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State Auditor’s Report Tells Tales of Poor Care, Feeble Oversight and Soaring Self-Dealing by Nursing Home Chains


A May 1, 2018 report by California’s State Auditor, Elaine Howle, paints a grim picture of nursing home care in California. Her report describes increasing instances of severe neglect, failing oversight by the Department of Public Health, and surging profits for nursing home chains that engage in self-dealing.

The Legislature ordered the audit last year due to reports that Brius Healthcare, California’s largest nursing home chain, was diverting large amounts of money from care by doing business with other companies (related parties) it owned or controlled.

The State Auditor found enormous increases in related-party transactions. From fiscal years 2007 through 2015, nursing home payments to related parties grew by 66 percent, and now exceed $1 billion annually. Three of California’s largest nursing home chains – Brius, Longwood and Plum – reported paying a combined $150.8 million to related parties in fiscal year 2015.

According to the report, it is unlikely that Medi-Cal is paying for owners’ profits from artificially inflated related-party transactions. However, the report does not address the harm to nursing home residents when nursing home chains siphon money from care and staffing through such arrangements. The State Auditor reported she could not determine how much of the nursing facilities related-party expenses represent profits for the owners because they are not required to report this information.

The Brius chain was singled out for having far more serious federal deficiencies and state citations compared to other nursing home companies.

Another key finding is that today’s nursing home residents are increasingly endangered despite huge increases in Medi-Cal payments intended to ensure they receive high quality care. Between 2006 and 2015, nursing home deficiencies that caused, or were likely to cause, serious injury, harm, impairment, or death to residents increased by 35 percent. During this period, annual Medi-Cal payments to nursing homes increased by 31 percent, from $3.4 billion to $4.4 billion.

Echoing themes from prior reports, the State Auditor blasted the Department of Public Health (DPH) for failing to enforce nursing home standards and to hold nursing homes accountable.
She cited numerous failings, including the following examples:

  • Despite the steep increase in serious deficiencies, the number of citations (State financial penalties) issued by DPH dropped by 34 percent during this period;
  • DPH ignored the State Auditor’s June 2010 audit recommendation that it seek legislation authorizing it to revise citation amounts based on the Consumer Price Index;
  • DPH has failed to perform required relicensing inspections for most nursing homes in Los Angeles County since 2015;
  • DPH’s website presents misleading on nursing home ownership and does not provide access to many inspection reports that are required to be posted under federal law.

The report’s title – Absent Effective State Oversight, Substandard Quality of Care Has Continued – succinctly describes the Department of Public Health’s exceedingly poor oversight of nursing homes over the last two decades. Yet, in typical fashion, the Department defiantly challenged the Auditor’s recommendations, once again choosing to defend the indefensible rather than provide the leadership nursing home residents need to ensure they receive the high quality care they deserve.