New York Times Probes HUD-Backed Nursing Homes on ‘Secret List’ of Special Focus Candidates

Merging two overarching storylines in the nationwide coverage of skilled nursing facilities, the New York Times on Monday identified 74 properties on a list of potentially troubled nursing homes that have received federally backed loans.

The facilities appeared in a previously unreleased collection of more than 400 SNFs considered for inclusion on the Special Focus Facilities list, which a bipartisan pair of U.S. senators publicized in a report issued earlier this month.

“Dozens of the worst-run nursing homes in the United States have mortgages guaranteed by a federal agency that mostly stopped inspecting such homes several years ago,” the Times reported.

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The story builds on the paper’s earlier reporting on the Department of Housing and Urban Development’s (HUD) loan program for nursing homes, prompted by operator Rosewood Care Centers’ $146 million default on a HUD-backed loan in Illinois last year. That was the largest loss for HUD’s Section 232 program for residential care facilities, prompting the Times to call the program’s safety into question.

“The result now is that the agency manages a portfolio of loans that are at risk of going bad. HUD, and therefore taxpayers, could be on the hook for money-losing facilities around the United States — just as waves of aging baby boomers are likely to prompt a surge in America’s nursing-home population,” the Times asserted in its original report, published May 31.

The paper then determined that 74 of the properties on the Special Focus Facilities candidate roster had received some kind of HUD financing, including nine facilities operated by Genesis HealthCare (NYSE: GEN); a spokesperson for the SNF giant told the Times that it’s “always striving to improve quality and performance at all of our locations regardless of financing source.”

Additionally, 43% of the nursing homes in the HUD loan program have a one- or two-star rating on Nursing Home Compare, the Times determined.

“These homes are causing harm and neglect to their residents,” Charlene Harrington, a professor of nursing and sociology at the University of California, San Francisco, told the publication. “So the fact that HUD is propping up these bad operators is very sad.”

The HUD 232 program backs 2,368 nursing homes with a collective $20 billion in outstanding balances, according to the Times, and forms a vital long-term option for SNF operators and investors. The products provide stable, low-rate financing of up to 40 years for the purchase, refinance, or renovation of skilled nursing and other residential care facilities, with protections for investors in the event of default.

Despite the newfound attention in the wake of the record-setting loss in Illinois, a HUD spokesman stressed to Skilled Nursing News that less than 1% of nursing facilities involved in the program end up defaulting.

David Gifford, chief medical officer at the American Health Care Association, echoed that sentiment in a statement to SNN.

“Thousands of nursing homes across the country provide high quality care every day. This list singles out a small percentage that have struggled in one way or another to meet the standard all our members aim toward,” Gifford said. “We will continue to work with all stakeholders to advance policies that lead to more positive patient outcomes, as that is our primary concern.”

The list of Special Focus Facility candidates dominated the conversation in the nursing home industry and the general public for most of this past month, after Sens. Pat Toomey and Bob Casey — both of Pennsylvania — released the information in a joint statement that called it a “secret document.”

In response, the Centers for Medicare & Medicaid Services (CMS) announced that it will soon begin releasing monthly updates of the candidate list moving forward, though budgetary restraints will prevent officials from expanding the actual Special Focus Facility count beyond its current 88.

To increase oversight of the HUD lending program, House Ways and Means Chairman Rep. Richard Neal — a Massachusetts Democrat — wrote a letter last month to HUD secretary Ben Carson, the Times noted, asking the department to bring back the practice of requiring Real Estate Assessment Center (REAC) property inspections for most nursing homes that participate in the 232 program; a regulatory change in 2012 exempted a large number of properties from that mandate.

“I urge you to reinstitute REAC inspections, with modifications to make them as appropriate as possible to guarantee the safety, dignity, and well-being of nursing home residents,” Neal wrote to Carson.