Nursing Home Risks Closure After Newsweek Investigated Lawsuits Over Deaths

In a rare move, federal health officials plan to cut funding to a Kentucky nursing home, weeks after a Newsweek investigation that revealed the facility faced almost a dozen wrongful death and negligence lawsuits amid a nationwide backlog of nursing home health inspections.

Hillcreek Rehabilitation and Care would no longer be able to bill public health insurance programs, which account for nearly all its revenue. The Centers for Medicare & Medicaid Services (CMS) announced in May that the nursing home had failed to meet "health and safety participation requirements." The facility received its latest annual inspection in September, more than two years overdue, records show.

The government's decision was set to take effect May 30, but a federal judge granted a temporary restraining order to allow Hillcreek more time to appeal. The nursing home filed a lawsuit arguing the loss of funding would effectively shut down the facility, displacing more than 100 residents. Approximately 90 percent of Hillcreek's revenue comes from government insurance payouts, the lawsuit states. Hillcreek is also appealing a $400,000 fine handed down by CMS in March, one of the largest penalties the agency has levied against any nursing home in the three years for which data is available.

Another Louisville nursing home operated by Hillcreek's parent company, Exceptional Living Centers, was also slated to lose federal funding this month, records show. However, St. Matthews Care Center also received a temporary restraining order delaying the action. A spokesperson for Exceptional Living Centers did not comment on either facilities' sanctions.

CMS rarely threatens to withdraw Medicare and Medicaid funding from nursing homes. An agency spokesperson described it as "generally the last resort after all other attempts to remedy noncompliance of deficiencies have been exhausted." Of the nation's more than 15,000 nursing homes, only about 100 to 200 face such a punishment each year. The majority return to compliance before losing funding, the CMS spokesperson said.

"This is probably the most serious thing that the federal government can do," said Lindsay Peterson, interim director at the Florida Policy Exchange Center on Aging.

In March, Newsweek revealed that six families of former Hillcreek residents had filed wrongful death lawsuits against the facility since early 2021. Five additional families had sued the nursing home for alleged negligence.

Theresa Hutchins said her 87-year-old uncle suffered massive weight loss after he was admitted to Hillcreek for physical therapy in December 2020. Hospital records stated Joe Naegele left the facility a month later about 23 pounds lighter than when he arrived, a weight loss 10 times greater than the nursing home logged, according to documents Hutchins provided Newsweek.

Hutchins said she hopes the government action against Hillcreek will act as a warning to nursing homes across Kentucky.

"I think this will definitely be an alarm to all the other facilities that you better do what you're supposed to do or else you're going to be shut down," she said.

Despite the slew of lawsuits, Newsweek found that Hillcreek's previous annual health inspection from the state of Kentucky was in early 2019. The nursing home's new lawsuit against the government shows the state health department began another series of inspections in September 2022. State and federal health officials have not publicly shared details of those inspections online; however, exhibits filed by Hillcreek in the lawsuit show state inspectors repeatedly cited the facility over several months.

The citations state Hillcreek hired caregivers with criminal records that disqualified them from employment in a nursing home. State inspectors wrote the facility was dirty, with garbage containers overflowing with used adult diapers. A former employee complained rats "as big as cats" had been seen inside the facility, and one resident claimed he was bitten inside his room. Staff failed to sanitize blood glucose monitors between uses, raising residents' risk of becoming sick.

Hillcreek is contesting the citations and its fine, its lawsuit states. The business says it has corrected any problems in its operations, but state officials have not completed a requested follow-up inspection. Shutting down the facility would harm both its residents and employees, the lawsuit states.

In addition to Hillcreek and St. Matthews, a third Exceptional Living Centers nursing home in Louisville was under recent federal scrutiny. CMS threatened to terminate funding to Lyndon Woods Care and Rehabilitation for not meeting health and safety requirements, but the agency later rescinded its decision.

Congressional investigation backs report

The three nursing homes were among some 4,500 nationwide behind schedule for an annual health inspection, Newsweek found in its investigation published this March. This month, a U.S. Senate panel repeatedly cited Newsweek's reporting during its own inquiry.

Uncompetitive salaries are driving staffing shortages and high turnover among state healthcare workers tasked with inspecting nursing homes, the Senate Special Committee on Aging found. Nine states reported half or more of their surveyor positions were not filled. The vacancies have led to massive backlogs in many states.

The committee's findings, based on documents and data from every state, were published in an 89-page report. "The report paints a picture of a system in crisis," committee chairman Sen. Bob Casey, a Pennsylvania Democrat, said. "Underfunded and understaffed state agencies have fallen behind on the basic duties that they're charged with executing on."

Stagnant federal funding is to blame, the panel found. Congress appropriated $407 million to nursing home oversight in its last budget, only $10 million more than in 2015 and $158 million less than what President Joe Biden has proposed for this year. The current funding equates to under 80 cents per resident per day, Casey said.

To address their inspection backlogs, states are entering expensive contracts with private companies that employ retired surveyors. In 2019, states spent less than $7 million on third-party inspections. That ballooned to almost $20 million last year. The committee found that most states were unaware that the same companies provide consulting services to nursing homes, potential conflicts of interest that Newsweek highlighted in its reporting. One company, CertiSurv, abandoned its consulting work following the magazine's investigation, the committee wrote in its report.

Congress should allocate more funding to nursing home oversight, the report stated. It also suggested that CMS should track surveyor staffing levels in each state, and that states that allow only registered nurses to work as surveyors should hire other types of healthcare workers as well.

Michael Scott Davidson can be reached at m.davidson@newsweek.com or find him on Twitter at @ByMSDavidson.