Sen. Elizabeth Warren sent a letter asking for an explanation of a $5.2 million retention bonus paid to the former CEO of Genesis HealthCare (NYSE: GEN), one of the largest nursing home operators in the country — and one of the hardest-hit financially amid the COVID-19 pandemic.
The Washington Post on January 20 reported that Hager received a $5.2 million “retention payment” in late October 2020, after earnings reports in the second and third quarters where the operator revealed a financial pummeling from the effects of the pandemic. In the second quarter, Genesis indicated that the fallout “raises substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period.”
Given that the operator reported receiving millions in federal grants under the CARES Act, in addition to other federal and state sources of capital, the the decision to pay a retention bonus, on top of other payments, is “even more troubling,” Warren, a Massachusetts Democrat, wrote.
“I would like an explanation for this unfathomable greed amidst a public health tragedy and economic crisis, and to know why Genesis, which claimed to be on the brink of bankruptcy and accepted $300 million in state and federal aid under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), gave its top executive — who was unable to keep nursing
home residents safe — a multimillion dollar bonus, in addition to a $650,000 retirement bonus and $300,000 consulting contract,” she said in the letter.
The Washington Post reported that Genesis’s more than 300 nursing homes had 14,352 confirmed cases of COVID-19 through the middle of December last year, citing data reported to Medicare officials. As of December 2020, 2,812 residents in total had died of COVID-19.
Warren acknowledged that given the pandemic’s staggering death toll in the U.S., it would not have been possible to prevent outbreaks at Genesis’ nursing facilities even with aggressive actions.
“But there is no rationale whatsoever for offering Mr. Hager a multimillion dollar windfall in the wake of these fatalities,” she wrote.
Hager will pay some amount of the money back, The Washington Post reported, citing a January 5 Securities and Exchange Commission (SEC) filing by Genesis. However, he is also receiving “a special cash bonus of $650,000 in recognition of his exemplary leadership during the COVID-19 pandemic during 2020,” and will provide consulting services for at least three months “in exchange for an up-front cash fee of $300,000,” according to the filing.
In the second quarter, Genesis reported $186 million in CARES Act grants, $157 million in advance Medicare payments, $90 million in deferred payroll taxes, and $56 million in state aid; and in the third quarter, it reported $64 million in federal and state COVID-19 relief.
“CARES Act funding should not be used to line the pockets of company executives who fail to address the public health threats from the pandemic, and your company should not be seeking additional public funds while giving departing executives multimillion dollar bonuses,” Warren wrote to Fish.
She requested answers to multiple questions around Genesis’s requests for aid, and the compensation granted to executives, by February 10 — including whether or not the board can claw back any of the compensation provided to Hager and whether or not it intends to do so.
Genesis spokesperson Lori Mayer confirmed that the company received Warren’s letter in a statement sent to SNN on Friday.
“While the letter relies, in part, on inaccurate information published in the media, we are evaluating the inquiry seriously and look forward to the opportunity to provide more information and context in our response,” Mayer said, declining in a follow-up e-mail to clarify which reports were inaccurate. “Genesis has been on the frontlines during this pandemic with our leadership and employees working around the clock to keep our patients, residents and staff members as safe as possible.”