: ‘All you hear about is the bad stuff’: Ephram Lahasky has a new investment model for America’s nursing homes. Regulators have questions.
In a bland brick office building across the street from a King Kullen supermarket in New York’s Long Island, nursing home magnate Ephram “Mordy” Lahasky is tallying up his latest deals. It’s a Friday afternoon in early February, and Lahasky has recently picked up 17 facilities in Ohio, he says, a couple in Massachusetts, and has his eye on five more in the south. He scribbles notes about his facilities on his office whiteboard and sifts through the piles of paper covering his desk—some of them chord sheets for songs he’s rehearsing with his garage band. By mid-month, he expects to take over another seven or eight nursing homes in Pennsylvania.
His typical shopping list, Lahasky says, includes facilities that are bleeding cash or have lots of compliance problems—or both. “We don’t mind problems,” he says. “We like problems.”
The 56-year-old Lahasky, who has shaggy gray hair and a penchant for improv comedy and acoustic guitar, has seen his share of problems. Over the past decade, he has built a complex nursing-home network that involves about a dozen different operating companies and roughly 200 facilities in two dozen states, where he or his wife own some or all of the operations, the real estate, or both. MarketWatch combed through business and regulatory filings, property records, and data from the Centers for Medicare and Medicaid Services to identify Lahasky’s holdings. Some of the nursing homes in his portfolio have been the subject of regulatory and law enforcement scrutiny, including Federal Bureau of Investigation raids on two facilities, a former administrator’s indictment on charges of falsifying staffing records, and Department of Labor allegations of failure to pay overtime to nursing staff and other workers, records show. Lahasky and his wife have not personally been accused of wrongdoing in any of the regulatory or law-enforcement actions.
Lahasky’s fast-growing nursing-home portfolio highlights the industry’s drift toward more complicated, fragmented and less transparent ownership as chains that were previously public or controlled by major private equity firms are split up or sold off. Going into the pandemic, there were four publicly traded nursing-home chains. Lahasky, who has largely avoided reporters for years and declines to be photographed, scored one of his biggest deals last year when he acquired one of those chains, Diversicare Healthcare Services, which operates 61 nursing homes in eight states.
Separately, Genesis HealthCare, which was owned by private equity firms Formation Capital and JER Partners before a 2015 merger with a public company, delisted its stock last year as part of a restructuring that gave an ownership stake to an affiliate of a small outfit headed by New York nursing-home investor Joel Landau.
The latest deals are a new twist on a trend that emerged roughly 20 years ago, when major private equity firms started making big bets on nursing homes. But with Washington politicians criticizing their tactics and easy wins hard to come by, some private equity funds backed by institutional capital have retreated from the industry, and a new wave of smaller private investors, like Lahasky, now control some of the biggest nursing home operations. Private investors often use complex ownership structures and webs of related entities that pose challenges for regulators trying to keep tabs on nursing home owners and ensure quality care, researchers and resident advocates say. They add that the opacity often confounds residents and families seeking accountability for COVID catastrophes and policymakers assessing how much taxpayer money should go to nursing homes.
The nursing-home industry “promotes a narrative that they’re underpaid,” particularly by Medicaid, the government program that covers more than 60% of nursing-home residents, says David Stevenson, a health policy professor at Vanderbilt University School of Medicine. But it’s hard to assess the merits of that argument, he says, given “the convoluted ownership structures where you can’t track the flow of dollars.”
The White House in late February announced a nursing-home reform package designed in part to make facility ownership more transparent, calling for a new federal database to track owners and operators across states, among other measures.
Lahasky does not maintain a corporate web site. Although federal data don’t present the full picture of Lahasky’s nursing-home affiliations, the 97 facilities for which CMS officially listed him as an owner as of February show a pattern of understaffing and subpar quality. Just two of the 97 facilities have the top overall five-star rating from CMS, compared with 23% of all nursing homes, while more than two-thirds of the facilities where Lahasky has an ownership stake have one- or two-star ratings, indicating lower quality. Only 3% of the Lahasky-owned facilities meet the federal government’s recommended staffing level of 4.1 total nurse staffing hours per resident day, compared with more than a quarter of all nursing homes. Lahasky points out that many of his facilities are “major turnarounds” taken over from deeply distressed chains such as Skyline Healthcare, which collapsed in 2018.
Lahasky acquired many of his nursing homes in “very hairy deals,” he says. “It can take two or three years to turn around a reputation.”
For 20 years, Ephram Lahasky worked for the Long Island Rail Road. Now, he’s one of the nation’s biggest owners of nursing home operations.
Bryan R. Smith/Agence France-Presse/Getty Images
Driving along rainy streets of suburban Hewlett, N.Y., in an SUV emblazoned with the logo of an ambulance service–one of his longtime side businesses–Lahasky takes a detour around stalled traffic. He has just left his office, and his mind is on his lifetime of work. As a kid in Queens’ Far Rockaway neighborhood, just a few minutes’ drive away, he’d go down to the beach—not to splash in the surf, he says, but to sell sodas to parched beachgoers for 35 cents each.
Long-term care of seniors wasn’t Lahasky’s first—or second—career. After studying math and computer science in college, he spent 20 years as a computer programmer with the Long Island Rail Road, he says, working on payroll and timekeeping systems—skills that would later prove critical in his nursing home operations. Having driven a taxi during college, he launched his own transport company on the side. He started with a couple of vans taking kids to school and eventually expanded into ambulance services, a business that gave him connections in the nursing-home world. Along the way, Lahasky says, he spent years working on his improv comedy, studying with the comedy troupe Upright Citizens Brigade.
Lahasky first got into the nursing home business in 2012, he says, with the help of Benjamin Landa, then head of New York nursing home company SentosaCare. In a 2019 ruling in a class action lawsuit that did not involve Lahasky, a federal judge in Brooklyn found Landa and affiliated entities liable under human-trafficking law in connection with the recruitment of Filipino nurses working in nursing homes. Landa and the other defendants denied the allegations in court. The parties have asked for the court’s approval of a $3 million settlement that also seeks to vacate the court’s finding of liability under human-trafficking law.
“Maybe they did some wrong things, but it doesn’t sound like such a terrible thing,” Lahasky says. He and Landa remain co-owners of more than 20 facilities, according to federal data. “He helped me out. I’m not going to leave him high and dry,” Lahasky says of Landa. “I kept doing deals with him—to a point.” The sticking point, he says, was not Landa’s legal trouble but Lahasky’s compensation. “If I’m doing the work, I need to be compensated for doing the work,” he says. Mark Weiss, a spokesman for Landa, said Landa is a “passive investor” in the facilities co-owned with Lahasky and is looking to unwind such investments where he doesn’t control facility management.
In his early years in the business, Lahasky invested in several facilities operated by Continuum Healthcare, including the Wanaque Center for Nursing and Rehabilitation in Haskell, N.J., which housed a pediatric unit. In 2018, while still under Continuum’s management, 11 children died in an adenovirus outbreak at the facility, and state inspectors found “egregious deficient practices in infection prevention and control.” Lahasky says he was a less than 3% owner in the Wanaque real estate and had no involvement with the facility’s operations. “I was purely an investor,” he says. A spokesperson for Continuum declined to comment on the outbreak and inspection findings but said that the Wanaque Center was acquired by another ownership group in 2019.
“The nursing-home industry promotes a narrative that they’re underpaid, particularly by Medicaid. But it’s hard to assess the merits of that argument given the convoluted ownership structures where you can’t track the flow of dollars.”
— David Stevenson, a health policy professor at Vanderbilt University School of Medicine
Meanwhile, payroll questions emerged at other Lahasky-affiliated facilities. The Department of Labor in 2018 filed suit against CHMS Group, a Lahasky-affiliated provider of payroll and other back-office services, and 14 Pennsylvania facilities co-owned by Lahasky, alleging a failure to compensate employees for all the overtime hours they worked. “There were definitely errors, and they’ve been corrected,” Lahasky says, although he disputes some of the Labor Department’s allegations regarding pay for employees working through meal breaks. CHMS denied the allegations in court, saying employees were properly compensated, and the case is ongoing.
In 2019, Waterbury Gardens Nursing and Rehab, a Connecticut facility co-owned by Lahasky, entered a court-ordered receivership. The facility had insufficient funds for “payroll, food, medical supplies and other necessary expenses,” the state Commissioner of Social Services said in a court filing. In the years leading up to the receivership, the facility had paid sharply increasing amounts of rent to a related party, according to cost reports filed with the state. In the year ended September 2018, the facility reported paying over $1.1 million in rent, up from $633,000 a year earlier, to Waterbury Gardens Holdings LLC, a Connecticut company where Lahasky is a principal, according to state business filings. Such related-party transactions are not illegal but are often criticized by resident advocates, who say they allow owners to vacuum money out of facilities that would be better spent on patient care and create the impression that facilities are struggling financially, bolstering operators’ push for higher Medicaid reimbursement.
Asked about the rent paid to the related party, Lahasky said, “that doesn’t seem accurate to me,” but declined to review the cost reports for accuracy. “If you own the real estate and the operations, you’re allowed to charge yourself whatever you want in rent,” he says. “I never got a dollar from that facility,” he says, adding that the nursing home’s financial problems were due to issues with the Medicaid reimbursement rates.
The early private equity nursing home investors often focused on chains that owned most of their facilities, looking to unlock the value of the real estate, according to research co-authored by Stevenson, the Vanderbilt health policy professor. They’d then separate the real estate from the nursing home operations, with the operator typically paying rent as well all the property-related expenses such as property taxes, an approach that also helped limit potential legal liabilities. In 2011, major nursing-home chain HCR ManorCare sold most of its real estate in a $6.1 billion deal that benefited its private equity owner, Carlyle
Over time, HCR ManorCare could no longer afford the new rents associated with the facilities, and the company filed for bankruptcy in 2018. Carlyle, which manages $300 billion of institutional capital, hasn’t owned any U.S. nursing homes since 2018. Some of the former ManorCare facilities, as well as some former Golden Living facilities previously owned by private equity, are now in Lahasky’s portfolio.
It’s now common for nursing homes, including those affiliated with Lahasky, to pay not only rent, but also management fees and other service fees to related entities. Following private equity buyouts, nursing homes’ management fees and lease payments tended to increase sharply, according to a 2021 study by researchers at the University of Pennsylvania, New York University, and the University of Chicago, while cash on hand decreased. Going to a private equity owned nursing home raised the short-term risk of dying by 10% for Medicare patients, the study found, while raising taxpayer spending by 11%, compared with facilities not owned by private equity.
Lahasky says that when his facilities pay management fees to related parties, those services are typically provided at cost, although rent that his facilities pay to related parties is “a profit center, absolutely.” He likes to have stakes in both the operations and the property company, he says, and “it’s in my best interest that the facility perform well on both sides.”
As Waterbury Gardens headed into receivership, Lahasky had his eye on Diversicare, the Brentwood, Tenn., based chain of 61 nursing homes. Through his company MED Healthcare Partners, Lahasky initially approached Diversicare about a deal in spring 2019, according to securities filings. The Diversicare board said it wasn’t interested, according to the filings—but the pandemic would change everything.
Many of the nation’s nursing homes, including some co-owned by Lahasky, struggled to keep their elderly residents safe during the pandemic.
Justin Heiman/Getty Images
The pandemic was swift to strike Lahasky, personally and professionally. In March 2020, when New York hospitals were overrun, he had a severe case of COVID-19 and was nursed by his wife at home, with an IV running from his coat rack, he says.
The scene was far more chaotic in some facilities co-owned by Lahasky. By late May 2020, Brighton Rehabilitation and Wellness Center in Beaver, Penn., had 335 occupied beds, and 76 residents had died of COVID-19, at the time one of the country’s deadliest nursing home outbreaks, according to CMS data. An inspection that month found that facility staff hadn’t been adequately trained in infection control procedures.
Lahasky notes that the facility is one of the state’s largest, and that some other large facilities had even more deaths.
Even while he was sick with COVID, “he was on the phone constantly, yelling at everyone to wear masks and sourcing PPE,” says his assistant, Ann Morhaime.
But the problems in Pennsylvania were just beginning. In August 2020, the state’s attorney general said that Brighton Rehab was a subject of criminal investigations into nursing home neglect during the pandemic. A few weeks later, agents from the FBI and the Pennsylvania attorney general’s office raided Brighton Rehab, as well as Mt Lebanon Rehabilitation and Wellness Center outside of Pittsburgh., another facility co-owned by Lahasky. The former administrator of Mt Lebanon was indicted in Feb. 2021 on charges of defrauding the government in connection with allegedly falsified staffing records at the facility. She pleaded not guilty.
The day after the indictment, the Pittsburgh Post-Gazettepublished an opinion piece by Lahasky that said the federal government was threatening people affiliated with Brighton Rehab with indictments “if they do not offer evidence in support of the federal government’s theory about what happened at Brighton.” Lahasky also set to work investigating the Mt. Lebanon staffing situation himself, he says. While he found one employee who was getting paid for hours he didn’t work, he says, he found no evidence that the former administrator had anything to do with it.
Asked about Brighton Rehab and related investigations, the Pennsylvania attorney general’s office said in mid March that the investigations are ongoing.
As the scrutiny was building in Pennsylvania, Lahasky and his partners were looking to buy a group of Genesis nursing homes in Vermont. In July 2020 emails to Vermont regulators obtained by MarketWatch through an open records request, the attorney who represented the purchasing group, Shireen Hart, initially identified Lahasky, along with Akiva Glatzer and David Gamzeh, co-owners of the Lahasky-affiliated operator Priority Healthcare Group, as the purchasers of the Genesis facilities. But when the purchase of the facilities’ real estate was completed in October 2020, the month after the raids in Pennsylvania, it was Lahasky’s wife Akiko Ike, rather than Lahasky himself, who was listed as co-owner. A local newspaper was first to report Lahasky’s involvement in the Vermont deal. The new ownership group entered agreements to manage the facilities, even as Genesis affiliates retained the licenses to operate them. A few days later, the group filed an application with Vermont regulators to become the licensed operators. The new management changed the facilities’ phone and computer systems and started operating the homes under new names—without having licenses for the facilities, says Alice Harter, a Vermont long-term care ombudsman. “It’s like putting the cart before the horse,” she says.
Regulators had trouble keeping up with who exactly was buying the facilities. In March 2021, an official with the Vermont Agency of Human Services, which oversees nursing home ownership changes in the state, asked Hart, the attorney, to clarify whether the third purchaser, in addition to Gamzeh and Glatzer, was Ike or Lahasky. The official noted that Ike had been identified as the third purchaser, but Lahasky’s name was on the loan documents and other key places in the application. Hart told the official in a July 2021 email that the group was removing Ike from the application, leaving only Gamzeh and Glatzer as the prospective buyers. “We were willing to walk away,” Lahasky says. “We didn’t want to lose the deal for my partners.” Ike did not respond to requests for comment.
“For some reason, the state of Vermont looks at the application and says, ‘Mordy Lahasky’s involved. He’s got all these problems in Pittsburgh,’” Lahasky says. “Aren’t you innocent until proven guilty?” He acknowledges that his name was on the loan documents. “The bank wanted my guarantee. I gave them a guarantee. So what?” he says.
But Lahasky’s problems went far beyond Pittsburgh. In June 2021, he was named as a defendant in a lawsuit filed by the Service Employees Pension Fund of Upstate New York against the Pearl Nursing Center of Rochester, alleging that the nursing home operator and Lahasky had failed to make correct and timely contributions to the pension fund. Pearl and Lahasky replied in court that they’d already made a contribution to cover most of 2020 and had made monthly contributions from January 2021 forward. The case settled late last year after Pearl made additional contributions related to covered employment, interest and attorneys’ fees.
The pension fund “doesn’t set aside resources to litigate month after month with a recalcitrant employer,” says Daniel Kornfeld, an attorney representing the fund. It was “unusual and very discouraging,” he says, that the employer took so long to live up to its obligations.
“I was never technically the operator of the home,” Lahasky says, although he did invest in the real estate. “I was involved,” he adds, “trying to keep them from falling apart.” As for the pension contribution issue, he says, “I believe it’s been fixed.”
The pension fight is part of a broader effort to ensure workers are correctly compensated, according to workers and officials at 1199SEIU United Healthcare Workers East, a union representing staff at Pearl as well as Comprehensive Rehab and Nursing Center at Williamsville, which is co-owned by Lahasky. Eight months pregnant, Tania Green worked over the Christmas and New Year holidays at the Williamsville facility to earn a little extra cash, she says, but she didn’t get all the holiday pay she was owed. “I’ve got kids, and I don’t want to work every holiday,” says Green, 30, a nursing assistant. But “bills have to be paid, and I’d expect them to give me the time and a half.”
“When it comes to holiday pay in our contract, or any type of pay that our members are due, I’m forced to file grievances, go have meetings, and it may take more than one meeting just to get people’s pay right,” says Darlene Gates, an 1199SEIU organizer.
“I’m not familiar with that,” Lahasky says, when asked about the union’s concerns, adding that he’s “not made aware of every grievance.”
By early 2021, Diversicare’s board had reflected on the nurshing home chain’s potential COVID-related liabilities, reimbursement rates and regulatory issues and decided to reexamine a potential deal, according to securities filings. In November, a Lahasky vehicle acquired the company in a $70 million leveraged buyout backed by Canadian bank CIBC. Lahasky says his investor group contributed $40 million in equity to the deal. Although the FBI raids had “freaked out my banks,” Lahasky says, the bankers at CIBC “know me and know this is nonsense.” CIBC declined to comment.
In contrast to the scrutiny in Vermont, nursing-home regulators in the eight states involved with the Diversicare deal generally didn’t give Lahasky a hard time, he says. In Missouri, which is home to three Diversicare facilities, the Department of Health and Senior Services wasn’t aware of the Diversicare acquisition before receiving questions from MarketWatch, says agency spokesperson Lisa Cox. The department was working with Diversicare in January for submission of documents needed to update the licensure records, Cox said. Some states didn’t require advance notice because the licensed entities directly operating the nursing homes didn’t change. Diversicare said in a statement that “notice was provided in advance of the transaction in all states that required notice” and that it continues to communicate with regulators to ensure filings “are completed to the regulators’ full satisfaction.”
In Maryland, Lahasky’s interest in a single facility unrelated to Diversicare triggered more scrutiny from regulators. Late last year, Lahasky, his wife and other investors were involved in the purchase of North Oaks, a continuing care retirement community in Pikesville, Md. In reviewing the transaction, the Maryland Health Care Commission noted the indictment of the former Pennsylvania nursing home administrator and that 10 out-of-state facilities owned in part by Lahasky had been flagged by CMS for having recent incidents of abuse or neglect cited in inspection reports or had a “special focus facility” designation, meaning they have several years’ worth of serious quality issues.
But ultimately, there was little regulators could do, says Ben Steffen, executive director of the Maryland Health Care Commission. Under state law, he says, “our ability to not approve an acquisition based on poor performance is very, very limited.” The Commission has more power, he says, when buyers are looking to open a new nursing home or expand an existing one. In a December letter Steffen wrote to the North Oaks buyers, he said that they “would be likely to fail to meet the Quality Rating standard” required to establish or expand a nursing home in the state. In the case of the Pikesville, Md. facility, Lahasky says, “according to the regulations, there was no reason to deny the application, and they did the right thing and didn’t make anything up.”
‘They don’t have blankets and pillows for people’
A few days before Christmas, a Burlington, Vermont nursing home resident sat in a wheelchair, covered in feces. “I asked over an hour ago for someone to come in and help me,” the resident told a state inspector, according to the inspection report. “This is my life, every day, and they don’t seem to care. I sit like this for hours until someone decides I am deserving of their help.”
When the inspector asked the resident’s assigned nurse to come see the resident, the nurse put out his or her arms and said, “What? Do you want me to go clean [the resident] up now?” according to the report. After the inspector spoke with the director of nursing, staff started cleaning up the resident 90 minutes after the inspector first noticed the resident’s condition, according to the report.
The resident was on a hunger strike, aiming to bring awareness to conditions at the facility, according to the report. “I worry about those that can’t speak for themselves,” the resident told the inspector.
The resident lives in a facility known as Queen City Nursing and Rehabilitation. So far as state and federal regulators are concerned, Queen City doesn’t exist—it’s just a moniker given to the facility by the Lahasky-affiliated group that started managing the nursing home in late 2020 but never had a license to operate it. In December 2021, the group withdrew its application for the licenses for that facility, officially known as Burlington Health and Rehab, and four other facilities officially licensed to Genesis.
Asked about the details in the inspection report, Lahasky said, “that building has been a problem for a long time.” The application had to be withdrawn because if it wasn’t, it would have been denied, he says.
Gamzeh and Glatzer, co-owners of the group that started managing the facility in late 2020, said in a statement provided by Hart, their Vermont attorney, “we are focusing on the future and continuing to work collaboratively with Genesis to resolve the future of the Vermont facilities as expediently as possible.” Genesis spokesperson Lori Mayer said the care and safety of residents at the five facilities “remains our number one priority,” and that the licensed Genesis affiliates “are working to ensure that the centers are in compliance with state and federal regulations.”
On a Sunday in January, when Jodi Gill visited her father at Brighton Rehab in Pennsylvania, conditions there were still unbearable, she says. “They don’t have blankets and pillows for people,” says Gill, who is among a group of residents and family members suing Brighton over its handling of the pandemic. In court filings, Brighton has said it used testing, screening, protective gear and other measures to fight the virus and claimed immunity from the claims in the lawsuit under the federal Public Readiness and Emergency Preparedness Act. “I’m not asking for the world,” says Gill, who moved her father to another facility in February. “I’m asking for basics. I want to know my dad is warm.”
“There’s budgets. Every facility has to control its usage. Otherwise things are through the roof,” Lahasky says. “It’s not like they don’t have blankets in nursing homes.”
“All you hear about is the bad stuff,” he says a moment later. “Nobody hears about the average facility—you go in, and the facility’s clean and the patients look good and they’re getting what they need,” he says. “I don’t know why we get beat up as bad as we do.”