract new residents.

Placement companies fill an important need — filling empty beds — but many exploit this need, said Cindi Laws, executive director of the Washington State Residential Care Council, an adult family home trade group.

"Placement companies absolutely control the rules," she said. "They control the rates. They have impunity to act. In the absence of protections for seniors, those who are unscrupulous will do whatever they can to make a buck. And there are clearly placement agencies whose primary interest is to make a buck."

Hundreds of owners reluctantly have turned to placement services. But Rhode is one of the fortunate few. There are seldom vacancies in her six homes — all with stellar records, state records show.

Rhode told A Place for Mom to stop sending faxes.

A company executive said she didn't believe her employees sent the faxes because they are not supposed to send such information to homes not under contract.

Rhode refuses to sign a contract with A Place for Mom.

"I have to contact the family and do all the work. And then this company expects me to pay a big commission just because they got hold of a name?" Rhode said.

"How do they know whether to refer people to my places? They've never been inside my homes. Who are these guys?"

Internet and phone

In July 2000, a Seattle couple and a college friend opened A Place for Mom and upended the senior-referral industry by embracing the speed and reach of the Internet.

Today, the Seattle company is the nation's largest placement service, spanning 45 states with 450 referral brokers in home offices. Nationally, it has contracts with 18,000 eldercare facilities. Financial analysts estimate the private company pulls in $50 million a year.

Behind this digital-era juggernaut is John Temple, a former Microsoft manager; his wife, Pamala, an experienced long-term-care executive; and entrepreneur Brian Trisler, a college friend.

The company's website attracts more than 60,000 visitors a month and instantly prompts them for contact information. Within 15 minutes, that information is routed to an employee, called an eldercare adviser, who quickly calls and gathers more information, Pamala Temple said.

Advisers provide seniors with a list of referrals to half a dozen or more adult homes, including information about costs and services. In turn, advisers send information about the seniors to adult homes. If a placement results, A Place for Mom collects a commission, with about $650 going to the adviser, company records show.

Many placement companies visit seniors at home to assess their medical conditions, then take them on tours of appropriate adult homes until they pick one. The process often takes weeks.

A Place for Mom generally does not meet face to face with families or take them on tours. Seniors and their families are responsible for visiting the homes themselves.

Instead, Temple said, her staff is trained to work with people over the telephone and by e-mail. An employee is required to visit the home once it's placed on the referral list, she said.

However, a dozen Washington families told The Times that A Place for Mom guided them to homes where caregivers said the company had not visited in years or not at all.

When told this, Temple acknowledged that staffers may be behind on visiting the homes.

A Place for Mom has about half of Washington's adult homes under contract. Seniors are told that her company refers them only to facilities that have agreed to pay finder's fees, she said.

Contracts are so ironclad that A Place for Mom collects commissions even when seniors or their families do nothing more than visit the company's website, provide their name, find a listing and call it themselves.

The company does not routinely check to see whether the home has a history of violations. As a result, A Place for Mom has on its referral list dozens of homes with histories of substandard care, including homes currently on probation for abuse or neglect violations, The Times found.

For example, the company listed a Tacoma adult family home, Narrows View Manor, which has been cited with more serious violations than any other home, including fatal neglect.

State inspectors cited the home's owner and employees for hiring caregivers with felony convictions that should have disqualified them from working with vulnerable adults; lying to state investigators and fabricating records; and failing to provide proper care for 32 days to Nadra McSherry, an 88-year-old woman who died from untreated pressure sores.

Temple removed the home from its referral list last week after questions from The Times.

Veteran employees can make six-figure salaries if they achieve strict performance quotas. A regional manager can earn $122,000 a year if he or she generates 50 new people to call and places 10 seniors every month, internal company records show.

Top performers are also rewarded with cash bonuses and luxury cruises.

The company randomly monitors telephone calls of its 450 advisers to track how many hours are spent on the phone, and warns those who fall short of their goals, Temple said.

Employees have also pushed back. In April, the company settled a federal class-action lawsuit for $1.7 million involving 222 employees. The 2008 suit alleged labor violations that included uncompensated overtime, delayed commission payments and not reimbursing job-related expenses.

Revenues have climbed this year, Temple said. In July, Warburg Pincus, a large Wall Street private equity firm, bought a majority stake in the company. It sees great potential for growth, since most seniors, or their families, find long-term care on their own, without anyone paying a fee.

Temple said most families using A Place for Mom have been very satisfied. On Wednesday, at her urging, scores of Washington families e-mailed The Times with praise for the company.

The company announced plans to expand overseas. "There are so many seniors who need our help," Temple said.

Face to face

Birger and Lillian Anderson met by chance on a West Seattle dance floor in the mid-1950s and never parted. Both 85 years old, they sat together on a couch last month and said goodbye to their Bellevue house.

They had wrestled for years with the decision to move into an assisted-living facility in Redmond, reluctant to trade thousands of square feet for hundreds, to shed a lifetime of possessions for a precious few.

Les Ostermeier, owner of Choice Advisory, a Mill Creek-based placement company, sat in a nearby armchair. This was one of many meetings with the couple.

Choice Advisory, founded in 1993 and one of Washington's oldest placement companies, represents the other end of the spectrum from such competitors as A Place for Mom. A regional company, Choice has 21 employees who inspect facilities and meet face-to-face with seniors and their families.

"I'm dismayed at how Internet-based companies are flourishing," Ostermeier said. "I think you have to personally get to know the people you're trying to help."

Although the company maintains a website, its most potent calling card is a free magazine, Choice, which he distributes in many hospitals and medical office waiting rooms.

The 200-plus-page magazine contains paid ads as well as free listings for nursing homes and assisted-living facilities. Adult homes have to pay $650 to be listed. Ostermeier does not screen advertisers.

The other half of his business is making referrals to homes. He said employees scour enforcement actions posted online by state regulators. Choice removes homes with serious violations from its referral list, he said. His veteran referral brokers make at least $70,000 a year, but it's not easy. Many families want to meet in the evening, on weekends or on holidays when the entire family can be more easily gathered, Ostermeier said.

"People think we're swimming in money but we're not," he said. "Some years have been very difficult."

Small scale

Two years ago, after witnessing assembly-line tactics of large placement services, Brandon O'Larey vowed to do better.

His mother, a licensed practical nurse, struggled to fill beds at her Lakewood, Pierce County, adult family home, he said. A Place for Mom sent her dozens of unsolicited e-mail offers of available seniors.

"I hope this is a great resident for you! Give them a call and let me know how it goes. Thanks and good luck!" a broker wrote in a May 2009 message. It concluded with a sales tip: "Don't be afraid to be pleasantly persistent! Keep calling — they really need your help."

Yet when O'Larey or his mother called the potential residents, families were often angry and hung up, O'Larey said. A Place for Mom had sent the same offers simultaneously to numerous other adult homes.

"It was like throwing a piece of meat to a pack of starving dogs," O'Larey said. The inundated families resented the flood of sales pitches.

His mother closed the home in 2009 because she could not fill all her beds and make enough money.

O'Larey, 25, said he was dismayed by the process. No brokers visited his mother's adult home. No attempt was made to determine its quality. Referrals were conducted on a faceless, long-distance basis.

"I couldn't believe they did so little work and charged so much," O'Larey said.

So he opened up Careful Placement Adult Home Agency, determined to offer personal service. He's one of dozens of placement companies that operate on a shoestring from a home office in Tacoma.

He collects the industry's standard finder's fee — one month's rent — for each resident he places. Working alone, he makes a few thousand dollars a month at best, and supplements his income substitute teaching at a high school in Tacoma.

Last month he visited Mama's Delight adult home in University Place, where he has placed four elderly women.

He'd already received his commission. This was a follow-up call, and he brought flowers for one of the women, who recently had a stroke.

The owner, Zelpha Coats, opened her five-bed home in 2009. State surveys give the home high marks. The three women who still live there told The Times that they were happy with their care.

Still, she has two empty beds. "It's more difficult than ever to attract seniors right now," Coats said.

She appreciates O'Larey's help. Even so, "I wish I didn't have to pay thousands of dollars to fill a bed. But I have no choice — if I want to stay in business."

Michael J. Berens: mberens@seattletimes or 206-464-2288.