Questions about Willow Terrace owner after nursing home collapse in Nebraska and Kansas
Joseph Schwartz, who operates eight nursing homes in the Philadelphia area, expanded dramatically across seven states since 2015. His company, Skyline Healthcare LLC, ran into trouble in Nebraska and Kansas, where he was unable to meet payroll. The case raises questions about how much due diligence states engage in before licensing nursing home operators.
The nursing home industry in recent years has been engulfed in wholesale changes in operators as Golden Living and other large companies, often under regulatory and financial pressure, abandon the business and lease bunches of facilities over to firms that emerge from nowhere.
Joseph Schwartz could be a poster child for this phenomenon. Schwartz, who operates 10 nursing homes in the broader Philadelphia region, has taken over at least 100 additional sites across seven states since 2015, and identifies his headquarters as an office above a Wood-Ridge, N.J. pizza shop.
The Brooklyn resident's spectacular run, which baffled the industry, has hit a wall in the Midwest, where regulators in Nebraska and Kansas took steps last month to put 46 of Schwartz's former Golden Living facilities, including 10 assisted living facilities, into receivership after he was unable to meet payroll.
"I'm kind of surprised that it's not happening anywhere else," given that Nebraska and Kansas happened in such quick succession, said Steve Monroe, managing editor of SeniorCare Investor, a trade journal.
Closer to Philadelphia, Skyline in February 2017 took over seven Golden Living nursing homes, including four — in Doylestown, Rosemont, Reading, and Lancaster — where nursing assistants are represented by SEIU Healthcare of Pennsylvania. Union officials said Skyline has not paid into the workers' training and education fund and owes workers' dues to the union. Under a settlement, Skyline was supposed to make an initial dues payment on Feb. 15, but the union has yet to receive it.
Even day-to-day, frustrations have been plenty for SEIU members since Schwartz took over.
"Our paychecks, they are never accurate. We can't see our vacation time. There are deductions being taken out that we don't understand why they're being deducted," said Maria Alvarez, a 31-year-old SEIU member who has worked as nursing assistant at Reading's Exeter Greens nursing home for nearly seven years.
The rise of Schwartz shows a lack of rigor in the licensing of nursing-home operators, said William P. Murray III, a trial lawyer with Wilkes & McHugh P.A. in Tampa, Fla.
"I think it's very concerning that operators like Skyline and Mr. Schwartz are allowed to take over dozens or more facilities at a time," said Murray, who said Schwartz has a track record, evident in lawsuits over unpaid bills, of lacking the financial wherewithal to successfully operate a facility.
"It's the residents who get hurt," said Murray, whose firm has filed malpractice and neglect suits against Schwartz facilities.
The Pennsylvania Department of Health, which regulates nursing homes, said it was aware of the reports on Skyline from Nebraska and Kansas. "Skyline Healthcare has a responsibility that their nursing homes provide a safe environment to residents. If the facilities are not meeting that responsibility, the department will take action," a spokesman said in an email.
The other local Golden Living facilities that Schwartz operates are in East Mount Airy, Doylestown, and Lansdale. For a longer period of time, he has also owned Willow Terrace in Philadelphia, Wynmoor Hills in Wyndmoor, and Voorhees Care & Rehabilitation Center.
Others have had a trajectory similar to Schwartz's, though on a smaller scale. Oak Health & Rehabilitation Centers Inc., formed by Bala Cynwyd lawyer Howard Jaffe to take over 21 nursing homes, saw its facilities put into receivership in September after falling behind on rent. Nathan Stern's Global Healthcare Services Group LLC took over 14 nursing homes in Pennsylvania and New York between 2007 and 2013, but has since sold at least nine of them.
When Schwartz did the Pennsylvania transaction with Golden Living, Murray, a native of Philadelphia who is now a managing attorney for Wilkes & McHugh in Florida, filed an extensive right-to-know request regarding the former Golden Living facility in downtown Lancaster with "a particularly troubled history."
"I wanted to know what had been done to determine that things were going to improve based on a change in operator, not stay the same or get worse," Murray said.
In his right-to-know request, Murray asked for Department of Health records showing what the state did to evaluate Schwartz's "reputation for providing quality care," whether he was "sufficiently capitalized to properly operate the facility," and his track record for paying vendors and wages in a timely manner.
What the health department came back with was … nothing. "The department does not request information to permit an analysis of an applicant's financial strengths and abilities," open records officer Lisa M. Keefer wrote in her March 2017 response to Murray.
Through an appeal, Murray obtained additional documents, including undated business profiles of Schwartz and his wife, Rosie, who co-owns some of the Skyline facilities, but nothing that came close to illustrating due diligence on the department's part. The profiles were offered as documentation of their health-care experience.
In addition to Skyline Healthcare LLC, Schwartz's businesses, all based in Brooklyn and northern New Jersey, have included an insurance brokerage, Oxford Coverage Inc., founded in 1988 and sold in 2015, the same year his nursing-home empire started expanding dramatically. He remains an employee of the buyer, Hub International Northeast Ltd.
Other businesses include Garden State Health Care Administrators Inc., which handles health insurance claims, and Kotel Management Corp., a real estate holding company with properties in New York, New Jersey, Ohio, and Pennsylvania.
In February, Schwartz acquired two nursing homes, in Scranton and Bloomsberg, from Geisinger Health for a total of $21.5 million, even as the Midwestern facilities were likely already under financial pressure.
In emailed statements, Skyline blamed the failures in Nebraska and Kansas on "external factors." The company also declined to comment on court cases involving payment disputes with vendors or to provide corporate details.
Industry observers can only shake their heads at the expansion Schwartz undertook, apparently without the infrastructure to support it.
"It's hard enough to add 10 nursing homes to a small- to medium sized company in one year, let alone 100 in two years," said Monroe.
"Any company that has 100-plus nursing homes, you've got a corporate office doing all the reimbursement work, the regulatory work, health care work. The nursing home industry has changed, and you can't do that with an empty office above a pizza shop."
Below is a brief profile that Schwartz provided to the Pennsylvania Department of Health as part of the licensing process for the Golden Living facility in Lancaster.