Operators of even low-rated Texas nursing homes get federal cash thanks to deals with public hospitals
From their headquarters in Brooklyn, N.Y., Teddy Lichtschein and Eliezer Scheiner operate some of the most poorly rated nursing homes in Texas. Their small empire has amassed more than $800,000 in federal fines over the past three years.

“The money’s not going to take care of the people they’re supposed to be taking care of,” said Hazel Meaux, a Stowell resident and political activist who has opposed the nursing home transactions. (Ashley Landis - Staff Photographer)

From their headquarters in Brooklyn, N.Y., Teddy Lichtschein and Eliezer Scheiner operate some of the most poorly rated nursing homes in Texas. Their small empire has amassed more than $800,000 in federal fines over the past three years.

Regulators reported numerous problems. One patient who fractured his leg waited four days to have his broken bone treated. Another resident, given food he could not chew, choked to death in his wheelchair. An 80-year-old woman with rectal cancer screamed in agony for two weeks before attendants phoned her doctor.

Despite this record, Lichtschein and Scheiner have new partners in the nursing home trade: seven public agencies, which could position the Brooklyn duo for a taxpayer-funded windfall.

Breaking News Get the latest breaking news from North Texas and beyond. Email Address By signing up you agree to our Terms of Service and Privacy Policy SUBMIT

A special state program to attract additional federal Medicaid money will bring an extra $69 million to Texas nursing homes this year, with more to come next year. It was supposed to be for government-owned homes.

Much of it, however, will go to a multitude of private operators — such as Lichtschein and Scheiner — who were savvy enough to craft unusual licensing arrangements with governmental bodies.

In a development wholly unforeseen by state officials, the licenses of more than 300 privately owned nursing homes have changed hands within the past year. They are now held by public hospital districts and hospital authorities.

Some of these homes are hundreds of miles from the districts themselves. Many of them have been repeatedly cited for serious deficiencies.

nurse.home.grafic

These arrangements were made for the sole purpose of attracting the Medicaid supplements. This additional federal money was intended to improve patient care. But no mechanism has been put in place to enforce that.

The state failed to require that the money be spent on patients or improvements, no matter how poor a nursing home’s record. Therefore, large portions of it will flow to the original private operators to spend as they please.

“The rules are flawed in that part,” said Chris Traylor, chief deputy commissioner of the Texas Health and Human Services Commission. “We’re going to be looking to change this program.”

Overhaul, however, will not occur until late next year. Until then, Lichtschein, Scheiner and dozens of other private operators — many of whom were already turning a profit — can watch as millions of government dollars come rolling in.

A study released this month determined Texas to have the worst nursing home record in the country.

The Kaiser Family Foundation’s analysis of federal nursing home rankings found that 51 percent of Texas homes received overall ratings of one or two stars out of a possible five. The rankings are done by the U.S. Centers for Medicare & Medicaid Services.

No state had a higher percentage of low-rated nursing homes, the Kaiser study said. The national average is 35 percent.

One of those one-star homes is the Palo Pinto Nursing Center in Mineral Wells, about 80 miles west of Dallas. It is a Lichtschein-Scheiner property.

In 2012, state inspectors found that Palo Pinto nursing home staff did little to control a 65-year-old male resident who roamed throughout the home, sexually abusing female patients. Home operators agreed in 2013 to pay a federal fine of $120,000.

Since then, regulators have cited the home for failing to attend properly to patients’ hygiene. An inspector found one resident sitting in the lobby with flies on her. “A strong urine and fecal odor was emanating from her,” the inspector wrote, and her face and hands were dirty.

An attorney for Lichtschein and Scheiner said the state inspection process is inconsistent and gives an inaccurate picture of their properties. In a written statement, their Texas operating company said it is “constantly looking for partnerships and relationships that add value to those facilities and their ability to deliver a higher quality experience to their residents.”

As of late last year, their Palo Pinto home has a new name on its state license: the Palo Pinto County Hospital District, which operates a 74-bed community hospital in Mineral Wells. The arrangement grew out of the state program to bring extra Medicaid money to nursing homes.

Regular Medicaid payments to nursing homes are determined in part by state reimbursement rates. “Medicaid reimbursement for nursing homes in Texas is the worst of all 50 states,” said Harris Brooks, CEO of the Palo Pinto district. “They’re pretty much eking by.”

For this supplemental program, the state human services commission restricted participation to “non-state government-owned” nursing homes. That generally meant those owned by counties and local hospital districts or authorities, which are public bodies supported by local tax revenue to provide health care.

But owners of for-profit homes — aided by trade associations and legal counsel — found a way around the restriction. They simply needed to partner with the hospital districts, even if their homes were not within district boundaries.

Statewide, 94 counties and hospital districts or authorities have signed up for the new payment program. They now hold the licenses to 357 nursing homes. All but 30 of those were formerly private, according to figures from the state Health and Human Services Commission.

Most of the participating hospital districts are relatively small, though not all. The Dallas County Hospital District, which operates Parkland Memorial Hospital, is acquiring the licenses of 12 nursing homes.

The sheer number of these arrangements caught state officials by surprise. “We did not anticipate that level of interest and participation,” said Linda Edwards Gockel, a spokeswoman for the commission.

Representatives for Lichtschein and Scheiner approached the Palo Pinto County Hospital District with a proposal to participate in the program. Without paying Lichtschein and Scheiner anything, the district became the license holder for seven of their homes.

Only one of the homes for which it now holds the license is within its boundaries. Most are two counties away.

Though its name is on the licenses, the Palo Pinto district doesn’t own any of the nursing homes’ real estate or any other assets. Nor does it operate the homes. That is retained by Lichtschein and Scheiner, who signed lease agreements with Palo Pinto.

The biggest change is the enhanced funding. “It allows us to bring in federal dollars,” Brooks said. Exactly how much money is still unclear, Brooks said, but initial estimates were about $1 million a year per home.

When the additional money arrives — perhaps not until next year — some of it goes to the hospital district. “We do get a cut of it,” Brooks said.

Much of the rest will go to several companies owned by Lichtschein and Scheiner, with no requirement to spend it on better patient care.

State regulators acknowledge this hole in their plan. The next program, to begin by September 2016, will base payments on improvements.

Another of the Lichtschein-Scheiner homes now controlled by Palo Pinto is the Santa Fe Health and Rehabilitation Center in Weatherford. That's where the patient fell and broke his leg.

His left leg was “swollen twice the size of the right leg,” records said, but a technician X-rayed the wrong patient, the man’s roommate. The man with the fracture was given only Tylenol for four days until a nurse persuaded a physician to order another X-ray.

Brooks said he is aware of the problems at the homes for which his agency now holds the license. “We are very concerned over quality issues,” he said. But, he added, “These are not going to change overnight, and we have only been involved a few months at this point.”

A contractor hired by the Palo Pinto district will employ administrators and monitor the quality of the homes, Brooks said.

The Palo Pinto district also holds the license for the Benbrook Nursing & Rehabilitation Center, a Lichtschein and Scheiner property in Tarrant County.

In 2013, a 54-year-old Benbrook resident with cerebral palsy was served lunch in his room. He had “a history of incidents of aspiration and choking,” his records said, so he required a “mechanical soft” diet.

However, the attendant gave him hamburger meat. Left unattended, the man choked on the meat, and died of asphyxiation.

CMS, in its most recent assessment, gave Benbrook a one-star — “much below average” — overall rating. It staffing levels also received a one-star rating.

One measure of staffing used by CMS is “registered nurse hours per resident per day.” Benbrook’s score was about half the Texas average and only 36 percent of the national average.

However, Brooks said there are no immediate plans to hire more staff. “The cash flow is not yet available to fund much more increases.”

In state filings, Lichtschein and Scheiner list their office as a small building on the outer reaches of Flatbush Avenue in Brooklyn. Neither of them responded to multiple requests for comment by The Dallas Morning News.

State and federal records show that companies controlled by Lichtschein and Scheiner operate 44 nursing homes in Texas, including nine in the Dallas-Fort Worth area.

More than three-fourths of their Texas homes have been rated “below average” or “much below average” by CMS.

Lichtschein’s and Scheiner’s Texas homes operate from Advanced Healthcare Solutions, a company they own in Arlington. Nancy Shellhorse, a lawyer for Advanced, said the company disputes the fairness of CMS’s rankings, which are based in large part on information from state regulatory agencies.

"The current survey and enforcement process is inconsistent and standards are not clearly defined and consistently enforced, which results in an inaccurate portrayal of the quality of care provided in nursing facilities," Shellhorse said in a written statement to The News. "Advanced does not believe that the findings from surveys and investigations that are used for public reporting accurately reflect the quality of care provided by the facilities it operated."

The attorney said Advanced agreed to pay fines to CMS to avoid the expense of litigation, and the settlements were “not an admission of liability.”

Shellhorse also said that the additional Medicaid money will be used for enhancements and improvements at nursing homes. “Advanced and the nursing facilities that they provide support for continually look for opportunities to improve both the physical plants of the building as well as invest in care programs and health technology,” she wrote.

In addition to Palo Pinto, Lichtschein and Scheiner also reached similar licensing deals with six other small-town hospital districts. Among them was the Jack County Hospital District, which now holds the license for the Park View Care Center in Fort Worth.

Jack County has a population of about 9,000, and the hospital district headquarters is 60 miles from Fort Worth.

At Park View in 2012, a 54-year-old patient escaped from the home, according to a suit filed in Tarrant County. Unobserved by staff, the suit claims, she left by climbing over a fence around the smoking patio.

Eight hours later, Veranda Jimerson — who had been wearing a heavy black coat on a 98-degree day — was found dead in some nearby woods. The cause of death was multi-organ failure due to hyperthermia.

The suit was settled this month.

Park View agreed in 2013 to pay a $134,400 to CMS. In its most recent rankings, CMS gave Park View an overall one-star rating. Park View also received low marks for staffing levels that are well under state and national averages.

Frank Beaman, CEO of the Jack County district, said he had no knowledge of problems at Park View. “Actually, I am not aware of the cited deficiencies, as they did not occur on my watch,” Beaman said in an email.

Lichtschein and Scheiner’s companies will continue to operate the home while Jack County’s name is on the license. “We will monitor the quality of the home as part of our overall quality improvement plan,” Beaman said.

The Coryell County Memorial Hospital Authority in Central Texas has assumed the licenses of 20 nursing homes, including two owned by Lichtschein and Scheiner.

“It benefits everybody,” David Byrom, CEO of the Coryell authority, said of the state supplemental program.

One of Coryell’s new properties is Lichtschein’s and Scheiner’s Colonial Manor Nursing Center in Cleburne. CMS fined Colonial Manor $235,000 in September. It was there that the woman with cancer screamed in “uncontrolled, severe pain,” as state records described it, for 14 days before her doctor was called.

Byrom said Coryell will spend money to improve quality even if the state does not require it. “We’re all responsible folks,” he said.

Among the other homes now licensed to Coryell County is Brentwood Place Three in Dallas, previously owned by a Longview company. The seat of Coryell County, Gatesville, is 135 miles from Dallas.

Byrom acknowledged the unlikelihood that Coryell County would send patients to Dallas. He would not say what improvements might soon be made at Brentwood, which has a one-star rating and was fined $146,120 by CMS in 2012.

“I don’t think we have all the answers to all those questions,” he said.

Some of the homes that are to receive extra money were already showing a profit.

A consultant for the lawyers who sued Park View said Lichtschein’s and Scheiner’s companies “had plenty of resources to rectify these problems and increase staffing if they wanted to.”

Sid Gerber, the consultant, wrote in court filings that state reports for 2012 show that the Brooklyn pair’s companies at Park View “paid themselves $2,441,403 in home office, management and related party costs and fees in addition to a straight line profit of $489,367.”

At Benbrook, the 2013 cost report—the most recent available—said the home recorded $5,382,947 in expenses against $5,919,839 in total revenue.

Lichtschein’s and Scheiner’s companies provided multiple services at Benbrook. For example, the nursing home leased its building for $715,942 a year from BP Tenant LLC, a Lichtschein-Scheiner company. The two also own a company that provides therapy and rehabilitation to nursing home residents, state reports show.

“They all bill each other,” said Jason Young, the Houston lawyer who filed the Park View suit. “They’re doing quite well.”

Byrom of Coryell County said homes making a profit should not be excluded from the state program to provide additional funds. “I’m not going to be the judge of what’s a fair profit,” he said. “I don’t think that’s your role or the government’s role.”

Although federal money is being used for the state program, it’s unclear if Washington sees the need for increased scrutiny. CMS’s national public affairs office declined to comment on the Texas plan. Nor would CMS comment on whether it is allowable for money intended for patients to be spent elsewhere.

In 2013, the Winnie-Stowell Hospital District in southeast Texas commissioned a legal opinion on the nursing home program. Austin lawyer Mark D. Chouteau concluded that the hospital district could participate without incurring problems with regulators. That’s because federal involvement on such arrangements has been “sporadic and ambiguous,” Chouteau wrote, as well as “isolated and weak.”

Hubert Oxford IV, attorney for Winnie-Stowell, said a subsequent outside legal opinion warned that the district could face "some degree of risk" by participating in the program. Oxford refused to release the text of that opinion to The News, citing attorney-client privilege.

Winnie-Stowell, with a population of less than 6,000, ultimately assumed the licenses of 13 nursing homes. One of them is in Atlanta, Texas, 260 miles north of district lines.

Hazel Meaux, a Stowell resident and political activist who has opposed the nursing home transactions, said much of the new money will go toward attorney’s fees and management contracts.

“They’re just scratching everybody’s back and the money’s not going to take care of the people they’re supposed to be taking care of,” she said. “It might be legal but it isn’t right.”

Attorney Oxford said the district has implemented a quality assurance program, and necessary funds will be spent on better nursing home care. “We really think we’re doing it right,” Oxford said.

A sizable portion of the money, he acknowledged, will flow to the district for hospital renovations and equipment unrelated to nursing homes.

“It’s a great way for the hospital districts to bring in money,” Oxford said. “We wouldn’t do it if there wasn’t a substantial return.”