By Max Blau, Georgia Health News (CNT) City News And Talk #atlanta-ga
Ronnie Rollins used a controversial loophole to secure $300 million in bonus payments for his nonprofit nursing home chain. A federal investigation called the payments ‘inappropriate,’ and Georgia is caught in a multimillion-dollar dispute.
Nearly 20 years ago, Ronnie Rollins walked out of a hotel in Macon, Georgia, with an idea that he believed might lead the state’s struggling rural nursing homes to financial salvation.
State health officials had just told a conference of industry players about a federal program that would dramatically increase payments for care provided to nursing home residents. But there was a catch: To obtain the bonus money, the nursing home had to be owned by a public agency affiliated with a hospital.
Rollins owned a chain of nursing homes and didn’t seem to qualify for the program. But he dreamed up a workaround. His company had partnered with development authorities, which are designed to attract new businesses and jobs to counties, to secure tax-exempt bonds for its nursing homes. Rollins believed he could convince development authority officials to use their agencies to apply for those bonus payments from Medicaid. The idea hinged on convincing the federal government that the owners of the nursing homes were those agencies. Not his chain.
It was an unorthodox idea, he knew, one that pushed the limits of the law, and so Rollins asked Georgia’s Department of Community Health for an opinion. After a “healthy debate,” according to one former top official, DCH approved Rollins’ plan — so long as a cut of the bonus payments went back to the department so it could help stabilize Medicaid reimbursement rates for providers statewide.
With the help of approximately $300 million in bonus payments, Rollins quietly built one of Georgia’s largest health care empires, which over a decade and a half grew up from making $20 million in total revenues to over $650 million in total revenue. Rollins’ nonprofit network, today called Community Health Services of Georgia, or CHSGa, includes a company called Ethica, which includes 55 nursing homes, and related firms that supply the facilities with prescription drugs, health care supplies and medical transportation.
Rollins today is many things to many people. A hardworking businessman determined to improve nursing home care. A pickup-driving deacon in his hometown. A well-connected political donor whose investment company and corporate executives over the past decade donated more than $1 million to Georgia’s top Republican officials. One of the smartest men in the state when it came to taking advantage of the arcane policies of Medicaid and Medicare.
But, to the federal government, Rollins is the architect of a scheme that threatens Georgia’s ability to collect Medicaid funds.
“If you’re going to change things,” Rollins explained, “someone has to push the boundaries.”
Georgians may pay the price for his success, according to an investigation by Georgia Health News and ProPublica. The investigation is based on an analysis of state and federal health data, interviews with nearly two dozen people, government records, court filings and state agency emails obtained under Georgia’s open records act.
The Centers for Medicare and Medicaid Services, the federal agency responsible for America’s major public health care programs, ruled in 2014 that a portion of the bonus payments that flowed to Rollins’ chain were “inappropriate.” Payments under the program have halted, and CMS is now seeking $76 million in repayment from the state for the allegedly improper reimbursements.
Georgia’s Medicaid agency has appealed the decision, locking the state in an ongoing battle against the federal agency. If the appeal fails, taxpayers will be responsible for paying back the money, not Rollins.
The dispute has also reverberated beyond Rollins’ case to impact Georgians. Three top health care insiders contacted by GHN and ProPublica said the conflict has hampered the pursuit of innovative new proposals and delayed a Georgia-style Medicaid waiver, all of which could have secured millions of dollars for patient care services.
DCH officials declined requests for interviews, citing the ongoing dispute. In a letter from 2015, one top DCH official called the CMS findings “factually and legally incorrect.” A U.S. Department of Health and Human Services appeals board has not made a final decision.
Since CMS closed the loophole six years ago, Rollins’ Ethica nursing home network has been slapped with more than $1.2 million in fines for violating standards designed to keep patients safe. Some facilities have reported below-average staffing levels. From 2013 to 2018, the network recorded more than twice the number of deficiencies per nursing home than the average facility in Georgia.
The problems have continued during the pandemic: The COVID-19 death rate for the company’s 55 homes is 6.1%, compared with the statewide nursing home death rate of 3.6%, according to a data analysis of COVID-19 deaths and bed capacity. Over half of Rollins’ 55 nursing homes have experienced coronavirus outbreaks, each of them with more than 30 residents testing positive.
In a series of interviews, Rollins said his nursing homes provided high-quality care. He pointed to awards given by industry associations, as well as internal data showing Ethica had fewer deficiencies per survey than the national average since 2018. Ethica’s staff remains devoted to the fight against COVID-19 to keep patients safe during an unprecedented pandemic, he said. He declined to specifically address questions about the death rate in his homes.
Rollins said his use of the CMS loophole was legal and approved of by federal officials, who had previously audited the program. While older nursing homes have at times lagged in patient outcomes, Rollins said his new and remodeled facilities have excelled. The loss of bonus payments, as he sees it, prevented Ethica from completing a systemwide overhaul that would have finally given rural Georgia’s seniors the nursing homes they deserved.
But the federal government, he said, stood in the way of those plans.
“We could’ve transformed long-term care,” Rollins said. “But we lost the ability to fulfill our mission.”
A search for money
In the mid-1990s, Rollins realized his for-profit nursing home chain, Care More, was headed toward financial doom. He had spent over a decade studying the ins and outs of Medicare. Rollins’ nursing homes, however, served rural Southerners who often qualified only for Medicaid, which had lower reimbursements than Medicare. After recession and war strained America’s economy in the ’90s, states froze their Medicaid reimbursement rates. His bank cut off Care More’s line of credit. “I couldn’t make the numbers work,” he said.
For most of the country’s history, there was no health care system for elderly people facing chronic medical conditions. When Congress created Medicaid in 1965, lawmakers intended for Medicaid’s costs to be split between federal and state governments.
But the Reagan administration slashed Medicaid. Stripped of some federal money, cash-strapped states experimented with unconventional ways to obtain more money. That often involved looking for legal loopholes. Daniel Hatcher, author of “The Poverty Industry: The Exploitation of America’s Most Vulnerable Citizens,” said states’ attempts to exploit such loopholes can undermine the broader intent of the nation’s massive public health insurance program.
It’s “a fundamental flaw of Medicaid,” Hatcher said.
At the hotel conference in Macon in 2001, Rollins received a packet of information explaining that state officials planned to raise the necessary funds through a “revenue maximization” campaign that would ensure “all federal reimbursement programs … are utilized to the fullest extent possible.” One strategy that intrigued Rollins was known as the “Upper Payment Limit” program, which effectively allowed government-owned nursing homes to receive matching federal bonus payments that closed the gap between Medicaid and Medicare reimbursement rates.
The UPL process is complex: A nursing home owned by a government agency wires funds to Georgia’s Medicaid agency; Georgia sends money to CMS; CMS returns the payment, along with a bonus amount, to Georgia; Georgia takes a cut of the bonus dollars and wires the rest back to the local agency’s nursing home.
The potential benefits to the state were clear: More than $80 million in federal dollars could flow to Georgia annually, allowing the state’s Medicaid agency to reinvest some of its money into health care reforms touted by then-Gov. Roy Barnes.
State officials dangled the opportunity before providers, explaining that reimbursement rates could increase anywhere from 6% to 180%. At one nursing home in south Georgia, the state projected that bonus payments would boost a $76 Medicaid reimbursement for a day’s worth of nursing home care into a $175 Medicare reimbursement — a 127% increase that translated into millions of dollars in extra revenue when spread across hundreds of patients.
If Rollins could convince the state to allow nursing homes owned by a development authority to secure bonus payments, the opportunity would be too good to pass up.
The first time Rollins visited his grandmother in a nursing home, his heart sank. The scents of urine, feces and bleach wafted through the halls past communal, cramped quarters. His grandmother was in a wheelchair as a result of breaking her knee in a fall. Rollins, the son of a south Georgia tobacco sharecropper, was in college. His family could not afford to send his grandmother to a nursing home with services like physical therapy. She would never walk again.
“I despised that nursing home,” Rollins said.
But the man who despised nursing homes eventually became an accountant for them, using his skills to understand the institutional forces that led to his grandmother not getting care. In the late 1980s, he became a part-owner of Care More’s nursing homes, and pursued reforms both conventional and unorthodox. Whenever Rollins stepped inside a dilapidated, decades-old nursing home, he saw an opportunity to reinvent rural health care. He believed newer nursing homes were the key to attracting qualified health care workers, offering more private bedrooms, and improving patient care outcomes.
“If I was going to try to solve a problem in my life, this was the land of greatest opportunity,” said Rollins, now in his early 60s. “Did it pose some large obstacles? Yes.”
After state officials approved his development authority idea, Rollins persuaded local officials to support his cause. During a meeting with Pulaski’s development authority around 2003, Rollins agreed to keep nearly 300 jobs there in exchange for nearly $20 million in tax-exempt revenue bonds, issued by the authority and repaid with nursing home revenues. The deal was good for both sides. It provided better rates than a commercial loan, Rollins said. He would then offer the development authority the chance to get a cut of the proceeds from the bonus payments.
Rollins hoped the bonus payments, along with tax-exempt bonds, would boost the fortunes of his nursing homes, which had a high number of Medicaid patients. Such nursing homes are more likely to have profit margins of less than 2%, according to the state’s leading nursing home association.
“In Atlanta, there’s a lot of payer sources, but if you’re rural Georgia, you have Medicaid,” Rollins explained. “We’re at their mercy.”
At first, Rollins said the Ethica network received minimal benefit because Georgia’s Medicaid agency kept most of the bonus payments. But after CMS proposed a rule that required providers to receive the full amount of the bonus payments, Georgia officials revised its Medicaid plan so that full payments went to providers.
The decision benefitted Rollins enormously. But some of his biggest competitors decided that going after the bonus payments was too risky a strategy.
“We determined that we couldn’t do it,” said Neil Pruitt Jr., current chairman and CEO of PruittHealth, one of the South’s largest nursing home chains. “It was a liability.”
Unfazed by the risk, Rollins overhauled his facilities thanks to the bonus payments.
Instead of taking out commercial loans, his companies paid millions of dollars in cash for additions to nursing homes. By the early 2010s, Rollins’ network had $47 million in construction projects happening simultaneously.
Putting the money toward buildings was perfectly legal. MACPAC, a nonpartisan legislative branch agency that analyzes Medicaid policy, has opined that bonus UPL payments do not have to be “directly related to specific Medicaid services or patients.”
The money from the bonus payments allowed Rollins’ companies to pour additional money into his health care system. He launched companies that supplied his nursing homes with prescription drugs, medical transportation and health care supplies. It also freed up enough cash to help the network purchase businesses that owned hospices, home health services, ambulances and a 90-bed rural hospital.
From 2002 to 2013, Ethica-affiliated companies grew their net assets from $17 million to $297 million. That final year culminated with total revenues of approximately $500 million, which, after expenses, resulted in a 7% profit margin.
That success didn’t benefit development authorities as much, who generally received less than 1% of the funds that moved through the agencies’ accounts.
At least nine public agencies — mostly development authorities — moved funds for Rollins’ network to obtain bonus Medicaid payments for Ethica nursing homes. They did little else, even though, on paper, they were the owners of the nursing homes. For instance, most of the authorities did not require Rollins’ companies to meet specific health care benchmarks.
Rollins said the payments were justified because of the jobs created or preserved. But Gerald Beckum, the head of the development authority in Macon County, said such authorities rarely hire lawyers specializing in bond financing because of their limited resources. Limited oversight follows, he said. Beckum, who took over the authority in 2015, never dealt directly with Rollins. But the arrangement struck him as strangely complex.
“Not everyone understands this system,” Beckum said. “Some people understand the system too well — and figured out how to take advantage of it.”
Rollins’ loophole caught the eye of federal health officials, who sometime around 2013 discovered millions of Medicaid dollars had passed through a tiny agency that claimed to own nearly as many nursing homes as there are in the entire state of Alaska.
When a CMS investigator asked Pulaski County officials about the 14 nursing homes they claimed to own, they replied that the development authority “does not own any nursing facilities.” Yet the authority was sending money to Georgia’s Medicaid agency that made it appear, for purposes of the bonus payments, as though it were an owner of the nursing homes. Even more baffling was that none of the nursing homes was actually in Pulaski County.
Then there was the money flow. Multiple development authorities received payments that traced back to a Rollins nonprofit called Health Scholarships. Bank records showed Pulaski County had received $35,000 for wiring nearly $14 million over a two-year period. Adding it all up, the CMS investigators determined that Rollins had convinced development authorities to help collectively obtain tens of millions of dollars in bonus payments since the state approved the loophole.
In December 2014, federal officials ordered DCH to “immediately cease and desist” the use of development authorities to obtain bonus payments. Federal officials did not believe the authorities were the true owners of the nursing homes under investigation.
The state faced a $76 million clawback, a requirement to return money to the federal government, for extra payments obtained through “inappropriate sources,” the report said.
Rollins used his influence to fight back. A political donor who, along with corporate executives, gave $200,000 to state GOP races from 2010 to 2014, Rollins secured a seat on then-Gov. Nathan Deal’s rural hospital stabilization committee, and had established a direct line of communication to the governor’s top health officials.
Rollins sent a memo to Clyde Reese, commissioner of DCH, and Deal’s chief of staff. Rollins described the findings as “deeply flawed.” He wrote that CMS had previously approved the state’s UPL payment plans, and he claimed the federal agency had erred in its interpretation of Georgia laws.
“This is the greatest issue to ever face our organization,” wrote Rollins, who pleaded with Reese to challenge the ruling.
Reese ordered his staff to craft a “very aggressive” response to CMS, hoping to convince the agency to reconsider the clawback. In February 2015, DCH sent CMS a strongly worded letter that included several points raised by Rollins in his memo, noting that the loophole had been cleared through previous federal audits. “CMS’ ruling is factually and legally incorrect,” wrote Reese, who declined to comment for this story.
Despite Reese’s defense, the clawback nevertheless weighed on the mind of his boss.
“Any time you’re talking about those kinds of dollars,” Deal told reporters in April 2015, “there has to be concern.”
Taxpayers on the hook
In November 2018, CMS denied Georgia’s appeal. The state appealed the decision and the case now lies with the U.S. Department of Health and Human Services Departmental Appeals Board. A CMS spokesman declined to comment since the case is still pending.
States including Alabama and Texas have paid back tens of millions of dollars after losing appeals before the same board.
Rollins said state officials have never asked him to pay back the $76 million. Nor does he expect them to. The dispute occurred between the two government agencies, he said.
Rollins noted that $76 million was a relatively small figure for two multibillion-dollar agencies. DCH declined to comment on the matter, citing the pending litigation.
But several lawmakers, lobbyists and policy experts expressed concerns about Georgia’s ability to absorb the potential hit with COVID-19 forcing budget cuts to state agencies.
“This couldn’t come at a worse time for the state’s fiscal situation,” said Erin Fuse Brown, a law professor at Georgia State University.
‘The right thing to do’
Today, Rollins has largely abandoned his pursuit of the bonus payments from Medicaid. Backhoes stopped moving dirt as much. Rollins asked his board to cut his $1.3 million salary.
“I felt like I had failed,” he said. “I felt personally responsible” — and, with development halting — “I felt it was the right thing to do.”
He takes an obvious pride in what Ethica has been able to accomplish. During a tour with GHN and ProPublica, Rollins unlocked the doors of a low-slung beige building a short drive north of Macon. The 58-bed Gray Health and Rehabilitation nursing home, which received bonus payments, had sat empty for months. Rollins noted the flaws of the shuttered nursing home, from shared rooms split by curtains, to window air conditioner units that offered poor ventilation.
Afterward, he showed off a new $12.4 million, 85-bed nursing home that replaced Gray Health and Rehabilitation. Rollins walked the perimeter because anyone who wasn’t essential staff — himself included — was prohibited from going inside. A “virtual tour” on the facility’s website boasted of a “warm and inviting decor,” “home-like settings for therapy sessions” and private bedrooms.
“Our country and state needs significant change in nursing facilities — funding for private rooms, building infrastructure,” Rollins said after the tours. “COVID-19 would be a much lesser issue today if we did what we advocated. We can’t correct the past.”
COVID-19 has sharpened focus on the care provided by Rollins’ nursing homes. During the pandemic, Ethica staffers were forced to make thousands of pieces of protective gear from scratch — including gowns made from plastic sheets. Rollins said Ethica’s nursing homes are following Centers for Disease Control and Prevention guidelines for infection control.
But nearly 18% of the more than 1,700 residents who tested positive at Ethica nursing homes have died, according to an analysis of state records. Fifty-four percent of Ethica’s COVID-19 cases have occurred in 15 nursing homes.
Rollins said the bonus payments ultimately paid to renovate or rebuild about a dozen nursing homes.
“Our new facilities generally have not had issues with COVID-19,” Rollins said. “They have modern air ventilation systems and are designed to facilitate staff segregation in units. So if there’s an outbreak, it’ll be more limited and contained.”
Most Ethica nursing homes with COVID-19 infections have yet to be renovated.
Arthur Daniels, an 86-year-old deacon who liked to sing gospel songs, was living in an outdated nursing home when the pandemic arrived. Last fall, Daniels was admitted to Sparta Health and Rehabilitation, a 81-bed facility in the rural town of Sparta, population 1,400.
The longtime coach of Hancock Central High School’s basketball team, Daniels was best known for once coaching Horace and Harvey Grant, who both went on to play in the National Basketball Association. Now he stayed in an Ethica nursing home that never got renovated, even though it once benefitted from the Medicaid loophole. It now has staffing rates, along with patient care measures such as rates of residents who were hospitalized or injured by falls, that are worse than the national average reported to Medicare.
Daniels visited with his longtime friend, Dianne Huffman, every other day until Georgia officials restricted nursing home guests. This past May, COVID-19 spread through the nursing home. Thirty-three staff members and 59 residents tested positive. Nineteen residents, including Daniels, died from COVID-19.
Shortly after the Ethica nursing home tours, Rollins was asked what he’d tell the families of patients like Daniels. After nearly a minute of silence, he mentioned Oxley Park Health and Rehabilitation, the nursing home where his grandmother once stayed, which he now owned. His brother-in-law currently lived in the same home and had recently tested positive for COVID-19.
Rollins explained: “In rural communities like where I’m from, and where my family is located, it’s been especially difficult. The choice is: Do you stay [at home] in the community, where you know there’s active cases, or do you remain in the nursing facility?”
Rollins’ family ultimately decided it was safest to keep his brother-in-law at Oxley Park. It happened to be one of the facilities Rollins had managed to upgrade before the loophole closed. State records showed over 40 people there had tested positive for COVID-19. Nearly 40 of those people have since recovered. His brother-in-law survived. (Three residents have died.)
Rollins once envisioned similar upgrades in Sparta. But with the loophole closed, his dreams were deferred. He now thought about the families of the deceased and what he might say. Having collected his thoughts, he looked up and offered a brief explanation: “We did the best we can do.”
ProPublica is a nonprofit newsroom that investigates abuses of power. This article was produced in partnership with Georgia Health News, which is a member of the ProPublica Local Reporting Network.
About the data
Georgia Health News and ProPublica collected COVID-19 data compiled by the Georgia Department of Community Health. The department requires long-term care facilities with 25 or more beds to report figures on positive cases among patients and staff members, patient deaths, and resident censuses. To calculate the death rate, we divided the number of deaths by bed capacity, as the state only reports resident census figures for homes that experienced outbreaks.