The Toppling of a Nursing Home Empire and the Elderly and Disabled Residents Who Suffer, Where’s the Oversight?

Image: Terri Thompson

Terri Thompson’s mother has dementia and wandered out of a locked unit through two broken doors and was found in ice and snow at 4:30 in the morning with severe frostbite.Hannah Rappleye / NBC News

A nursing home chain grows too fast and collapses, and elderly and disabled residents pay the price

By Laura Strickler, Stephanie Gosk and Shelby Hanssen

NEW BEDFORD, Mass. — Once a week for two years, police Lt. Jeannine Pettiford had visited the nearby nursing home where her 52-year-old cousin with cerebral palsy lived. But on their daily phone call in early May, her cousin had bad news.

“I’m getting kicked out,” he told her.

In disbelief, Pettiford asked to speak with a nurse, who told her there were rumors of closure. Her alarm rose when she visited the facility and saw nurses crying. The nursing home’s owner, Skyline Healthcare, had told its staff there was no more money.

Skyline’s four other nursing homes in Massachusetts were facing the same crisis. Funds were so short, staff had begun buying toilet paper with money from their own pockets, according to former employees. Residents and their families discovered from local newscasts they had just 30 days to find somewhere else to live.

“Nobody from the nursing home ever called me to tell me,” Pettiford said. She was angry. And, she later learned, so were many others.

At its peak, Skyline Healthcare owned or ran more than 100 facilities in 11 states, overseeing the care of more than 7,000 elderly Americans. But during the past two years, the chain has collapsed, and more than a dozen Skyline-operated nursing homes have shut their doors, throwing residents, vendors, employees and state regulators into chaos.

For more watch Stephanie Gosk tonight on “NBC Nightly News With Lester Holt” at 6:30 p.m. ET / 5:30 p.m. CT (or check your local NBC station).

Many homes ran out of money. Others were shut down over neglect documented in government records. Fourteen homes were forced to close permanently, displacing more than 900 residents to new facilities, sometimes hours away.

The story of Joseph Schwartz and Skyline Healthcare is one of swift expansion, alleged mismanagement and catastrophic failure. An NBC News investigation reveals the scale of the Skyline debacle, in which one man built an empire that quickly crumbled, with painful consequences for vulnerable people.

It also shows the failure of state and federal authorities to keep up with just who owns and runs America’s nursing home facilities, which house 1.3 million elderly and disabled Americans — about three-quarters of them in beds paid for by taxpayers via Medicare and Medicaid. The states are responsible for tracking ownership and conditions at nursing homes within their borders, but only the federal government can monitor the performance of firms that own or operate facilities across the nation. The allegations of negligence at a major nursing-home chain come as the Trump administration is moving to ease, not increase, accountability for the industry, reducing penalties and terminating fewer contracts with problem owners.

Schwartz, meanwhile, still has ownership stakes in 53 nursing homes, according to federal records. He has not returned multiple messages and emails requesting comment from NBC News.

“I just don’t think I’ve ever seen anything like it,” said Stephen Monroe, an industry analyst of three decades who is the managing editor for the nursing home trade magazine Senior Investor. “I have no idea what that family was thinking. To go from 10 to 100 in two years with no real back office? I looked at that and said from day one, ‘Impossible.”

‘The Home Life You Crave’

A Brooklyn, N.Y.-based insurance broker and landlord, Joseph Schwartz entered the nursing home business more than 10 years ago after he sold a Florida-based insurance company.

In a 2017 deposition for a malpractice lawsuit filed by a family alleging neglect at one of his homes in Pennsylvania, Schwartz explained why he’d gotten into the industry. “”Basically, I used to do a lot of servicing in selling insurance policies to long-term care industry,” he said, “and I felt that I could, that I understand the quality care … and I will do a very good job in doing the quality care for residents.”

Image: Joseph Schwartz listed a tiny office above this New Jersey pizzeria in Wood Ridge, NJ as the location where he ran over 100 nursing homes nationwide.Joseph Schwartz listed a tiny office above this New Jersey pizzeria in Wood Ridge, New Jersey, as the location where he ran over 100 nursing homes nationwide.NBC News

He started with a half dozen homes, but after creating Skyline Healthcare he began expanding rapidly in November 2015 with the purchase of 17 homes.

Schwartz ran Skyline out of a tiny office above a New Jersey pizzeria. He was CEO, his wife Rosie co-owned most of the properties and his two sons, Michael and Louis, served as vice presidents. The company had a bare-bones website and a slogan, “Skyline: The Home Life You Crave.”

During the 2017 deposition, he said, “Skyline is an entity that is me.”

His net worth is hard to compute but real estate records show he owns over $9 million worth of real estate in the New York metropolitan area, including a gated house in Suffern, N.Y.

Within a year of his purchase of 17 nursing homes, Schwartz had taken on another 64, and by 2017 was operating more than 100.

Schwartz wouldn’t provide a number when the plaintiff’s attorney asked him repeatedly in June 2017 how many homes he ran. He confirmed it was more than five, but asked if it was more than 100, he said several times that he couldn’t recall.

 

Image: Joseph Schwartz speaking to lawyers during a sworn deposition in June 2017 for a neglect case he settled.  He told the lawyers, "All our facilities are very, very, very , very compliant with all clients.  They all have every program that's necessarJoseph Schwartz speaking to lawyers during a sworn deposition in June 2017 for a neglect case he settled. He told the lawyers, “All our facilities are very, very, very, very compliant with all clients. They all have every program that’s necessary for patient care.”Ace Reporters

With more than 100 facilities, experts estimate Schwartz would have been juggling a few hundred million dollars a year in taxpayer money from Medicare and Medicaid.

But problems had emerged quickly. Within six months of Skyline’s entry into the Arkansas market in 2015, the state’s attorney general was investigating reports of neglect in Skyline facilities.

Marcela Watkins, who visited her mother daily in Spring Place Health and Rehab in Little Rock, said the food went downhill once Skyline took over. She recalled staff serving raw vegetables and boxed pizza to elderly patients.

“It’s a money-making business,” she said. “And guess who doesn’t get the care? Our loved ones.”

Karen Coats’s 57-year-old brother Donny Owens fell at another Skyline Arkansas facility in 2017, heavily bruising his face. She said he laid on the floor for 45 minutes before staff found him.

Coats said staffing was a “revolving door” and that she frequently complained, though little changed.

The state attorney general later issued Skyline facilities more than $200,000 in civil fines for neglect, preventable falls, failure to bathe residents and maggots in a resident’s personal medical equipment.

In Massachusetts, staff say the Schwartz sons visited the properties before taking over, promising new resources. But cuts started within a year.

Certified nursing assistants were reduced from five to three, according to ex-employees. Staff were told that disposable briefs would be rationed to two per patient per shift, instead of as needed, meaning patients were left to languish in their own body waste. One former head of nursing told NBC News that management offered giveaways to smooth over the changes.

She said she told them, “I don’t want a [free barbecue] grill, I want to save the staff I have on the floor.”

As problems mounted, Skyline continued to expand. In 2017, it entered South Dakota.

Schwartz reportedly leased at least half of the homes he operated around the nation from Georgia-based Golden LivingCenters, according to local news reports and property records, which acted as Schwartz’s landlord.

Last year Skyline released a statement to a South Dakota reporter blaming Golden for problems in its South Dakota nursing homes. Skyline said the chain was “dedicated to providing quality care” and meeting its obligations, but that Golden had caused the issues.

Monroe, the analyst, said landlords like Golden hold some responsibility. “How did they not do their due diligence to [vet Skyline]? That is a mystery.”

A spokesperson for Golden LivingCenters conceded the company contracted with Schwartz to run 17 homes in South Dakota but would not comment on other states. The spokesperson also declined to answer if the company vetted Schwartz, saying, “He convinced a lot of people in a lot of states. He ran a big scam.”

By September 2017, Skyline had taken over Ashton Place, a nursing home in Memphis, Tenn. Less than two months later, a resident with a recent leg amputation was taken from the nursing home, where he was found lying in feces, to a hospital, where nurses discovered maggots and gangrene in his leg, according to the police report obtained by local NBC affiliate WMC. His death two days later prompted a state investigation, which revealed the man had not had his dressing changed for two days. Staff said problems arose in part when Skyline told nurses to abandon electronic medical records and go back to paper record keeping.

Image: The Ashton Place Rehabilitation and Care Center in Tennessee.
The Ashton Place Rehabilitation and Care Center in Tennessee.NBC News

During the investigation, the company’s medical director told inspectors, “I have no support, no direction.”

A spokesperson for the state agency that approved Schwartz’s takeover of Ashton Place said while Skyline had faced problems in other states, that did not disqualify it from operating the Memphis nursing home.

A month after the death, the Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees the nursing home industry, terminated Medicare certification for the facility and another Skyline property in Tennessee. It terminated a third in the state in 2018.

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