John Minchillo/AP Photo
Demonstrators gather for a rally decrying New York Gov. Andrew Cuomo’s handling of nursing homes during the coronavirus outbreak, March 25, 2021, in New York.
The biggest nursing home chain in America quietly changed hands earlier this month, in a little-noticed deal that underscores just about everything that is rotten about America’s elder care system.
Genesis HealthCare and its 350 facilities are now in the hands of a documented serial liar with a history of conning his way into nursing home takeovers, then evicting the patients and flipping the real estate to luxury condo developers. His name is Joel Landau, and he pulled off exactly this feat with a nursing home on the Lower East Side of Manhattan in 2016, walking away with a $72 million profit after orchestrating an improbably elaborate campaign to convince a battalion of city and state officials that lifting a deed restriction that required the property to house a public health care facility was the only way to preserve the building as a public health care facility.
The Rivington House scandal, which captivated the New York media for symbolizing the emptiness of Mayor Bill de Blasio’s populist pledges to reclaim the city for the 99 percent, was part of a broader pattern for Landau, who has been perpetually sued across multiple industries in the service of flagrant frauds. Whatever his intentions for the Genesis homes, it’s safe to say they can’t be good.
Starting around 2000, many corporate nursing home chains became a powerful lure for private equity.
The nursing home business is literally crawling with guys like Landau, many of whom are in turn linked to either Landau or his partners. Three other nursing home chains—Joshua Farkovits and Ephraim “Mordy” Lahasky’s Long Island–based Comprehensive Healthcare Management, Simcha Hyman’s Englewood Cliffs–based Portopiccolo Group, and Louis Schwartz’s erstwhile Central New Jersey pizzeria–based Skyline Healthcare—have emerged from nowhere over the past six years to acquire hundreds of (often formerly private equity–owned) nursing homes. Their properties have returned such gruesome results—patients spending prolonged periods “lying in feces” have been a fixture of all three—that state health departments have been repeatedly forced to send emergency strike forces, often assisted by (as many as 40) National Guard troops, to assume temporary control.
And yet over the medium to long term, no regulatory agency or politician has even approached holding anyone accountable for any of the asset-stripping or cash-extracting that begat the staff-slashing and PPE-depriving that caused so much senseless and unnecessary death during the pandemic. Part of the problem is that the nursing home industry is fragmented and difficult to understand; the other part is that it is, like any industry that relies almost wholly on government funding, extraordinarily powerful.
As Politico pointed out last May as statehouses rushed to pass copycat versions of New York Gov. Andrew Cuomo’s liability shield into law, nursing homes are “one of the lobbying world’s quiet powerhouses.” Indeed, one overlooked wrinkle in the saga of the New York governor’s baffling decision to pour gasoline on the nursing home tragedy by forcing homes to accept COVID patients in exchange for a wrongful-death lawsuit moratorium is the role that might have been played by a longtime nursing home lobbyist named Jeffrey A. Sachs, who ran Cuomo’s Medicaid modernization commission in 2011, aggressively promoted Landau’s $72 million nursing home flip in 2015, and happens to be the governor’s lifelong best friend. Like Landau, Sachs has shrewdly kept his name out of the papers since the Rivington House flip, but his consultancy the Sachs Policy Group has been lobbying up a storm, producing more than 100 regular COVID-19 policy newsletters for clients since the pandemic began.
But back to Genesis.
LIKE A LOT OF NURSING HOME OPERATORS, Genesis has been battered by the twin 21st-century plagues of private equity looting and coronavirus. Starting around 2000, many corporate nursing home chains became a powerful lure for private equity, which bought up the firms and drowned them in rent, interest, and other financial obligations, extracting value along the way. A landmark study of roughly 1,600 private equity nursing home buyouts published last month calculated that the average nursing home’s interest expenses rose 325 percent after a private equity buyout, and its average rent expenses rose 74 percent.
Genesis’s private equity parent was called Formation Capital, and by the time the company went back into the public markets in 2014, it was paying more than $750 million a year on interest, rent, and transaction fees related to the constant cash-juggling involved in keeping the whole mess afloat, and was paying interest rates as high as 22.2 percent on some of its credit lines.
All that money has to come from somewhere, and the most obvious target is staffing and quality. While most academic studies of private equity in health care have shown only small cuts in the nursing payroll, those numbers tend to count hours worked by administrative staff located hundreds of miles away, as a recent New York Times database investigation showed. The outcomes are more difficult to fudge: A 2016 Boston Globe investigation of Genesis homes in Massachusetts found that more than half had lost a star in the five-star rating system since the Formation buyout. One home was so filthy a health inspector’s shoe slipped off when it got stuck to the floor, and another was so understaffed a resident had died from an untreated urinary tract infection, a telltale sign of severe neglect. Academics at four universities recently calculated that private equity buyouts had caused roughly 21,000 excess deaths among nursing home patients between 2004 and 2016.
Like any industry that relies almost wholly on government funding, the nursing home industry is extraordinarily powerful.
Then came COVID, which a Genesis nursing assistant in New Jersey likened to being “led to slaughter.” Dozens of Genesis nursing homes became mass casualty events. The company has lost at least 2,800 residents and workers to COVID, and the death toll nearly doubled between the end of May 2020 and the end of January 2021.
This mortally wounded an already dying business. Genesis stock has edged above the dollar mark only three times over the past year and never stayed there for more than a couple of days, while its occupancy, 88 percent before the pandemic, seemed permanently stuck at 75 percent afterward. CEO George Hager had been steadily downsizing the chain in an attempt to claw his way out of the quicksand, but there was little he could do. Genesis was hopelessly insolvent and destined to stay that way unless someone took a haircut.
It wasn’t going to be the landlords. Genesis’s recently filed 2020 10-K reports that the chain spent $366 million on rent in 2020, down a paltry 5 percent from 2019, before it sold about 20 of its homes. Indeed, all of the chain’s publicly traded landlords report it has been current on its obligations. Nor has Genesis been known to have defaulted on any of its credit lines, even as occupancy had plunged by 15 percent.
But despite $665 million in bailout funds from the CARES Act and state assistance, the only way for Genesis to keep current on its obligations was to keep the facilities horrifically understaffed, with nursing assistants single-handedly charged with caring for as many as 39 patients in one New Hampshire facility, according to a group of whistleblowers who worked there. Gloria Duquette, who works as a nursing assistant at three Connecticut nursing homes including Kimberly Hall, told me recently that while her other two nursing homes drastically changed procedures after the spring, Genesis could not even be moved to pay for separate equipment for checking residents’ vitals, so they were hauling the same blood pressure machines between the COVID ward and the rest of the facility. Worse, she told me, the kitchen never had snacks, not even Saltines. “They beg me for a bit of juice and I have nothing to give them,” she says.
That’s likely because Genesis wasn’t really in control of its finances. While the company had ostensibly been taken public in 2014, Formation Capital retained a substantial stake in the company, and more importantly controlled the board of directors until around October 2018. And since Formation had multiple other deals going with the REITs that owned Genesis’s buildings and the lenders like Apollo’s MidCap Financial that supplied its cash, the haircuts were always going to be borne by the workers and the residents.
Still, during the spring and summer it seemed certain that Genesis would have to spend time in bankruptcy court. CEO George Hager told analysts a restructuring was all but certain in August, and reiterated those sentiments throughout the fall. And then, quite suddenly around December, “circumstances at Genesis changed quickly and dramatically … in an unanticipated manner,” according to a cryptic letter one of the company’s lawyers wrote in response to an inquiry from Sen. Elizabeth Warren (D-MA), who wanted to know why she had read in The Washington Post that the company had decided to award Hager a $5.2 million bonus, only to fire him. Warren has since returned repeatedly, in writing and in public hearings she promoted on Twitter, to the subject of Hager’s bonus. But $5.2 million is a rather pedestrian sum for a CEO severance package, and fixating on it distracted from the real mystery. What about Genesis’s circumstances had changed so quickly and dramatically that they had triggered a massive shake-up of the company’s C-suite in the midst of a literal bloodbath?
What we do know is that a few weeks after Hager’s pre-bankruptcy comments, Genesis’s biggest landlord, Welltower, suddenly sacked its CEO Tom DeRosa, who had become the nursing home industry’s highest-profile critic of private equity in the aftermath of the 2018 bankruptcy of Carlyle-raided HCR ManorCare. The ouster “puzzled some analysts,” according to The Wall Street Journal, noting DeRosa’s recent pledge to invest in more affordable senior housing.
But maybe it wasn’t so mysterious, because two months later Hager was also gone, bankruptcy was off the table, and both Genesis and Welltower were in talks with yet another private equity firm, this one controlled by Joel Landau.
THE STORY OF JOEL LANDAU starts at 199 Lee Avenue in Brooklyn’s Williamsburg neighborhood, a nondescript brick building that is famously home to at least 1,300 LLCs, and where you send your rent checks if you live in a semi-dilapidated building owned by Hasidic Jews. From this perch, Landau has launched shell companies and middlemen across the health care space, from medical supplies to home health care to Medicaid managed services.
In 2011, a medical-device distributor called Integra Partners sued Landau for allegedly pirating all of its proprietary legal documents and poaching its client list. But by then, thanks to a nursing home administrator who would also end up suing him, Landau had landed on a get-rich-quicker scheme, cheaply scooping up a pair of nursing homes in Crown Heights whose owner was in trouble with the attorney general.
Landau then set his sights on CABS, a nursing home nearby built in the 1970s with a Great Society grant. In 2013, he bid $20.6 million and won, on the strength of his managed-care organization, his promise to lure in new business from the surrounding Hasidic community, and most of all, the ardor with which he emphatically promised the owners that nothing about the operation would change.
Statehouses rushed to pass copycat versions of New York Gov. Andrew Cuomo’s liability shield into law.
Across the river, Landau was making the same pitch to VillageCare, the AIDS charity that owned Rivington House, one of those New York prestige nonprofits that grosses hundreds of millions of dollars in annual revenue and drew most of its board members from Wall Street, real estate, and New York University. VillageCare had “purchased” Rivington House from the city in 1992, but it had only paid $1.5 million, while the city spent $70 million converting the former school into a nonprofit health care facility that was now half-empty in exchange for imposing a restriction on the deed requiring the property to maintain operation in that form.
VillageCare, whose board was chaired by a recently retired chief financial officer of Morgan Stanley, had assembled a blue-chip advocacy team (including New York mega-lobbyist James Capalino and Andrew Cuomo’s best friend Jeffrey A. Sachs) to petition officials to lift the deed restriction so the nonprofit could sell the property to pay off some of its debts, which the Bloomberg administration agreed to do only if VillageCare coughed up $8.825 million it did not want to pay. No matter what, the deal’s outcome was likely to involve some variety of shitstorm, since Rivington House employed 231 unionized workers and the new mayor Bill de Blasio had built his campaign platform largely around halting the city’s relentless luxury condofication; city officials held no fewer than 48 meetings on the fate of the building.
Then Landau emerged, and with stunning alacrity won over all the relevant stakeholders with the same line that had wooed CABS: Nothing would change! “I really believe my proposal is a win-win and will keep ALL jobs,” he promised in a typical text to SEIU 1199 political director Kevin Finnegan, who would become a close confidant and accomplice. By October 2014, Landau had bought the building for $28 million, at which point he set about lobbying city officials to remove the deed restriction anyway, for flexibility’s sake. On December 3, the city told Landau it would cost $16.15 million to remove the deed restriction; by December 5, an appraiser told Landau the building was probably worth $90 million.
In February 2015, the sale closed and Landau had a year to kill before he could officially flip the property without paying an extra $17 million in taxes. So he bided his time attempting to negotiate down the price of lifting the deed restriction, while instructing an associate not to buy any computers for the nursing home because “maybe we don’t need to open.” In May, he finally agreed to fork over the $16.15 million, and signed the papers to sell the property to a luxury condo developer two weeks later.
By the fall of 2015, both Rivington House and CABS had been emptied of their elderly. At first, Landau told the CABS residents they were being temporarily relocated to make way for a new art therapy room he planned to build on the second floor; then gradually, the residents caught on to the fact that, as one told the city’s long-term care ombudsman in a panic over the phone that summer, “They’re closing the place! They’re closing the place!” One of the last patients at Rivington House, a skeletal cancer patient with AIDS and pneumonia, was discharged to a fifth-floor walk-up in such a frail state he literally had to crawl up the stairs to reach it. A former doctor at CABS claimed the scorched-earth evictions caused multiple deaths.
In February 2016, The Wall Street Journal broke the news that the largest residential real estate developer in China had purchased Rivington House for $116 million, netting Landau an instant $72 million profit and sudden blitz of notoriety. The city’s Department of Investigation, Comptroller’s Office, and state attorney general launched investigations into Landau and halted the sale of CABS and a Harlem nursing home Landau was about to buy.
CABS filed suit against Landau, as did a former business partner, along with a long list of small $15.25-an-hour nursing contractors who had been stiffed by Landau over the past few years: He allegedly owed $15,956.39 plus two $35 bounced-check fees to Home Health Care Services of New York, $40,000 to Fadmo Health and Home Care Agency of Staten Island, $54,084 to 1st Choice Home Care of Brooklyn, $121,665 to Edison Home Health Care of Brooklyn, $54,246.72 to Regency Home Health Care, $64,840.97 to Signature Care LLC, and so on.
The Comptroller’s Office pored over 80,000 documents and issued a 32-page report summarizing its findings. The saga captivated the tabloids and the real estate blogosphere, while The New York Times’ more detached dispatches emphasized the ineptitude of the de Blasio administration.
Landau was apparently unfazed by the controversy, though the attorney Julie Globus says he or one of his representatives threatened to sue WordPress for copyright infringement every time she illustrated a post on her blog Lost Messiah with one of his headshots. Slowly, Landau began recasting himself as a thought leader, writing benign op-eds on aging and disruptive health care technologies on LinkedIn and other outlets to detract from the media attention. In 2017, a San Francisco rabbi also named Joel Landau realized the nursing home grifter Landau had been using his head shot and biography on op-eds in The Times of Israel and a Twitter page used to promote his Allure Group nursing home chain. Prospective investors in Israel were none the wiser.
THE RIVINGTON HOUSE DEBACLE fits into a larger pattern whereby the private sector and the government haggle with one another by taking turns screwing over the elderly, in the apparent hope that their loved ones will be terrified into paying ever higher prices to keep them out of the system. This dynamic is particularly perverse in New York, where the cost of living is steep and just about anyone over 65 can qualify for a nursing home bed if they take in less than $875 or so a month. The industry has successfully fended off calls for state-mandated minimum staffing requirements, in part because it has been dominated since at least the 1960s by a network of politically superconnected crooks once widely referred to as the nursing home “Syndicate.”
The Syndicate drew some of its political clout from the fact that traditional nursing home care is financed almost entirely by Medicaid, which draws nearly half of its funding from states, making nursing homes something like the defense contractors of state governments. In recent years, the savviest nursing home operators have agreed to play along and attempt to fill more of their beds with Medicare patients, for whom they can bill the government at far higher rates—roughly $500 a night compared with $200 for Medicaid beds—albeit only for short-term “rehabilitative” stays. Essentially, the system rewards nursing home operators who treat the lives of the elderly as speculative securities to be traded and arbitraged; it even often rewards operators who neglect Medicaid patients so badly they require hospitalization, by sending the selfsame patients back to the scene of the crime for a far more lucrative “rehab” stay. And states reward these operators as well, because the more they bilk the federal government, the less they bother with the state-subsidized Medicaid budget.
The other aspect of the Syndicate’s political clout involved religion. Its boss in the 1970s was an enormously prominent Orthodox rabbi named Bernard Bergman with strong ties to Israel and then-Gov. Nelson Rockefeller. Reports on the abuses within his homes drew condemnations from the Synagogue Council and the Federation of Jewish Philanthropies and even briefly made him a pariah in Israel, where Orthodox youth leaders called for his ouster from the leadership of the Mizrachi movement. Today’s emerging Syndicate is increasingly dominated by insular ultra-Orthodox Jewish sects, whose followers (and investors) tend to be increasingly detached from mainstream Judaism, let alone the secular New York community; getting their news from Hebrew and Yiddish papers, eschewing vaccines, and voting for Trump.
And yet as Joel Landau’s buyout of the sprawling Genesis HealthCare shows, the reach and ambitions of the new nursing home Syndicate are broader than ever. Landau tapped some surprisingly prominent figures to help him seal the deal. Serial private equity executive, periodic Republican political candidate, and former Obama Treasury official Harry Wilson, whom Steve Rattner hired to restructure General Motors during the financial crisis, will assume the CEO post at “ReGen,” Genesis’s new corporate moniker. Lesser known are Landau’s two representatives to the ReGen board: longtime Warburg Pincus adviser John Randazzo, whose CV reads something like a highlight reel of private equity health care profiteering, from urgent care networks to dermatology practices to fertility clinics to hospital software; and David Harrington, a veteran of Aetna and HCA, who will become board chair. Harrington purports to go way back with Landau; the two apparently co-founded a private equity firm called Pinta Capital Partners in 2012, though no one bothered registering that company’s domain name until 2017. ReGen, which purchased a controlling stake in Genesis for a $50 million cash injection along with a pledge for another $25 million, is an “affiliate” of Pinta, according to a press release on the deal.
Then as now, the nursing home Syndicate operates with an almost baffling sense of impunity.
Behind this ostensibly blue-chip collection of suits, a far more questionable clique of characters is linked to the lucrative back end of the transaction. A majority interest in some $500 million worth of Genesis’s real estate has been sold to a consortium of a small nursing home chain called Peace Capital and the Aurora Health Network, a venture co-founded by Landau and Leopold Friedman, a powerful Hasidic nursing home operator who owns interests in at least 19 nursing homes, many of them joint ventures with some of the East Coast’s most odious nursing home slumlords. (A phone call to Aurora was not returned; Pinta Capital’s mailbox was full. Landau didn’t return a request for comment.)
We could spend another few thousand words on Friedman, who also co-owns a company that applied for a license to produce medical marijuana and along with his father famously helped concoct a phony extortion case against a man who blew the whistle on his cousin Baruch Lebovits, a rabbi accused of molesting multiple underage boys. (In another little twist of 1970s déjà vu, Lebovits retained Bernard Bergman’s old defense attorney Alan Dershowitz to represent him.) But by now you should get the gist: A shadowy network of interconnected hustlers controls an ever-expanding swath of the nation’s elder care infrastructure, generating a steady stream of fines, penalties, and media horror stories while extracting obscene sums from public coffers.
Then as now, the nursing home Syndicate operates with an almost baffling sense of impunity, in part because like Bergman before him, Landau and Freidman et al. are conspicuously pious men who are implicitly trusted by large swaths of other pious people, and neither politicians nor nursing assistants are entirely comfortable calling into question the foundation of that trust because they know how easily it can be weaponized against them. (It should also go without saying that they are prolific campaign donors, although New York Attorney General Letitia James returned a $10,000 donation from Landau in 2018.)
Back in the 1970s, though, Congress and regulatory agencies eventually mustered the political will to break up the Syndicate. Congressional hearings delved into the inner workings of its incestuous circles of self-dealing; an Arkansas congressman even took a second job inside a nursing home to get a better grip on the mechanisms by which the industry abused seniors and bilked the government for the privilege. Bergman was brought to trial, sentenced to (admittedly, just a year in) prison, and ultimately exiled to Israel.
Today, on the heels of a year in which the unbridled greed of nursing home owners conspired with a global pandemic to kill some 200,000 residents, a small clique of documented psychopaths is annexing hundreds and possibly thousands of distressed elder care facilities in convoluted transactions with no apparent resistance or even scrutiny. Like so many of the helpless seniors condemned to ride out their days inside these hellholes, it seems we have lost the will to fight.
