Marin nursing homes' operator faces state inquiry over billings

July 17--The California State Auditor is looking into whether Brius Healthcare Services, which operates more than 80 nursing homes in California including two in Marin, inflated its prices to profit from Medi-Cal reimbursements.

The audit was requested by Marin's representative in the state Senate, Mike McGuire, D-Healdsburg, and state Assemblyman Jim Wood, D-Healdsburg.

The legislators say there is evidence that Brius sites paid inflated prices to some of its related businesses, with some prices exceeding 200 percent of the local market average.

Brius denies this.

"Not only will the audit results prove that Brius has abided by all applicable rules and regulations, it will also show that Brius went well above and beyond its duties and obligations to subsidize the care of California's most vulnerable," Brius spokesman Stefan Friedman wrote in a statement.

Los Angeles-based Brius owns Marin's largest nursing home, the 181-bed Novato Healthcare Center, and the San Rafael Healthcare and Wellness Center, which has 54 beds. CalQualityCare.org, which evaluates California nursing homes, rates both facilities as "poor," its lowest of five rankings.

"This one corporation, Brius, takes in approximately $570 million every year in Medi-Cal and Medicare dollars," McGuire said. "They have two medical supply corporations, a pharmaceutical company and management service businesses."

The legislators say in that in 2015, Brius paid out more than $67 million to related-party businesses for the purchase of services, goods and supplies, and more than $46 million of that was paid to companies established by Brius' CEO, Shlomo Rechnitz, to serve as landlords for the centers.

In her analysis of the audit request, State Auditor Elaine Howle wrote, "Related-party transactions could cause concerns because they may create opportunities for conflicts of interest. For example, a company may be paying higher than market rates to related parties, which are then reimbursed using Medi-Cal funds."

Howle added that in 2014, the state's Department of Public Health and Department of Healthcare Services attempted to block Brius from acquiring more skilled nursing facilities due, in part, to its failure to disclose related-party transactions. The state requires skilled nursing facilities to report related-party transactions annually.

At the June hearing when the audit was approved, Brius' attorney, Mark Johnson, said that "the substance of this request is largely derived from media reports and others who lack a healthcare auditing or regulatory background."

"Therefore, despite the cost of this audit to the state, we are relieved that this issue will be analyzed by an objective, professional auditing entity instead of the continued dissemination of false assumptions and reckless positions by some media and special interest groups," Johnson said.

Brius spokesman Friedman questioned McGuire's and Wood's information, stating that it came from the National Union of Healthcare Workers (NUHW), which represents workers at the two Brius-owned nursing homes in Marin. The union has been outspoken in its opposition to Brius and created a website -- briuswatch.org -- to scrutinize the company and its CEO.

Wood and McGuire said the data that they and the union have cited comes directly from the California Office of Statewide Health Planning and Development.

"The Sacramento Bee, the Los Angeles Times and other news organizations across the state have done extensive stories on the abuses at Brius facilities up and down the coast," McGuire said.

He said one of the most egregious examples was when a Brius nursing home in Eureka discharged a 65-year-old man who was blind to a residency hotel without informing his family.

"This patient was abandoned with half a gallon of milk, boxes of macaroni and cheese, instant noodles, and a respiratory machine without an oxygen tank," McGuire said. "Four days later emergency personnel found him dead due to a lack of oxygen."

McGuire said he first became acquainted with Brius in October 2016 when the company announced it was going to close three Humboldt County nursing homes because they were too expensive to operate.

"This announcement came after the state enhanced their average daily rate three times, placing their rates up to 10 percent higher than the statewide average," McGuire said. "They used patients in Humboldt County as pawns to leverage higher Medi-Cal rates."

The union contract at the San Rafael Healthcare and Wellness Center expired in 2013, and NUHW has been trying for 18 months to negotiate Novato Healthcare Center's first union contract.

"The Novato facility reported a $2.6 million profit in 2015, yet nearly half of Novato's 175 caregivers make under $16 per hour," said NUHW organizer Dennis Dugan.

The union asserts that in many cases Brius' owner, Rechnitz, owns the properties Brius' nursing homes rent, and that he charges them above-market rates. The union says government records show at least 65 Brius nursing homes rent their facilities from a firm controlled by Rechnitz.

The union says when Rechnitz doesn't own a property he sometimes works with a intermediary. For example, the union says that in 2012, when Brius was preparing to take over operation of the San Rafael Healthcare and Wellness Center, Rechnitz set up a middleman property firm which leased the property from the owner for $259,200 a year then subleased the facility to the Brius nursing home for $388,800 -- nearly a 50 percent markup

The union says Rechnitz purchased the San Rafael property in 2014 and in 2016 Brius paid $421,177 a year in rent.

Responding to the accusations, Friedman said this was another attempt by the union "to conduct labor negotiations in the press."

Friedman said the analysis of the rent paid by San Rafael Healthcare and Wellness Center "is filled with intentional inaccuracies and misrepresentations."

The Eureka Times-Standard contributed to this report.

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