As a refresher, the Marion Co. Health & Hospital Corporation formed a partnership with American Senior Communities to bilk the federal government out of Medicaid dollars. Under the scheme, referred to as upper payment limits, HHC pretends it owns nursing homes that are in fact owned and operated by American Senior Communities. The nursing homes operated under this fictional ownership arrangement receive $71.54 per patient per day from Medicaid more than the federal program pays to other for-profit and non-profit nursing homes because HHC also operates a county hospital in Indianapolis. Despite the fact its state charter limits its operations to Marion County, HHC fictionally owns about 78 nursing homes scattered across the state. From 2003 to 2014, HHC passed on to American Senior Communities $452 million as its 50% share in form of management and rental fees.
With the arrival of the Affordable Care Act and other changes in the health care market, HHC anticipated that the UPL program it has relied upon to build its $750 million Eskenazi Hospital would soon be coming to an end. That spawned the idea of "put options" which would allow American Senior Communities or an alternative party to acquire the fictional interest HHC has in the nursing homes. While HHC is selling its fictional interest, it's actually making a large payment to the holder of the put option who exercises the right to acquire its fictional interest. In this case, the holders of the put options are ASC and Burkhart. ASC holds put options on 13 nursing homes, while Burkhart holds put options on 63 of the nursing homes. Unknown to the public until now, HHC paid Burkhart's Crusader Healthcare Services a $4 million kickback to just to sign put option agreements with HHC covering 63 of its nursing homes. Burkhart will be paid tens of millions more by HHC if the put options are exercised by HHC. One put option agreement alone requires HHC to pay $16.5 million to Burkhart and his business partner in Crusader Healthcare Services, Robert D. New. New is a partner in the put options for 45 nursing homes, while Burkhart alone owns put options for 18 nursing homes.
. . . None of the agreements require Crusader to pay anything to acquire ownership of the facilities. In fact, the contracts promise to give Crusader all accounts receivable as well as title to the nursing homes’ physical assets—but not its real estate.
The terms were made so attractive to Crusader because the most likely scenario under which HHC would transfer ownership would be if the nursing homes became ineligible for extra federal funding that is now enriching the entire nursing home industry in Indiana. Without that extra funding, some homes might close or deteriorate in quality, disrupting care for their elderly residents.
The put option contracts are publicly available because HHC, which also operates Eskenazi Health hospital, is supported by the taxpayers of Marion County.
HHC cannot exercise its nursing home put options until September 2017, at the earliest. And right now, HHC has no plans to do so.
“Under the circumstances as they exist today, the prospect that we would exercise those puts is extremely low,” Gutwein said.
The put options require that American Senior remain manager of the nursing homes at the time ownership transfers from HHC to Crusader. But it appears that Crusader could replace American Senior as manager after that point.
A spokeswoman for American Senior declined to discuss whether the company or its owners worried about being replaced as manager if Burkhart’s Crusader became owner of the nursing homes.
“We believe it is unwise to address speculative questions; subsequently we have no comment,” American Senior spokeswoman Sherri Davies wrote in an email . . .Naturally, the IBJ only spoke to interested persons about these less than arms length transactions designed to defraud taxpayers out of tens of million more in tax dollars. The IBJ's J.K. Wall only spoke to Barnes & Thornburg attorneys. One is Larry Mackey, who is representing Burkhart in the criminal investigation despite the fact that his law firm also supposedly represents the interests of HHC, a fact not mentioned by the IBJ story. “For Jim Burkhart the motivation was genuine,” Mackey wrote in an email. “As an owner of facilities, he could ensure that resident care would not suffer if HHC transitioned out of the business and he would continue his growth in an industry he cares deeply about.” Mackey said the Jackson family, which owns ASC, wanted to get out of the nursing home business and the other parties trusted him. HHC's Matt Gutwein concurred. ASC has already sold its real estate interest in 17 of its nursing homes to Maryland-based Omega for $203 million. Wall turned to Barnes & Thornburg's Mike Grubbs, who helped broker most of the agreements in Indiana between nursing homes and county hospitals, for further help in writing his story. Grubbs tells Wall that the UPL program will come to an end if nursing homes are forced into a managed care arrangement under that will do away with fee-for-service for the care provided to nursing home patients.
Obviously, Barnes & Thornburg is not a disinterested party. How it can simultaneously represent the interests of Burkhart in the federal criminal probe and HHC is anyone's guess. I've also previously pointed out a fact that seems of no interest to our local news media regarding the conflict of one of HHC's board members. American Senior Communities and HHC were both represented by Krieg DeVault until a few years ago. Krieg's managing partner, Deborah Daniels, sister of former Gov. Mitch Daniels, sits on HHC's board. She believes she has no conflict of interest in serving on HHC's board despite the fact that her law firm has performed legal work for ASC for many years. She apparently believes she has no conflict of interest because she has never personally performed any legal work for ASC, although the company has been a major client of the law firm she manages. It's sort of like how Barnes & Thornburg's Bob Grand saw no conflict of interest in him serving as president of the Capital Improvement Board, which negotiated one-sided deals with the Simon-owned Indiana Pacers, while his law firm represented the Simon family interests.
I don't know which is more disturbing: the fact that such corrupt deals and arrangements are permitted to occur; or the fact that our local news media is incapable of reporting on them for the fraud on taxpayers they are. It's just further confirmation of my belief that only people who lie, cheat and steal get ahead in this country. The rest of us just get eaten and spit out for the pleasure of the corrupt elites. Wall's story gives no indication the kickbacks Burkhardt is allegedly under investigation for receiving has anything to do with the sweetheart put options he negotiated with HHC. I can't imagine what he could have been doing that was any more corrupt. If there were any justice in this world, this entire team of fraudsters would be rounded up to spend the rest of their lives in prison, but you know that will never happen.