Back in January, Elizabeth Stout had to find a place for her brother John Krok.

Krok, 62, had been struggling with a brain tumor for nearly two years — since having a seizure at a Jewel supermarket where he worked as a cashier. He had endured countless medical procedures, hospital trips and rehab-center stays.

Krok tried returning home but quickly ended up back in the hospital.

“They needed him out,” Stout said. “I had only a few days to find him a nursing home.”

She printed out federal ratings for nursing homes near her brother’s house on Chicago’s Northwest Side. She spotted two facilities with high marks for having enough staff to care for the residents. Both places were owned by nonprofit organizations. She toured those nursing homes and tried to get Krok in.

But both rejected him. Stout said they made it clear it had to do with Krok’s reliance on Medicaid, the government program that pays for long-term care for poor people.

She looked next at Fairmont Care, a facility with lower staffing ratings. It welcomed Medicaid recipients.

Stout had no way of knowing that Fairmont’s main proprietor would be among the state’s least effective nursing-home owners at protecting people from COVID-19.

Krok was transferred there Jan. 27.

Stout said he ended up with a roommate who had a hacking cough. That man eventually tested positive for the virus.

Soon after that test, Stout said, Krok developed pneumonia in both lungs. Fairmont sent him back to the hospital. He was tested for COVID-19.

The result was positive.

When Krok caught COVID-19, the virus was taking hold in the Chicago area and other parts of Illinois, spreading especially fast in nursing homes. Seven months later, the illness is spreading fast again. Nursing home residents now account for at least 5,782 coronavirus fatalities in Illinois, more than half the state’s total death tally, according to public health data posted Friday.

But a WBEZ analysis of Illinois and federal data has found that the coronavirus’ spread through the industry has not been even. Nursing homes that operate for profit in the state have had more infections and deaths per bed than nonprofit facilities. The difference is most stark in the 20 counties hit hardest by the virus. In those counties, for-profit nursing homes have had nearly double the death rates as nonprofit facilities.

WBEZ also reviewed regulatory filings to the state from dozens of nursing homes. They tend to cast the owners as barely getting by. But the filings typically show big payments to companies in which these same people have interests. The arrangements create myriad ways for the individuals in control to extract their gains outside public view.

“If you have multiple entities and complex ownership structures that are skimming off profits, anything that goes to profit or shareholders or private-equity companies is money that is not being used to combat the virus,” said Tamara Konetzka, a University of Chicago health care economist who studies nursing homes.

While nonprofit nursing homes have put up a stronger fight against COVID-19, their success does not stem solely from reinvesting surplus dollars into caring for residents. The success also owes to rejecting applicants who rely on Medicaid in favor of those who can pay more. The nonprofit facilities then provide more staffing, according to federal data. WBEZ’s analysis found that more staffing correlates with lower COVID-19 infection and death rates.

For years, industry lobbyists have described nursing-home finances as dire. Last year, they convinced Illinois lawmakers to increase Medicaid rates. After the pandemic arrived, nursing homes got another funding infusion from the federal government. Heading into winter, as COVID-19 numbers surge again, nursing-home owners are seeking yet another boost in public support.

“They know that they cannot keep the doors open over time unless we see a turnaround,” said Donna Ginther of the Health Care Council of Illinois, a group that lobbies for the owners. “They want to make sure that the people in their building today are cared for.”

But some advocates for nursing home residents and staff members say the state should focus on holding the owners accountable for packing elderly and frail people into poorly staffed facilities in which contagions spread quickly. Some even say it’s time for a reckoning, an overhaul.

The industry has “had a nice run, but we’re going to need fewer nursing homes, fewer hotels and maybe fewer airline seats,” said Michael Gelder, a university instructor who held top health policy posts under two Illinois governors. “The important thing from a policy standpoint is not to keep putting people in harm’s way.”

Staff overstretched

Fairmont Care, the facility that took in John Krok, has some of the worst COVID-19 numbers among nursing homes in Illinois. In January, it averaged 152 occupied beds. By Nov. 6, state public-health regulators had recorded 155 infections and 32 deaths tied to the facility. Fairmont had more COVID-19 deaths per occupied bed than 95% of the state’s 758 long-term care facilities.

Krok’s care there was not all bad, his sister Elizabeth Stout said, praising a social worker, a physical therapist and a nurse practitioner.

“On John’s birthday, they bent over backwards to facilitate a family Zoom call with him,” she said.

What bothered Stout were the staffing levels for day-to-day care.

“I don’t believe, in his entire stay, he was walked to the bathroom,” she said. “It was either a bedpan or bedside commode. Then the [nursing aides] would come back — whether he was finished or not — and put him back in bed. He’d then have to do his business in a diaper.”

When COVID-19 swept through, many Fairmont staffers got sick. The facility’s management said it directed others to work double shifts and brought in temporary nurses from staffing agencies.

For Krok, according to his sister, those efforts were too little, too late.

“Eventually they quit moving him from bed,” Stout said, “even for meals.”

She said Fairmont had a mechanical lift to get the job done “but never enough staff to use it.”

Stout said she also had a hard time reaching Fairmont managers.

“The director of nursing’s cell phone said ‘messages full,’ ” Stout said. “I’d send emails and it would take days to get a response.”

Konetzka, the health care economist, studied federal data about COVID-19 in nursing homes around the country and found a link to low nurse-to-patient ratios.

“Addressing a COVID crisis takes a lot of staff,” Konetzka said, pointing out tasks including testing and separating COVID-positive staffers and residents from others. “Even if COVID gets into your facility, you’ll have fewer deaths.”

The federal government rated Fairmont’s staffing levels as average or below average compared to nursing homes nationwide during the four quarters just before the pandemic.

Stout said Fairmont staffers admitted they were overstretched, saying they would arrive in Krok’s room to take vitals or put a meal tray down and then have to rush away.

When Fairmont sent Krok back to the hospital with pneumonia, Stout said, he arrived without his medical charts. She found that out when hospital personnel called her to see whether his symptoms were from a stroke. Without those charts from Fairmont, the hospital lacked the most basic information about his condition, including that he had a brain tumor.

In the hospital, Krok begged not to be returned to Fairmont, Stout said.

But eventually he was.

Profits hidden

When Laurence Zung helped start his family’s nursing-home chain — the business that would eventually own Fairmont Care — he did not have much health care experience.

Originally from Shanghai, Zung went to the California Institute of Technology, where he received an engineering science Ph.D. in 1967. He later helped build Universal Furniture, one of the first companies to capitalize on low-cost labor in Asia to manufacture U.S. furniture imports.

At the time, Zung’s sister Cynthia Chow was building a dietary consulting firm that managed food service for hospitals and nursing homes.

Zung left the furniture business and joined Chow and their brother in a venture. In 1987, they bought a nursing home, a northwest suburban place now known as Norridge Gardens.

The siblings kept acquiring nursing homes, including Fairmont Care in 1995, and named the chain the Lancaster Health Group.

After Chow died in 2001, Zung headed the operation for years, his daughter Laura Zung said.

“My father came to visit me in Florida and said, ‘This is a family business, and no one in your generation works in the business, so, I think it should be you.’ ” she recalled. “I said, ‘I don’t think that is a good idea. I don’t know anything about health care.’ ”

Laura Zung’s background was software development.

But her father convinced her she could learn on the job. In 2012, she moved to Illinois. She and her husband bought a $1.9 million home in Winnetka. She became Lancaster’s CEO.

At the time, the Zungs were selling off nursing homes, including Norridge. In 2013, that 292-bed facility fetched a reported $39.5 million, a price per bed that set an Illinois record, according to one trade journal.

Years later, Laurence Zung, 81, still keeps tabs on the business, even during the pandemic. “He knows what’s going on, up to the minute … in every building,” the daughter said.

A WBEZ request to interview him was not granted.

Laura Zung said the mission of the business is not to enrich owners but to provide care to people who need it.

“We don’t make a lot of money,” she said. “Mostly we break even.”

That claim cannot be verified by looking at financial disclosures that Illinois requires for receiving Medicaid payments. The filings for Fairmont Care indicate a net loss in 14 of the last 15 years.

But those same filings show Fairmont making big payments to companies controlled by Laura Zung’s father. Last year, the facility paid more than $1.3 million in “rent” for the building and grounds and $514,000 in “management fees.” Fairmont also paid $348,230 in long-term loan interest to an unnamed “shareholder.”

Asked to identify that person, the family did not.

Zung said running Fairmont through multiple companies — one for the license, another for the property, another for management — helps shield assets from plaintiffs suing about matters including the care the facility provides.

“Every nursing home in Illinois is set up that way,” she said, “because this is one of the most tort-unfriendly states in the nation.”

Illinois also allows the people who control a nursing home to have an interest in companies providing everything from therapy to bookkeeping, from ventilators to medications. Many of the firms are organized as limited liability companies, whose owners are hidden.

“A lot of folks walk into a nursing home, they think that they’re going to be treated by the nursing home and, in reality, they’re going to be treated by a lot of different companies that they usually have no knowledge about,” said Chicago personal injury attorney Benjamin Carter, an expert on nursing-home ownership.

The bottom line may look anemic on regulatory filings but, Carter said, there is simple proof the industry is profitable: “They continue to operate.”

Carter said the profits come at the expense of residents and staff members: “The inherent nature of the ownership of nursing homes contributes to a lack of resources.”

Because the public cannot see how much profit has been extracted over the years, the public cannot see how much money was available to pay for staffing, training, equipment and infection control — things a nursing home needs to protect residents and employees from a powerful contagion.

The public also cannot determine the level of support the industry will need going forward, whether for Medicaid rate hikes or for grants toward COVID-19 testing and protective gear.

Zung said her nursing homes have less income during the pandemic because they have fewer patients: “Our censuses are down more than 30%.”

Expenses, meanwhile, have skyrocketed.

“Our PPE costs are in the hundreds of thousands of dollars,” Zung said. “We paid the most generous hazard pay that I know of in the skilled nursing industry. We paid our staff $10 an hour extra.”

The human costs have also added up. The family’s three long-term care facilities accounted for at least 374 coronavirus infections and 72 deaths, according to state records posted Friday.

“Our entire team, we all have PTSD because of what we’ve gone through,” Zung said, her eyes welling up. “These were not strangers that passed away. We knew them. I knew them. I visited them. I visited all of our buildings.”

“I hurt for every resident that we lost, and I hurt for all their families,” Zung said. “Some of them were the most cheerful, delightful people that I have ever known.”

Elizabeth Stout, the sister of John Krok, said Zung’s sentiments would mean more if Fairmont Care had been more prepared for a pandemic.

“They had years and years and years of stockpiled funds,” she said. “They have an absolute, 100% duty to be protecting those residents.”

“They can’t throw up their arms and say we didn’t know,” Stout said. “It’s unconscionable.”

Emergency unanticipated

Among Illinois nursing-home owners, the Zungs have some of the highest COVID-19 rates in their facilities. But they are small players in an industry that has attracted huge investors.

The WBEZ analysis identified 403 people who own 5% or more of at least one Illinois license for a long-term care facility operating at the start of the pandemic.

Of those, 15 people have shares amounting to at least 500 occupied beds. Their holdings tend to be part of big chains.

Symphony Care Network CEO David Hartman owned portions of Illinois licenses for 19 long-term care facilities in the early days of the pandemic, according to state records. Those portions are mostly 50% shares in Symphony facilities.

Multiplying his ownership percentages to the infections, deaths and occupied beds for each of his facilities, Hartman’s numbers are 61.1 infections and 8.6 deaths per hundred beds. Those are the highest rates among the 15 big owners.

Limiting the comparison to facilities in the 20 counties hit hardest by the virus, Hartman’s COVID-19 rates remain the highest among big owners.

Some of his biggest COVID-19 numbers come from Symphony of South Shore, a four-story nursing home in Chicago that averaged 220 residents in January. By Friday, state regulators knew of 207 infections and 29 deaths linked to the facility.

Symphony’s annual financial statements to Illinois regulators for the South Shore facility claim it operated in the red during each of the last three years. The reported 2019 loss was $150,783.

But the South Shore operation that year generated nearly $1.1 million in “management fees” to a separate Hartman company, Maestro Consulting Services LLC. The statement identifies $566,589 in Maestro costs for South Shore ranging from salaries to equipment rental. But the statement includes no accounting for the remaining $518,612.

The South Shore nursing home in 2019 generated hundreds of thousands of dollars more for other Symphony-related companies, according to a regulatory filing the company submitted this year. They include Maple Leaf Insurance, a firm that shares ownership with the South Shore facility but is based in Grand Cayman, an offshore tax haven. The facility paid $283,079 to Maple Leaf for liability and workers compensation insurance.

As the dollars flowed from South Shore during the year — just before COVID-19’s arrival — Hartman’s company provided the facility’s residents with staffing coverage “below average” and “much below average,” according to federal ratings.

When the virus arrived, some of those staff members fell ill and some who were healthy stayed home to protect their families, according to certified nursing assistant Sharonda Stokes.

“They were just not comfortable coming to work and having to come home to, maybe, elderly parents or children,” said Stokes, who was a union steward in the building. “Short-staffing is something that we always have been doing within nursing homes. But when the pandemic hit, it was to the point we would never imagine.”

Stokes and other nursing aides began working double shifts. It was not unusual, she said, to have one aide for 20 residents.

Staffing problems at many nursing homes during the pandemic have gone beyond their number of employees.

“Poor pay for staff members drives them to take jobs at a second facility, increasing the spread of COVID,” said Shaba Andrich, a vice president of SEIU Healthcare, a union that threatened a strike at dozens of Chicago-area nursing homes as the virus ravaged them last spring.

That threat led to pay hikes, including one that set a $16 hourly minimum for certified nursing assistants starting this coming May.

At Symphony of South Shore, the residents who came down with the illness needed extra care, Stokes said. “We do things like brushing teeth, bathing them, putting all their clothes on, feeding them as well — whatever they cannot do on their own.”

She recalled one of her favorites, a 73-year-old dementia patient with COVID-19: “He wasn’t able to eat or able to drink. The energy that he had in his body was drained, so he wasn’t able to just go ahead to go to the bathroom. He needed help.”

Once, the man had his call light on for help, but Stokes was busy with a resident across the hall.

“By the time I did actually come to service him, it was a little too late,” she said. “He had urinated in his bed. He wasn’t able to get the help he needed. It hurt me. It broke me down. … I could feel his pain and embarrassment.”

Another night, Stokes finished a double shift on the facility’s COVID-19 floor.

“I felt fine, came home, got in the shower and I could not smell my soap,” she said. “By the grace of God, I had no other symptoms.”

Stokes tested positive and had to stay home for 14 days.

She said Hartman’s nursing-home network should have been ready to bring in more aides during the pandemic: “Maybe we wouldn’t have lost as many people as we lost if we had been on top of it before it actually hit.”

Hartman, whose father Bob Hartman built the business, declined to be interviewed. He also did not answer written questions asking how much money he makes from the South Shore facility or how his nursing-home network stays afloat while its filings to state regulators report that most of the facilities operate at a loss, year after year. In 2018, the red ink totaled $28.6 million.

“Our annual losses and the structuring you point out are the unfortunate and necessary outcomes of operating in a litigation-friendly state that incentivizes TV lawyers to sue even in the midst of a pandemic that the federal government was woefully unprepared to combat,” a written response from Hartman’s company said. “Over the last decade, TV lawyers have earned tens of millions of dollars in fees that could have otherwise been dedicated to patient care.”

Hartman’s company also pointed to the difficulty of fighting the virus when it’s prevalent in nearby communities: “No care facility, no matter how excellent, can keep COVID-19 away if it’s widespread in the areas where staff members live and work.”

Last spring, Hartman joined leaders of various Illinois nursing-home chains who defended their performance against the virus in a letter to newspapers.

“Nursing home staff are following extreme infection protocols, washing their hands frequently and wearing appropriate PPE, but the coronavirus is like glitter, spreading to every nook and cranny and popping up in the most unexpected places,” the letter said. “What we needed to keep everyone safe wasn’t entirely clear and it wasn’t readily available.”

Gelder, who now teaches about health policy for Northwestern University and the University of Illinois at Chicago, acknowledged that COVID-19’s sometimes-asymptomatic spread presents challenges but said the nursing-home owners should be held accountable nevertheless.

“You’re supposed to anticipate emergencies,” Gelder said. “You have to have a plan, like a fire drill in a school. You didn’t know when a pandemic would happen, but you knew there would be one. The facility should have an infection control policy, staff training, access to PPE and ways to isolate individuals so you can keep the vast majority of residents safe.”

“We knew germs pass easily,” Gelder said. “There shouldn’t have been large outbreaks at these homes. It’s not always luck. It’s about planning and investment in resources.”

Applicants rejected

When Elizabeth Stout was rushing to find a nursing home for her brother, she first visited Norwood Crossing, a 261-bed nonprofit facility founded in the late 19th century for Norwegian immigrants.

But Stout said a staffer there told her there was no more room for Medicaid recipients: “Norwood never gave me even the slightest hope that he could get in there.”

Next, Stout visited Wesley Place, a nonprofit Methodist facility with 108 licensed beds.

“They flatly told me the day after I toured the place, ‘We do not take Medicaid patients,’ ” Stout said.

Nonprofit nursing homes in Illinois routinely turn away Medicaid recipients in favor of private pay or Medicare, a federal program that covers short stays and provides a relatively lucrative daily rate.

“If you’re on Medicaid, most not-for-profit nursing homes will then say, ‘We don’t want you because it costs us three times as much as Medicaid pays to take care of you, so forget it,’ ” said Wendy Meltzer, head of Illinois Citizens for Better Care, a group that advocates for nursing-home residents.

For applicants who will not initially rely on Medicaid, many nonprofit nursing homes will perform what Meltzer calls a “wallet biopsy” — a review of the person’s savings and assets. The goal is a reliable estimate of how long it would take the person to “spend down” those funds before resorting to Medicaid.

Karen Messer, head of LeadingAge Illinois, a group that lobbies for nonprofit nursing homes, said those steps are necessary because those facilities “are unwilling to compromise on the standards of care.”

“They’re unwilling to buy a lesser quality of food for everyone or to drop down their staffing ratios,” Messer said. “They want to stay in business. They have to be financial stewards of their other residents.”

“When you have a gap in what you’re getting from the state and what your actual cost in care is, that has to come from somewhere,” Messer said.

Meltzer, the resident advocate, said nonprofit nursing homes dedicated to taking poor people “mostly don’t exist anymore.”

“They have become wealthier and whiter over the years,” Meltzer said.

That leaves people with less means in the care of for-profit homes.

Ginther, the lobbyist for for-profit facilities, said they have more residents who have exhausted their resources for long-term-care or never had any to begin with. She said they tend to be poorer, older and frailer and to have more medical needs — “all kinds of problems that contribute to the comorbidities that make them more susceptible to COVID.”

Ginther said for-profit facilities are also more likely to be located in communities of color and low-income areas: “So if we’re pulling our workers from areas where there’s a high concentration of COVID, you’re going to see high concentrations of COVID in those buildings.”

Some nonprofit facilities, moreover, do not have to pay property taxes, and some are backed by endowments.

Compared to Fairmont, both Norwood Crossing and Wesley Place had higher ratings for staffing levels before the pandemic and have had lower COVID-19 rates. As of Friday, the state of Illinois had not recorded a single COVID-19 death tied to Wesley Place.

But both of those nonprofits also have far fewer residents on Medicaid, according to their regulatory filings. In 2019, Medicaid recipients totaled 29% of Norwood Crossing residents. At Wesley Place, they totaled 39%. At Fairmont Care, 74%.

Fairmont Care’s owners were operating for profit and had lower staffing ratings, yes, but they gave Krok a place to stay when others would not.

Defining moment

The nursing-home industry, in its present form, is relatively new. For much of the 20th century, most nursing homes were small operations owned by families or mission-driven charities.

The 1965 law that created Medicaid provided the first large-scale government funding for the facilities. Poor care by some of them led to lawsuits, and new regulations required more staffing. Long-term care facilities also faced increasing competition from assisted-living centers and home-care attendants.

Many nonprofit owners and mom-and-pop operations over the years have closed or sold off facilities to chains run for profit.

As smaller players have exited the industry, bigger ones have entered. They include private equity funds, investment firms and real-estate investment trusts — all expecting steady growth of Medicaid reimbursements as baby boomers age. Last year, a chain of nine Chicago-area facilities was acquired by British-born billionaire Joseph Lewis, who built his fortune trading currency.

The American Health Care Association, which lobbies for nursing homes that run for profit, is pushing the federal government for a second round of COVID-19 “relief funds.” The first round, distributed beginning in April, included $175 billion for hospitals, nursing homes and other health care providers. The trade group that represents for-profit nursing homes in Illinois says it’s planning to push for more publicly funded COVID-19 testing and PPE for the facilities.

But some advocates for nursing-home residents and staffers say the state, before increasing that industry’s funding, should determine how much the owners are netting.

“I wouldn’t think that taxpayers should pay more money until there’s adequate oversight on finances to make sure that those funds are being used in the best way possible to provide care,” Illinois AARP Director Bob Gallo said.

Beyond accountability, the AARP and other advocates say the COVID-19 spread is reason to shift public funds to community-based care. For individuals who don’t need much skilled nursing, they say, it’s cheaper to send professional caregivers to houses and apartments than to put people in long-term care facilities.

Gelder said medically vulnerable people are “easy prey” for an airborne virus “when you put them altogether in a facility — two to a room, and maybe 20 to a dining room, 10 or 15 to an activity room.”

“They could be much better cared for in small groups or individually with families,” Gelder said.

But not everyone can get the care they need at home. And assessing what’s best for families and public finances is not easy.

“If you’re getting care at home, you’re going to be going back and forth to the hospital a lot more,” Konetzka, the health care economist, said. “That’s not only expensive, it’s hard on people who are frail, elderly and have long-term care needs. There’s also a huge cost to family caregivers.”

Meltzer, the nursing-home resident advocate, said the state and federal governments could improve care in the facilities by enforcing existing laws and regulations covering everything from minimum staffing to infection control — and by requiring nonprofit facilities to admit more low-income recipients. 

But that leaves the question: Should the government be paying for anyone to live in a nursing home run for profit in the first place?

Gallo, the AARP leader, said COVID-19 has “ripped the covers off of the industry.”

“To think you should be able to make as much money as possible — by providing a low-quality service to people that can cause them injury or death — needs to be rethought,” Gallo said. “We have to look at other ways to take care of people.”

Elizabeth Stout wondered whether Fairmont Care’s for-profit status was a factor in COVID-19’s spread to her brother John Krok.

“He didn’t have a chance in hell, there,” Stout said.

Krok eventually became defiant and refused to eat, Stout said. Fairmont sent him to the hospital two more times. But the pneumonia worsened. He became more lethargic and confused.

On May 21, as a result of the virus, Krok died.

Chip Mitchell reports out of WBEZ’s West Side studio; follow him at @ChipMitchell1. Kristen Schorsch contributed reporting; follow her at @kschorsch. Katherine Nagasawa and Nick DePrey designed the page and data visualizations; follow them at @kat_nagasawa and @nickdeprey. Robert Wildeboer was the lead editor; follow him at @robertwildeboer.

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Infection And Death Rates Of Nursing Home Owners In Illinois

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