Metro

A nursing home giant stumbles amid expansion

Genesis HealthCare Twin Oaks Center in Danvers.

Jonathan Wiggs/Globe Staff

Genesis HealthCare Twin Oaks Center in Danvers.

The nursing home’s linen room reeked of urine. Some residents’ rooms were so grimy, a state inspector’s shoe came off when it stuck to the floor, according to a report investigators filed in May about the Twin Oaks Center in Danvers.

At the Maplewood Center in Amesbury, administrators in May acknowledged to inspectors that they were so short of certified nursing assistants, they had to use an activities director and an admissions executive to help feed patients.

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In November, administrators at Meadow View Center in North Reading agreed to pay a $56,000 federal fine after a resident with a high fever, “delirious, and talking about monsters,” died from massive inflammation following an untreated urinary tract infection, according to a state report.

The three nursing homes are owned by Genesis HealthCare, a Pennsylvania company that has grown into a behemoth in the past four years, more than doubling in size, to become the largest owner of nursing homes in Massachusetts and nationwide. Genesis, which as of July was partly owned by a private equity firm, counts nearly 500 nursing homes, including 32 in Massachusetts, in its portfolio.

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But with rapid expansion has come an erosion in quality of care, federal and state data show. Nearly half of the nursing homes owned by Genesis have seen their ratings by federal regulators decline since 2010, a Globe analysis shows. And most of those whose ratings remained the same were ranked as below average in quality.

At the same time, health and safety problems have climbed. Federal regulators assign a score to each nursing home based on the severity and extent of problems discovered in facilities. A Globe analysis of those numbers found that Genesis homes had strikingly worse scores than the state as a whole.

The analysis suggests that problems at Genesis facilities worsened over time, and by early this year, the score for Genesis homes was twice as bad as the statewide number.

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In a statement issued to the Globe, Genesis said it is “committed to providing quality care to each and every patient in the centers it owns and operates across the United States.”

The statement, which did not address specific questions about the company or the Globe’s findings, acknowledged some hurdles.

“The integration of centers, and the improvement of quality and performance in an incredibly difficult operating environment, is a challenging and long-term effort,” the statement said.

The Genesis experience underscores the growing turbulence in an industry that cares for some of the nation’s most frail residents. Across the country, nursing homes are being bought and sold at a rapid pace, analysts say, as companies vie for facilities that attract more higher-paying patients.

This year alone, companies have notified Massachusetts regulators about plans to sell 58 nursing homes. That’s 14 percent of the state’s roughly 400 nursing homes.

Just a few years ago, Genesis nursing homes were considered to be respected long-term care facilities, say lawyers who routinely field calls from distraught families about nursing home injuries and deaths.

That has changed.

“Now, I get a lot of calls on Genesis,” said David Hoey, a North Reading attorney who specializes in nursing home-related cases.

Hoey said the problems reported by families, such as pressure sores and broken bones from falls, are typically seen when nursing homes do not have enough staff to monitor and care for residents.

Hoey said his office has litigated about a half-dozen cases involving Genesis homes in the past few years. But he said he could not discuss specific cases because Genesis, reflecting widespread industry practice, typically requires confidentiality agreements in legal settlements with families, barring them or their lawyers from discussing a case.

Saul Gruber, a New Jersey lawyer and executive board member of the Nursing Home Trial Lawyers Association, reports similar experiences with Genesis.

“We have seen more abuse cases, more cases that simply come from not paying attention, and not watching the resident, which is surprising for Genesis,” Gruber said.

“In the past couple of years, people are choking and dying because someone allowed them to have food they weren’t supposed to. Who does that, unless you are understaffed?” Gruber said.

Staffing shortages in nursing homes are not unusual. But the Globe analysis found more pronounced gaps in nurse staffing levels in Genesis homes in Massachusetts compared with median levels statewide.

Federal data for this year show registered nurses at Genesis homes spend roughly 19 percent less time caring for patients than federal regulators expected, based on the severity of patient illnesses. Nursing assistants spent 14 percent less time.

However, Genesis licensed practical nurses — who provide more specialized care than nursing assistants but less than RNs — spent more time than expected.

The Globe analyzed data collected by the Centers for Medicare & Medicaid Services, the federal agency that regulates nursing homes. The data included information about health and safety problems uncovered at each Massachusetts nursing home and nurse staffing levels.

That information was used to compare the performance of Genesis homes with others statewide, a methodology suggested by university researchers.

The Globe also reviewed nursing home state inspection reports and financial reports filed by Genesis with state regulators. The analysis excluded one nursing home, Renaissance Manor on Cabot in Holyoke, for which the Globe had incomplete data. Genesis purchased Renaissance Manor last December.

Genesis was the nation’s fifth-largest nursing home company in 2007 when two private equity companies, Formation Capital and JER Partners, acquired it in a $2 billion deal.

The sale was one of a number of private takeovers of nursing home companies that began more than a decade ago, and the trend continues to fuel concern from patient advocates about quality taking a back seat to profit.

In private equity deals, money raised from large investors is used to buy companies and overhaul them, typically with a goal of reselling them at a profit.

If the acquired companies were previously publicly traded, as Genesis was, it becomes harder to track them and their earnings while inside a private equity portfolio.

But after eight years, Genesis returned to the ranks of public companies, merging last year with Skilled Healthcare Group, a California company that operated 73 nursing homes.

Genesis reported losing millions of dollars last year, but also reported paying more than $6 million in compensation to its top seven executives.

Researchers have drawn mixed conclusions about private equity’s effect on quality of care in nursing homes, with some finding the deals lead to more health problems and fewer staff, while others seeing no measurable differences.

David Grabowski, a health care policy professor at Harvard Medical School, has not found private equity ownership to be a significant factor. Grabowski scrutinized private equity sales through 2010, and concluded they did not appear to affect patient care.

More troubling, Grabowski said, is the rapid pace of nursing home sales in the United States, typically by corporate chains. Grabowski and some of his colleagues studied thousands of nursing home transactions in a study published earlier this year.

They found a direct link between the number of times a nursing home was sold in a 10-year span and the volume of deficiencies found by inspectors. Nursing homes that remained in the same hands had significantly fewer deficiencies. Facilities sold multiple times typically saw a spate of problems, notably health and safety violations, that often persist after the transactions.

The researchers did not conclude that the market transactions necessarily caused the decline in quality of care; rather, the transactions were indicative of nursing homes in trouble. Some analysts have suggested that corporate owners may target for purchase facilities with higher profit margins — homes that may be spending less on resident care, resulting in poorer quality.

Grabowski and other researchers have urged federal and state regulators to pay closer attention to these deals, and to make the information readily available to consumers. The current system monitors nursing homes individually through annual state inspections, and the online report card available to consumers provides limited information about a nursing home’s owners. It includes no way for consumers to search by chain ownership.

“There are some common ties around quality and overall culture across providers in a chain, and that could be a useful signal for consumers,” Grabowski said.

The federal Centers for Medicare & Medicaid Services, which runs the online report card, known as Nursing Home Compare, said in a statement that the agency is looking at the possibility of providing consumers more information about chain ownership, but declined to elaborate.

Meanwhile, Genesis recently announced it intends to sell a sizeable chunk of its chain — at least 61 nursing homes in eight Midwestern states. Additionally, the company alerted regulators of plans to sell at least four of its Massachusetts nursing homes.

All four nursing homes were purchased by Genesis in the past four years.

They include Meadow View in North Reading, the facility that recently paid a $56,000 federal fine following the death of a patient from an untreated urinary tract infection.

The planned sales appear to be bolstering Genesis’s bottom line, said Stuart McLendon, a senior financial analyst at CFO Network, an Arkansas firm that has helped state and federal investigators decipher nursing home financial reports. Days after the November announcement regarding the Midwestern sales, the company’s stock price showed a considerable bounce, climbing $1 a share, to $3.60, before the end of the month.

“They increased their value in a substantial way by spinning off these underperforming [nursing homes],” McLendon said.

He predicted some of these Midwestern nursing homes may end up being sold to another company affiliated with Formation Capital, one of the private equity firms that acquired Genesis in 2007.

But even as it prepares to shed some of its portfolio, Genesis appears primed to buy other nursing homes, according to its latest annual report.

The report describes a highly fragmented industry, still largely made up of smaller companies that are seeking to get out of the increasingly competitive business. That, the report suggested, provides ripe opportunities for consolidation by larger firms, such as Genesis.

“As the largest operator of skilled nursing facilities in the United States, we are well-positioned to purchase facilities,” the report said.

McLendon said he believes Genesis will continue to be a prominent name in long-term care.

“There is still money to be made with the purchase and sale of nursing home assets,” he said. “I don’t see anything likely to change there until you see a restructuring of the whole health care industry.”

Kay Lazar can be reached at kay.lazar@globe.com Follow her on Twitter @GlobeKay
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