Senator Mike McGuire and Assemblymember Jim Wood Receive Approval for Audit of Skilled Nursing Facilities Business Operations

Wednesday, June 28, 2017

SACRAMENTO—Today, Senator Mike McGuire (D-Healdsburg) and Assemblymember Jim Wood (D-Healdsburg) received approval from the Joint Legislative Audit Committee for their request earlier this month that an audit be performed of the Department of Public Health (DPH), the Department of Health Care Services (DHCS) and the Office of Statewide Planning and Development (OSHPD) to determine the impact and appropriateness of related-party transactions on skilled nursing facilities’ Medi-Cal rates and reimbursements.

Last year, McGuire and Wood worked together with the Humboldt community to successfully prevent two of three skilled nursing facilities, all owned by Brius Healthcare, California’s largest nursing home chain, from closing and displacing more than 100 residents. Through that process,” said Wood, “we learned a lot about Brius, its ownership structure and business operating procedures, which compelled us to better understand the impact and appropriateness of what are called related-party transactions.

Related-party transactions are those business dealings that occur between companies with similar, or related, ownership. When a company is purchasing services and goods from another company in which it has an ownership interest, it is critical to ensure that those services are, among other things, fairly priced and free of conflict of interest.

In 2015, Brius received more than $507 million in Medicare and Medicaid funds, more than 80 percent of its revenue. In that same year, Brius paid out more than $67 million to related-party businesses for the purchase of services, goods and supplies. More than $46 million went to companies established by Brius’ CEO, Shlomo Rechnitz, to serve as landlords for the facilities.

“Brius Healthcare’s bottom line is buoyed by over $500 million in public funds and the State must act to ensure those Medi-Cal patients, who are in their most vulnerable moments of life, are receiving quality care,” Senator McGuire said. “Unfortunately, we save seen too many instances with Brius where quality care is not part of their mission. As good stewards of state resources we must understand how Brius Healthcare and affiliated companies receive and invest Medi-Cal dollars.”

“This audit,” said Wood, “will investigate the inner workings and interrelated business relationships that exist in this industry and determine whether changes need to be made to protect the use of public funds for this vulnerable population.”

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