Cutting the Gordian Knot

by James C. Sherlock

An overarching fact often overlooked is that the for-profit nursing home industry is the creation of Medicare and Medicaid. Few for-profit facilities and chains existed before the passage of those programs in 1965. Yet it is for-profit systems that overwhelmingly commit abuses.  

Government oversight has proven an abject failure across much of the country and certainly here.

In Virginia, in what started in October of 2024 as a police investigation of reported elder abuse, the Administrator and the Director of Nursing at Colonial Heights Rehabilitation and Nursing Center (Colonial Heights) were arrested in December of 2024 along with 16 other employees. They were joined on the docket in January of 2025 with the arrest of the facility Medical Director.  

Police allege that a 74-year-old patient with cerebral palsy and diabetes was maltreated at the facility that resulted in her death. Among the charges are felony neglect and abuse, falsification of records and obstruction of justice.  

The government alleges a sequence of events truncated below:

• she was admitted to Colonial Heights;
• she suffered a pressure ulcer caused by not being repositioned in her bed by nurse assistants; 
• the ulcer was not properly treated;
• she was readmitted to a hospital;
• she was diagnosed there with sepsis acquired at Colonial Heights; and
• died as a consequence.

That exact sequence, assuming it happened that way, was predictable from government records.  

Colonial Heights’ score on quality measure  S_039_01: Percentage of infections patients got during their SNF stay that resulted in hospitalization during the period Oct. 1, 2022 to Sept. 30, 2023  was 15.38%. Nearly one in every six Medicare patients was re-hospitalized for infections acquired at Colonial Heights. Innovative Healthcare Management (now Lifeworks Rehab) was in charge during the entire grading period. That performance is noted in the record as  “worse than the National Rate.” In government-speak, that means bottom 10% nationally. 

That is hardly the only notice of danger the government had. They knew the facility remained grossly understaffed and very crowded.  

VDH’s inspectors – nurses and other professionals:

• report regularly and cite in detail abuses of helpless people. Their observations are called citations for a reason. The facilities are cited for violations of specific federal laws and regulations.
• The facilities then promise never to do it again. Case closed.  
• Until the next serious patient complaint or routine inspection.  
• When the facility is cited again and again promises to reform. The state accepts those assurances without even a revisit to check.

That passes for oversight here.

Those inspectors conducted a complaint inspection of Colonial Heights that was in progress on the day of the police raid. The resulting report of deficiencies is 341 pages long. Every word of it details federal law and regulation violations.

Colonial Heights isn’t even the chain’s worst facility in Virginia. That honor goes to Special Focus Facility Henrico Health & Rehabilitation Center, the worst nursing home in the state. 

Nothing effective was done by the owners of Colonial Heights to fix the well-documented problems before that woman’s death. The government proved helpless to stop it. It remains so. 

I think I may have landed upon a solution that will work.

First let’s look at Colonial Heights’ ownership to see what that tells us.  

The Code of Federal Regulations contains Program Integrity sections governing both Medicare and Medicaid. Each has provisions for Disclosure of Ownership and Control Information. For those disclosures, owners of the worst nursing homes make the whole thing as complicated as they can. Many of the records are embarrassing, purposeful quagmires.  

The Colonial Heights example:

1.  Each of the seven or more LLCs discussed here could be controlled by the same individuals. I found one guy in the business not mentioned here to be a principal in over 200 LLCs.

2. Colonial Heights’ legal business name Colonial Heights Operator LLC is the NPI-registered Medicare Provider. Mr. Elazar Fisher registered it. He was at that time director of operations for Innovative Healthcare Management. That makes the chain, which is on its third name this calendar year, the fiscal agent and the disclosing entity.  

3. From CMS Ownership data, the direct owner is Virginia Care Holdco LLC (Holdco) of Richmond.

4. There are six indirect owners, defined as an ownership interest in an entity that has an ownership interest in the disclosing entity. So the indirect owners own Holdco, which in turn owns the operating company Colonial Heights Operator LLC . Those indirect owners are:

• • Charles 1994 Family Grantor Trust – Lakewood – 25%
  • Edward 1998 Family Grantor Trust – Lakewood – 25%
  • ISVA Holdings LLC – Lakewood – 30%
  • JKVA Holdings LLC – Lakewood – 30%
  • MLVA Holdings LLC – 30%, and
  • Saul 2012 Family Grantor Trust – Lakewood – 25%.

Yes, that does total 165%. Owners report that one Virginia Lifeworks Rehab facility, Chesapeake Holdings I LLC dba Chesapeake Health & Rehabilitation Center, has indirect ownership totaling 453%.

3. Charles 1994 Family Grantor Trust

• • No ownership percentages are offered in Ownership but Charles 1994 Family Grantor Trust (Charles) is listed in Skilled Nursing Facility All Owners, as are the rest of those investors, where the percentages are found. (No, I cannot explain that divergence.) That trust invested in nearly all of the Innovative Healthcare Management (now Lifeworks Rehab) facilities in Virginia and North Carolina. Here is a composite view. You can see there that Charles is not passionate about adequate staffing. 
  • Charles has been reported to be located in Las Vegas, Cleveland and at 400 Boulevard of the Americas, Suite 401, Lakewood NJ.  Its location on May 28, 2021 was reported to be in both Cleveland and Lakewood.  
  • That same report shows Charles with an average 22% equity stake in 45 Lifeworks facilities. One of those, Colonial Heights, has reported to Virginia that its 2023 profit was in excess of $3 million.  
  • Based on those numbers, Charles’ owner’s draw for its share of 45 facilities could have been as much as $30 million in 2023.
  • We are not picking on Charles. The rest have similar profiles with different mixes of Lifeworks Rehab facilities in their portfolios. The business and personal tax returns of the multiple owners of the LLCs and the trustees presumably run to thousands of pages.  

4. Operational/Managerial Control is reported to belong to Innovative Healthcare Management LLC which, inconveniently, is listed by the Virginia State Corporation Commission as inactive.

5. The Managing Employee is listed as Moshe Rajchenbach, now of Illinois. He also holds a mortgage. 

6. The owner of the Colonial Heights facility and land in city property records is 831 E Ellerslie Ave LLC (Ellerslie). It is  also located at 400 Boulevard of Americas Unit 401 Lakewood, NJ. Ellerslie paid $12,600,000 for the Colonial Heights property on January 13, 2020.

7. Colonial Heights annual expenses would seem to include the paying of rent to Ellerslie, fees to Colonial Heights Operator LLC and Innovative Healthcare Management LLC and a salary to Mr. Rajchenbach.  

Clearly we, our governments and our attorneys are supposed to be confused. That seems to be the point. Yet CMS faithfully reports this nonsense unchallenged and parrots it in Medicare Compare. The folks at CMS tell me that QA of the data is each state’s job. I don’t know if the states agree. But nobody fixes it.

Most disturbingly, the characteristics of the full Lifeworks portfolio show clearly how the managers and owners of those facilities value the money compared to the safety and well being of the human beings in their care.

A solution. I offer a way to address the problem at its source.  

• It represents a major change, but not so radical as the problems of neglect, abuse, wrongful deaths and fraud.
• It offers to be cost-neutral for the government and the owners.
• All of those owners and chains and their contracts can remain in place. There will be no “takings”.
• Government will have direct daily oversight at each facility.
• Honest owners won’t miss a beat.

The proposal:

1. Make nursing facility Director of Nursing and Administrator government positions as a condition for enrollment in Medicare and Medicaid.
2. Make them state employees, reporting to the state departments of health. Pay for them with a combination of Medicare and Medicaid funds. Those programs are the sources of their salaries anyway. Formalize it.
3. Lower Medicare and Medicaid per diems annually to each facility to offset the direct costs of the new government employees. Nursing home owners will no longer have to recruit them. They will no longer pay those two employees and their associated benefits and payroll taxes.  

Advantages.

1. Patients would be protected daily and directly.  
2. The Director of Nursing and the Administrator would not accept more patients than could be properly cared for by existing staff.
3. The government will know what is going on and can intervene if necessary in a timely manner.  
4. Medicare Advantage care managers and Virginia Medicaid’s Cardinal Care contractors have failed to protect nursing home clients. They would no longer need to be paid to do so.
5. Under honest, competent leadership, nurses would actually want to work there again. They could honor their oaths at work and would not be asked to do the wrong things.  
6. Owners could still make profits, but not likely the 20% operating margins gained by some through the breaking of federal laws and regulations for which they are regularly cited.   
7. No more shadows will fall on the decent owners from the ones that don’t do the right things.
8. States already employ a lot of nurses who work in state agencies, in state nursing homes and serve as inspectors.

Bottom Line. Virginia has about a hundred nursing homes out of 290 that display a business model that features long-term understaffing, near maximum occupancy, extraordinarily high patient needs assessments and various other measures to maximize profitability. The rest do not operate that way.

Observations:

• That business model makes understaffing a self-fulfilling prophecy. A lot of administrators and nurses won’t consider working there. (Neither would you or I.)  Most of the ones who do sign up leave quickly. Nurse turnover rates approach 100% annually in some of the worst facilities.
• Profits indeed follow, but so do patient humiliation, neglect, abuse, injuries, infections, re-hospitalizations and wrongful deaths. Patient rights violations, unsanitary conditions and unhealthy and spoiled food are commonly noted in inspections.     
• Those are nationwide phenomena, but generally worse here.   

A federal judge with a civil or criminal case in front of her could order the federal and state government and owners to execute this solution as part of a court-approved settlement.  

Better, Congress could legislate it nationwide. But a precedent, possibly overseen by a judge, that is supported by a state and seen to work well would make such legislation more likely to become law.