Rosewood: Five Star Fraud

In June 2010, an 87 year old woman was admitted to the Rosewood Post-Acute Rehabilitation facility for what was supposed to be a short-term rehabilitative stay. A month later, she was rushed to hospital in acute respiratory distress; an hour after that she was dead. Her death was the result of reckless neglect and fraud on the part of Rosewood’s management company, North American Health Care (NAHC).

The tragedy was attributed to severe understaffing and inadequate supervision at the  Sacramento facility, which treats high acuity patients with unpredictable medical needs who require diligent care from knowledgeable nurses. NAHC President John Sorensen sought to reduce staff numbers, pressuring administrators to increase profits at the expense of patient care, while marketing Rosewood as an estimable facility.

NAHC charges $18.50 per patient per day plus residual profits under a service agreement imposed upon the facilities without their input or consent. The company extracts more than $20 million per year through its service agreement. NAHC has no ownership interest in any of the facilities. Sorensen manipulated company finances to insulate it from a significant judgment and ultimately render it insolvent.

Rosewood is one of more than 30 nursing home facilities operated by NAHC. Back in 2010, it held the distinction of a five-star rating from Medicare. The ratings system, which gathers data from more than 15,000 nursing homes across the country, is used by physicians to make referral decisions about patients being discharged from hospital, insurers ascertaining preferred networks, and private equity firms looking for a safe investment.

There was one problem with Rosewood’s rarefied status – it was a sham orchestrated by NAHC. Medicare’s ratings criteria rely largely on self-reported data, with the only independent assessment coming from annual health inspections. Criteria like staff levels and quality of care are reported by the nursing homes themselves.

How does a facility with scores of complaints and a dozen lawsuits filed against it get a five star rating?

By gaming a flawed system. One of the key self-reported metrics – quality of care – is scored by gathering data on every patient in a facility, a practice which is clearly open to manipulation. Another metric – staffing levels – is rated annually at the time of inspection. Unscrupulous nursing home operators have learned to add more employees during the period leading up to an inspection, thus skewing the numbers in their favor.

Ed Dudensing has brought several other elder abuse lawsuits against NAHC facilities and deposed more than 30 of their employees. He was quoted in a 2014 New York Times article on Medicare ratings: “I strongly disagree with the suggestion that its nursing homes are five-star quality.”

The daughter of the Rosewood resident who died under their care chose to admit her mother to the facility based specifically on an unwarranted five star rating. NAHC continued to attract high-acuity patients over the following three and a half years, even as the elder abuse case against them was being prepared. Then, three hours after the first court date was announced, they filed for bankruptcy.

At time of writing, Rosewood has a four star Medicare rating.