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Tighter Rein on Homes for Aged

Facilities that care for the frail and elderly should be far more than quick-buck operations for investors. But last week’s closure of a chain of Orange County residential care facilities illustrates that sometimes the quick buck rules, with little state oversight to get in the way.

In the last two years, the chain, operating under the name Autumn Rose, expanded rapidly through reckless deals that state regulators failed to scrutinize. The company appears to have suffered a financial meltdown five months ago, but the state nevertheless allowed it to acquire seven new homes in Costa Mesa only six weeks ago. Last week, senior citizens in those and 22 other homes were served with a three-day eviction notice.

Mergers and acquisitions by owners of nursing homes and chains of residential care facilities have swept the state in recent years. Regulators have been reluctant to apply the brakes because the deals have been seen as ways of bringing cost-saving “economies of scale” to the industry.

Evidence of such economies is slim. Autumn Rose’s expansion reportedly included a plan to hike rates by 15% to 20%. And while state regulators are only now studying how Autumn Rose managed its books, evidence of profiteering by some other facility owners is mounting.

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For instance, owner Jon H. Robertson abruptly closed his bankrupt nursing home in Reseda last year, literally sending wheelchair-bound residents onto Wilbur Avenue at 2:30 a.m. State regulators studied the home’s books and found that Robertson had drawn a $900,000-a-year salary to finance a high-flying lifestyle.

While the state can’t regulate the compensation of care facility owners, it can do a better job of fiscal oversight. xWhen Autumn Rose acquired its seven Costa Mesa homes last month, its regulator, the state Department of Social Services, had no way of assessing the chain’s solvency because the agency lacks a central computer database that would allow thorough analysis of a company’s fiscal status.

Last year, a bill by then-Sen. Herschel Rosenthal (D-Los Angeles) that would have created such a database died before reaching the floor. Identical legislation has been introduced by Assemblyman Kevin Shelley (D-San Francisco). It should pass, along with another Shelley bill, facing heavy industry lobbying pressure, that would allow the state to collect fines from care facility owners who evict their residents without notice.

Sacramento so far has passed only toothless legislation. For example, legislators approved a bill last year requiring nursing homes that declare bankruptcy to notify state officials. Good enough, but not much help to the feeble and often sick seniors who find themselves about to be tossed from their homes.

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