New operator takes over nursing homes after $62 million settlement Tuesday, August 9, 2011
Skilled Healthcare, owners of one of the nation’s largest nursing home chains, has leased out the operation of its five facilities in Humboldt County, Calif., after a jury there returned a $677 million verdict against it for failing to meet legally-required minimum staffing levels at those facilities and 17 others in California.
The agreement to put Brius Healthcare in charge of operations at the facilities means a court-ordered injunction requiring compliance with the staffing levels no longer applies to those facilities. Under terms of the injunction, which was part of a settlement that reduced Skilled Healthcare’s liability to $62.8 million, the company is paying for a court-appointed monitor to ensure compliance. That injunction still applies to the other 17 Skilled Healthcare facilities covered by the verdict.
Eureka attorney Tim Needham, one of the attorneys who represented residents of the Skilled Healthcare facilities in the class action suit, said he was not surprised by the maneuver to remove the Humboldt County facilities (four in Eureka and one in Fortuna) from the injunction, because the possibility was raised in the negotiations to reduce the jury’s $677 million verdict. “The deal was that if they transferred operations of the facilities to any type of entity affiliated with Skilled that the injunction would transfer as well,” Needham said. But if the new operator were unaffiliated with Skilled, then the injunction would not apply.
Needham said criticism of the part of the settlement that makes it possible for the facilities involved to be removed from the effects of the injunction doesn’t take into account the context of the negotiations. They took place while Skilled Healthcare officials were threatening to declare bankruptcy if the jury’s verdict were not modified. Not only would bankruptcy would have significantly reduced what the members of the class would have been able to collect, but Skilled would have been able to continue operating the facilities without an injunction requiring monitoring of staffing levels.
“You can say, in hindsight, was this bad [to remove the facilities from the injunction in the event of new operators], but I still don’t have any indication it was,” Needham said. “If they had come out of those negotiations saying, listen, we’re going to give those facilities to new operators, we would have been ecstatic. The fact that they are no longer operating five of them doesn’t hurt my heart. The way I felt when we were negotiating, it was good riddance if Skilled decided to get out.”
Needham said even though the new operators in Humboldt County won’t be monitored under the injunction, they’ll still face increased scrutiny as a result of last year’s verdict against Skilled Healthcare. “It’s our hope that they’ll play by the rules,” he said. “They’ve certainly been given every reason to understand that if they don’t play by the rules, we’ll go after them. I’m not going to jump in and prejudge these guys because it’s too easy to do so. I want to give them every chance to do a good job. And if they don’t, I’m going to be after them.”
Humboldt County native Brad Gibson, a health care industry veteran, is the Brius executive overseeing the facilities and is based in Eureka. “I’m in constant contact with Brad,” Needham said. “At least you know this much, the guy who’s responsible for the facilities now lives in our community, and you can pick up the phone and say, ‘Brad, what the hell are you doing?’ It makes a huge difference. [Skilled Healthcare senior management is based in Southern California.] He’s met with the [Humboldt County] district attorney, he’s met with me, he’s going around trying to improve their image in the community.
“At least from what I’ve seen so far there’s been pretty much a sea change [in the operation of the facilities]. I’m not upset by that.”