Poorly rated nursing homes got HUD-guaranteed mortgages anyway
Nursing home magnate Floyd A. Schlossberg had to be happy with the Department of Housing and Urban Development on March 30, 2012.
Nursing home residents and the American taxpayer, perhaps, not so much.
Related: Key findings from our investigation into nursing home HUD loans
It was on that day that Cambridge Realty Capital gave initial approval to a mortgage application for $12 million for the Alden Alma Nelson Manor nursing home in Rockford, Illinois.
The Department of Housing and Urban Development (HUD) insured the loan through a little-known federal program started in 1959.
Related: Nursing homes with 1-star ratings and a HUD-backed loan since 2009
The single-story facility that sits on a tree-lined street was recently renamed Alden Debes. It is one of dozens of nursing homes the sturdy, bespectacled Schlossberg has come to own since starting out in the industry in the 1970s.
A refinance, the $12 million loan had an interest rate of just 3.63 percent — close to the average rate for participants in the HUD program and nearly 2 percentage points less than the rate Cambridge had granted Alden Alma Nelson Manor in 2004 for a similar HUD-backed mortgage.
Related: Analysis shows widespread discrepancies in staffing levels reported by nursing homes
But a lot had happened at the home in the years between the two loans.
For one thing, the state fined the facility a total of $145,000 for its role in three residents’ deaths. It is unclear from publicly available records whether those fines were reduced on appeal.
Related: Methodology for our nursing homes investigation
In addition, Alden Alma Nelson Manor earned the lowest possible overall quality rating — a one star on a five-star scale — from the federal Department of Health and Human Services (HHS) in 2009. The overall quality mark is determined by rankings on health inspections, staffing levels and metrics like the percent of high risk residents with pressure ulcers. A one-star rating, HHS says, indicates that the care provided is “much below average,” in the bottom 20 percent within a particular state. The score for the Rockford home remained unchanged for seven consecutive reporting cycles into 2011, one of relatively few in the country to retain such a low ranking for that long, according to a 2012 analysis by USA Today.
Nevertheless, Cambridge Realty granted that mortgage refinance.
Related: Nursing homes serving minorities offering less care than those housing whites
And HUD guaranteed it.
Business as usual
An unusual situation? Not really. Nursing homes providing poor care routinely have received HUD-insured acquisition, construction, refinancing and improvement loans all over the country. In fact, since 2001 hundreds of the nation's worst-ranked nursing homes have received one, and in many cases two, low-cost, HUD-backed mortgages worth close to $2.5 billion, according to the Center for Public Integrity’s analysis of loan and ratings data.
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Copyright 2014 The Center for Public Integrity. This story was published by The Center for Public Integrity, a nonprofit, nonpartisan investigative news organization in Washington, D.C.
