Bankruptcy Sale

The recent $53 million sale of nine Pennsylvania nursing homes previously owned by Comprehensive Healthcare Management Services illustrates a recurring issue in the nursing home industry: financial exploitation. The bankruptcy court approved the sale to Kadima Healthcare Group, under certain stipulations that Lahasky and former owners could not retain any ownership stake.

Comprehensive Healthcare, owned largely by Ephram “Mordy” Lahasky, filed for bankruptcy after a federal court awarded a $36 million judgment based on violations of the Fair Labor Standards Act.  Employees faced wage and hour violations, which suggests that funds were not being adequately directed toward employee compensation or facility improvements, but rather going somewhere else…

While intended as a fresh start, I can’t help but question the real impacts of simply shifting ownership without addressing the underlying systemic issues.

The court’s order prevents Lahasky from retaining direct ownership of the newly acquired facilities under Kadima, however, it doesn’t fully close the door to indirect financial gain. Lahasky, and other owners in his shoes, could easily maintain involvement through family members or affiliations that allow them to continue profiting without explicit ownership. Though the court required Lahasky to divest, I would confidently contest any guarantee that he won’t continue to exert some sort of influence or benefit financially through some sort of backdoor arrangements with Kadima. I’m sure he will get his foot in the door by servicing Kadima’s facilities with one of the other entities he owns.

In Lahasky’s case, allegations of severe neglect and misuse of funds have followed for years, so he is not a first-time offender. Previously, he was linked to The Villages of Orleans Health & Rehabilitation Center in New York, where, under his co-ownership, conditions deteriorated dramatically which resulted in a civil lawsuit alleging the misuse of $18.6 million in Medicare and Medicaid funds by the facility. Despite high profits, funds were not adequately invested in patient care and over seven years, The Villages paid almost $16 million in rent to its affiliated real estate company. Telegraph Realty, a real estate company owned by the same investors including Lahasky,  acted as the landlord, charging The Villages for rent and other property-related expenses. This type of setup allowed Lahasky and associates to channel funds from the nursing home into their real estate company and other affiliated entities, drawing substantial profits even as care quality reportedly declined.

These affiliated entity transactions, in which the same owners charge their own facilities for management, real estate, or staffing services, are widespread in the industry. They allow owners to shift profits indirectly, reducing transparency and prioritize profit over patient care. The fact that nearly half of New York’s nursing homes do this, with over $12 billion nationally flowing to affiliated entities, proves that this isn’t isolated but rather is a major industry-wide issue. The other case referenced by the article involving Fulton Commons Care Center in New York further enhances this pattern. This facility was owned by a man by the name of Moshe Kalter, as well as his extended family (not going to state the obvious connection between these two men).

Investigations revealed that Kalter similarly diverted substantial funds from resident care leading to significant staff shortages and inadequate care. Between 2018 and 2021, the facility received $105.8 million from Medicare and Medicaid, but less than half was allocated to direct resident care. Kalter and company paid themselves nearly $15 million through inflated rent payments to an affiliated real estate company they also owned, Fulton Commons Realty Co.

In his defense, Lahasky argued that his facilities were “beautiful” and well-maintained, emphasizing strong employee morale to counter allegations of misallocated funds, deflecting attention from shady financial practices. Similarly, his legal team pointed to COVID-19 as the primary reason for staffing shortages. This relates to a whole different issue of how during the pandemic, many nursing homes received substantial federal aid meant to improve care and support staffing however, many owners exploited this as an opportunity for their own financial gain. The pandemic even produced an opportunity for skewed causes of death due to increased mortality rates, allowing for inadequate care and negligence to go unpunished, but all of this is slightly off-topic.

As for Kalter, he claimed no personal oversight of operations, distancing himself from facility management and casting himself as an “absent owner.” Both responses by Lahasky and Kalter are utterly unadmirable and quite cowardly, but just serve to highlight the accountability issue that the industry faces.