By the time she was hospitalized in 2020, Pearlene Darby, a retired trainer, had suffered open sores on each legs, each hips, and each heels, in addition to a five-inch-long gash on her tailbone. She died two weeks later at age 81 from infections and bedsores, in response to her loss of life certificates. Her daughter sued the nursing house, alleging it had left Darby sitting in her personal feces and urine repeatedly.
The lawsuit, settled on confidential phrases final yr, blamed not solely the managers of City Creek Post-Acute and Assisted Living but in addition the constructing’s proprietor, an actual property funding belief, or REIT.
In the yr Darby died, City Creek paid CareBelief REIT greater than $1 million in hire, whereas the Sacramento, California, nursing house ran a deficit, court docket data present.
Federal tax guidelines ban REITs from working well being care services, however CareBelief was not an absentee landlord both, in response to inner data filed within the case. It selected the nursing house’s administration firm and required via the lease that the house preserve a minimum of 80% of beds occupied. CareBelief granularly tracked how properly the house saved to its monetary plan, right down to the cash spent month-to-month on nurses and meals, the data stated. And the paperwork confirmed that the actual property firm saved tabs on authorities security inspection findings and Medicare high quality scores.
Pearlene Darby, a resident of a Sacramento, California, nursing house, was hospitalized with bedsores and an an infection. A surgeon stated she was too fragile to outlive surgical procedure, her daughter’s lawsuit alleged. The house denied legal responsibility and the case was settled out of court docket. She is pictured right here along with her grandson Caleb Darby. (Shirlene Darby)
Both CareBelief and the nursing house operator denied legal responsibility for Darby’s loss of life. CareBelief officers stated in court docket papers that it isn’t concerned in day-to-day nursing house choices or affected person care, and that it displays services to make sure nothing jeopardizes hire funds. In a written assertion, CareBelief Corporate Counsel Joseph Layne advised KFF Health News: “We are the property owners, not the operators.”
Landlords With Influence
Over the previous decade, actual property funding trusts have purchased 1000’s of buildings that home nursing houses, hospitals, assisted dwelling services, and medical workplaces. A KFF Health News examination of court docket filings and company data reveals that these landlords have extra affect than the well being care services publicly acknowledge.
The paperwork reveal REITs typically choose the administration who oversee the operations and depart them in place even when they’re conscious of threadbare staffing, floundering governance, repeated security violations, or different issues that hamper high quality of care. A California jury in March awarded $92 million in punitive damages in opposition to a former REIT over the loss of life of a 100-year-old resident with dementia who froze to loss of life exterior her assisted dwelling facility.
“The REITs are in charge,” stated Laraclay Parker, one of many legal professionals who symbolize Darby’s daughter.
Absence of Oversight
Despite their ubiquity, REITs stay invisible to state and federal well being regulators. Hospitals and nursing houses will not be required to reveal hire funds or landlord identities within the annual studies they undergo Medicare.
Under President Donald Trump, the Centers for Medicare & Medicaid Services indefinitely suspended a Biden-era requirement that nursing houses disclose REIT involvement. Catherine Howden, a CMS spokesperson, stated in an announcement that the company doesn’t regulate services based mostly on their tax standing or company type and as a substitute focuses on the standard of the care they supply.
REITs now own a fifth of the nation’s senior housing, which incorporates assisted dwelling, reminiscence care, and unbiased dwelling, in response to an trade evaluation. REITs additionally maintain investments in 1 in 6 nursing houses. Publicly traded REITs that target well being care are actually value almost 1 / 4 of a trillion {dollars}, in response to Nareit, an trade affiliation.
While one analysis examine discovered REIT investments had been related to higher spending on nursing wages, one other concluded that after being purchased by REITs, nursing houses ceaselessly replaced registered nurses with much less expert nurses and aides. A third analysis concluded that well being inspection outcomes had been worse after REIT funding.
Researchers additionally discovered that investor-owned hospital chains that offered buildings to REITs had been more likely to close or go bankrupt, as happened in 2024 with Steward Health Care. Often, personal fairness buyers saved the sale proceeds as income whereas the hospitals had been burdened with new hire prices. “There were no improvements in clinical outcomes,” stated Thomas Tsai, an affiliate professor on the Harvard T.H. Chan School of Public Health.
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REITs are required to distribute most of their earnings and don’t need to pay the 21% federal company earnings tax on it. There is a catch: A REIT that “directly or indirectly operates or manages” a well being care facility loses the tax break for 5 years. Typically, a REIT leases the property to a different firm that runs the nursing house or assisted dwelling facility and maintains its tax break. Nareit stated well being care REITs distributed greater than $7 billion in dividends in 2024.
Michael Stroyeck, head of well being care evaluation at Green Street, an actual property analysis firm, stated “there’s definitely a symbiotic relationship” between REITs and facility managers as a result of they’ve the identical targets. He stated he has seen REITs substitute operators which can be having difficulties or go bankrupt.
John Kane, a senior vice chairman on the American Health Care Association and the National Center for Assisted Living, an trade group that represents nursing houses, stated in an announcement: “Given government funding often falls short, REITs have been valuable partners in helping to invest in long term care without influencing daily operations.”
Leslie Adams holds a photograph of his mom, Shirley, who died after growing contaminated bedsores at Lakeview Rehabilitation and Nursing Center, in response to a lawsuit he filed. A court docket awarded the household $17 million. (Taylor Glascock for KFF Health News)
Low Staffing at a Chain
Strawberry Fields REIT, which like CareBelief trades on the New York Stock Exchange, owns or controls the buildings of 131 nursing house services. The nursing house operations inside 66 of these services are owned by Moishe Gubin, Strawberry Fields’ chief government, and Michael Blisko, one in all its administrators, in response to Strawberry Fields’ annual report for final yr.
Gubin and Blisko additionally collectively personal Infinity Healthcare Management, which manages their nursing houses; Blisko is Infinity’s CEO. On common, Infinity-affiliated nursing houses offered an hour and 1 / 4 much less nursing care per resident per day than the nationwide common of 4 hours, a KFF Health News evaluation of federal data discovered.
Infinity and a number of other of its nursing houses have just lately settled 30 loss of life and damage lawsuits in Cook County, Illinois, totaling greater than $4 million, stated Margaret Battersby Black, a Chicago lawyer. A jury final yr awarded $12 million in a lawsuit introduced in opposition to Infinity and one in all its Chicago nursing houses over the 2023 loss of life of Shirley Adams. A retired sweet manufacturing unit employee, Adams died after growing contaminated bedsores at Lakeview Rehabilitation and Nursing Center, in response to the lawsuit.
“She had wounds that no one could explain,” one in all her grownup youngsters, Leslie Adams, testified at trial. Medicare gives Lakeview its lowest high quality ranking, one star out of 5.
Leslie Adams poses for a portrait at his Chicago house within the room the place his mom, Shirley Adams, lived earlier than she was moved to Lakeview Rehabilitation and Nursing Center. (Taylor Glascock for KFF Health News)
Paul Connery, a lawyer for Adams’ household, stated they’re nonetheless attempting to gather on the judgment in opposition to the nursing house and administration firm, which now totals $17 million with curiosity and lawyer charges.
“If I get caught speeding and I went to court, they issue me a ticket and I’ve got a fine to pay,” Adams stated in an interview. “How are they able to still continue to move on with business like nothing has happened?”
In a cellphone interview and an e-mail, Gubin stated Strawberry Fields, Infinity, and the nursing houses are all legally distinct and that he has not performed an energetic position in Infinity in additional than a decade. He stated nursing houses get sued on a regular basis however that the decision in opposition to Lakeview is so giant that it’s going to power the house to declare chapter or shut down.
“The whole thing is unfortunate,” Gubin stated by cellphone. “For 15 years they were a perfectly good guardian” and “a well-run building,” he stated. “You wouldn’t think it was fair to be judged on your worst day.”
Blisko and an Infinity lawyer didn’t reply to requests for remark.
Strawberry Fields, which owns 10 assisted dwelling services and two long-term care hospitals along with the nursing houses, earned web earnings final yr of $33 million from $155 million in hire, a 21% revenue margin, securities filings present. Gubin stated these weren’t extreme returns.
The house owners and operators of Lakeview Rehabilitation and Nursing Center in Chicago are also administrators of the actual property funding belief that owns the constructing, a securities submitting reveals. (Taylor Glascock for KFF Health News)
A $110 Million Verdict
Traditionally, REIT leases make the working corporations chargeable for paying property taxes, insurance coverage premiums, and upkeep prices. In 2008, Congress gave well being care REITs a brand new choice to earn a living: On prime of accumulating rents, they might arrange subsidiaries and take income instantly from well being care companies. They nonetheless should have unbiased administration overseeing care choices. Many REITs have embraced the position although the subsidiaries should pay company taxes and danger shedding cash if the companies do poorly.
Colony Capital was a REIT that via layers of shell companies owned each the constructing and the operation of Greenhaven Estates, a Sacramento assisted dwelling and reminiscence care facility. In 2018 Greenhaven paid Colony $1.4 million in hire, almost a 3rd of its $4.5 million in income that yr, in response to monetary data filed in court docket.
Greenhaven additionally was on the verge of shedding its license, in response to a revocation discover filed in November 2018 by the California Department of Social Services. Greenhaven had racked up years of well being violations, together with from letting untrained employees administer drugs, missing sufficient workers to take care of folks with dementia, and neglecting a resident who smeared feces over his physique, mattress, ground, and loo, the discover stated.
In February 2019, just a few weeks after celebrating her one centesimal birthday, Mildred Hernandez, a resident with Alzheimer’s, wandered out of Greenhaven in the midst of the evening. Her assisted dwelling wing had no exit door alarms although it housed a number of residents with dementia, court docket data confirmed. Berta Lepe, one in all Greenhaven’s caregivers, discovered Hernandez underneath a bush, carrying solely a shirt and underwear. The temperature was within the 30s.
Mildred Hernandez died of hypothermia after wandering out of her assisted dwelling facility in the midst of the evening. A jury awarded $92 million in punitive damages in opposition to the proprietor of the house. (Ric Tapia)
“She was talking, but I couldn’t understand what she was saying,” Lepe testified at trial over a lawsuit from Hernandez’s household. Hernandez died of hypothermia just a few hours later, in response to her loss of life certificates.
Frontier Management, the corporate that Colony had employed to handle Greenhaven, denied legal responsibility and settled the lawsuit on undisclosed phrases.
Since the lawsuit, Colony has modified its identify to DigitalBridge, which now not owns Greenhaven and gave up its REIT standing. At trial earlier this yr, DigitalBridge stated resident care was the duty of Frontier and that Colony “encouraged” Frontier to deal with issues. Richard Welch, a former Colony government, testified that changing administration is disruptive. “I viewed it as a last resort,” he stated.
In March, a jury awarded Hernandez’s household $110 million: $10 million in compensatory damages, $92 million in punitive damages in opposition to DigitalBridge, and $8 million in punitive damages in opposition to Formation Capital, an asset administration firm.
“REIT money is very detached from knowing about or caring about patient or resident outcomes, because it’s not in their business model,” Ed Dudensing, a lawyer for the household, stated in an interview. “Their allegiance is to their investors.”
DigitalBridge has requested the decide to delay finalizing the judgment whereas its authorized challenges to the lawsuit and the decision are evaluated. A DigitalBridge lawyer and a company spokesperson didn’t reply to requests for remark, a Formation lawyer declined remark, and a Frontier lawyer and a spokesperson didn’t reply to a request for remark.
‘Wet From Head to Toe’
When CareBelief purchased City Creek Post-Acute and Assisted Living in 2019, the Sacramento nursing house the place Pearlene Darby lived had a one-star Medicare ranking and was shedding cash. CareBelief leased the constructing to a administration firm known as Kalesta Healthcare Group based mostly on the marketing strategy Kalesta submitted.
While CareBelief was not the operator, it held periodic cellphone calls with Kalesta, which offered “a full update of what’s happening at the facility,” together with modifications in management, monetary progress, and well being inspection survey outcomes, in response to deposition testimony by Ryan Williams, a Kalesta co-founder.
According to a state inspection report, in 2020, the yr Darby died, City Creek left a resident in dirty linens “wet from head to toe lying in bed” for greater than eight hours. During a distinct go to, a well being inspector cited the house after watching a nurse put a grimy diaper again onto a resident after caring for a wound. “It was just a small stool and it is far from where the wound is,” the nurse advised the inspector, in response to the report.
James Callister, CareBelief’s chief funding officer, stated in his deposition that CareBelief officers “review results of regulatory surveys provided to us by the tenant. We review the five-star rating.” He stated, “We evaluate results of care, but we do not evaluate types of care given or how or when, no.”
Darby had been dwelling in City Creek since 2011 after a stroke left her in a wheelchair. She wanted assist getting out and in of mattress. From September via November 2020, Darby misplaced 30 kilos, her household’s lawsuit alleged. During these months, workers dropped her 3 times as one employee somewhat than the required two operated the mechanical carry, the lawsuit stated.
The go well with alleged City Creek did not reposition her each two hours in mattress or her wheelchair, which is the medical normal for folks liable to bedsores, and to promptly order gadgets to guard her pores and skin.
In November, the nursing house despatched Darby to the hospital. A blood check discovered micro organism had entered her bloodstream from her feces’ touching open pores and skin wounds, in response to the lawsuit. The hospital recognized her with sepsis. A surgeon stated she wanted an operation to redirect fecal waste from her intestines however concluded she wasn’t medically steady sufficient for surgical procedure, the go well with stated.
Darby started receiving consolation care measures and was despatched again to City Creek. She died two weeks later. In court docket filings, CareBelief and Kalesta denied the allegations.
In a cellphone interview, Williams, the Kalesta co-founder, stated Darby’s loss of life occurred throughout probably the most difficult level of the covid pandemic, when California guidelines required any nurses testing constructive for the virus to be despatched house and nurses had been quitting out of worry for his or her well being. “It was the most herculean of professional efforts to secure enough staff,” he stated.
While expressing sympathy for Darby and her household, he stated it was “unconscionable” that private damage legal professionals sued nursing houses over care failures throughout “the worst of times.”
In court docket, CareBelief petitioned Judge Richard Miadich to dismiss it from the lawsuit earlier than trial. “This case does not concern a property condition,” CareBelief’s legal professionals wrote. “CareTrust is simply a landlord.” But the decide dominated final yr a jury ought to resolve whether or not CareBelief “exercised actual control over City Creek.”
The case was settled out of court docket just a few months later. All events declined to disclose the settlement phrases.
A 67% Profit
As just lately as November 2023 — 4 years after its acquisition — City Creek earned one star from Medicare. It was cited for failing to have the minimal nursing house staffing required by California regulation throughout 5 of 24 randomly chosen days in 2022, in response to an inspection report. Williams stated within the interview that Kalesta had elevated spending on nursing over the course of its possession, together with boosting wages, however that it takes a yr or two to show round a troubled nursing house. He stated the house’s star ranking in 2023 was dragged down by its poor inspection historical past from earlier than Kalesta took over.
City Creek’s ranking has climbed prior to now two years, and it now has the highest total ranking of 5, in response to Medicare. Medicare charges City Creek’s present staffing ranges as common. That’s higher than most nursing houses in additional than 200 buildings CareBelief purchased earlier than 2025, in response to a KFF Health News evaluation of federal information. On common, CareBelief nursing houses offered a half hour much less nursing care per resident per day than the nationwide common of 4 hours.
In its assertion to KFF Health News, CareBelief’s counsel Layne stated the REIT labored to “identify quality operators as tenants,” and that the houses the REIT rents out have extra nurses and aides than the minimal required for nursing houses by their state governments. “The operators are licensed by state regulators and retain sole responsibility for operations,” the assertion stated.
CareBelief, which now owns greater than 500 senior housing and nursing house buildings, reported web earnings final yr of $320 million from $476 million in rents and different income — a 67% revenue margin. By comparability, HCA Healthcare, one of many nation’s largest for-profit hospital and well being care chains, reported a 10% profit margin for final yr.
Lesley Ann Clement, one in all Darby’s legal professionals, stated instances like hers present the nursing house trade is mistaken to complain it lacks monetary assets for extra staffing.
“There’s plenty of money,” Clement stated. “They’re just not spending it on patient care.”
