When one of the biggest owners of Pennsylvania nursing homes, Welltower Inc., announced this month that new companies would take over the day-to-day management at 147 nursing homes in 15 states, it was no great surprise.
The nonprofit ProMedica Senior Care, the current operator of the Welltower nursing homes, including 38 in Pennsylvania and seven in New Jersey, has lost massive amounts of money in the last two years, including $316 million in the first nine months of 2022.
What's puzzling to advocates for the elderly and others who closely watch the nursing home industry is that the company Welltower is bringing in to facilitate the shift to new operators is unknown in the world of nursing homes, even to industry veterans.
That could make it harder for nursing home residents and the families to know who is actually in charge of care at the nursing homes, which were long known as ManorCare facilities and cared for nearly 15,000 residents a day in October, according to federal data.
That new company, Integra Health, will lease the facilities from Welltower and then sublet them to regional operators, according to Welltower. Integra's CEO, David Gefner, did not respond to multiple requests for more information on his experience in real estate and health care. Welltower declined to provide details about its dealings with Integra, which is also known as Integra Healthcare Properties.
What's known about Integra
Integra was formed this year, according to Gefner's LinkedIn profile. Public records indicate that Gefner is 29 years old. Attempts to reach Gefner at a residential phone listing in Monsey, N.Y., were unsuccessful. A person who answered the phone twice said Gefner was not there and would not take a message.
Gefner's LinkedIn profile also says he founded Perigrove LLC in 2012. The company is described there as "a real estate investment fund with a vertically integrated development arm, positioning the company to create and capitalize on emerging trends across equity sources like sovereign capital, international financing, next-gen currencies and more."
But Perigrove's website provides no information about the company's real estate investments. Gefner did not respond to two voicemails at his Perigrove numbers. Two e-mails to a general address at Perigrove went unanswered.
Gefner said in Welltower's news release announcing the deal that he aims to bring the nursing homes "back to their previous glory."
Lacking ownership transparency
Welltower's move comes as nursing home regulators are trying to boost transparency in the increasingly complex ownership structures of nursing homes, which often have the real estate split from the operations, and a mix of related companies providing services, such as staffing.
Pennsylvania recently adopted new regulations that require greater scrutiny from state Department of Health officials when nursing homes change ownership, but the most significant of them don't take effect until next summer — meaning that Integra might not undergo greater scrutiny. A bill introduced in May in New Jersey would enhance financial and ownership disclosures for nursing homes.
The regulatory push is designed to make it easier for nursing home residents and their families to know who is ultimately responsible for care in the facilities, all the way up to the landlords who swap operators when they don't get the financial results they want.
It's not clear how long it will take for ProMedica to be replaced in local nursing homes. Because ProMedica is a nonprofit, the transfers in Pennsylvania, at least, will undergo attorney general review, which requires at least 90 days' notice.
Welltower: Time for a change
The facilities in question, including 13 in the Philadelphia area, have had a tumultuous financial history in the hands of a series of investment firms. Welltower bought the former ManorCare nursing homes out of bankruptcy for $2 billion in 2018, with ProMedica as its operating partner.
During Welltower's Nov. 7 earnings conference call, the company's chief executive, Shankh Mitra, stood by the investment, despite the need to switch operators.
"We didn't predict COVID and its impact on the cash flow portfolio and, frankly, were underwhelmed by the execution," Mitra told analysts, referring to ProMedica's management of the nursing homes.
However, in the spring of 2021, Welltower used ProMedica to replace Genesis Healthcare Inc. as operator at nine Genesis PowerBack facilities, which are focused on rehabilitation.
Welltower gave analysts no details about Integra other than that it had experience with Integra at 21 properties. Federal nursing home records show no evidence of the company's or of Gefner's involvement in nursing homes.
"We have worked with Integra and its parent company on many of these transactions before. There's no question that they are significantly better in the skilled nursing business than we ever were and will ever be," Mitra said.
Asked for more details after the call about which Welltower nursing homes Integra had been involved in, a Welltower spokesperson, Tara Gallagher, said in an email: "We have no further comment beyond what has been publicly released and discussed on our earnings call."
More rent dollars to Welltower
One Wall Street analyst found it notable that Welltower expects to receive higher rent — and thus more money toward its bottom line — from Integra, despite ProMedica's losses.
"I've been covering this for 15 years. I don't think I've ever seen a rent restructuring where the rents went up. So that's pretty cool to see," Omotayo Okusanya, a managing director at Credit Suisse, said on the Nov. 7 earnings call.
For such advocates as Toby Edelman, a senior policy attorney at the Center for Medicare Advocacy in Washington, higher rent is alarming.
"If the rent goes up, there's less money for resident care, staff," Edelman said.
