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Genesis HealthCare’s CEO Bonus Vindicates Watchdog Concerns

“No Strings Attached” Aid Money Could Be Going to Execs, Not Patients

In October of 2020, half a year into pandemic shutdowns and restrictions, nursing home chain Genesis HealthCare paid its CEO a $5.4 million bonus. The money was certainly not a reward for a job well done: At the time, nurses were reporting PPE shortages and Genesis homes had a higher COVID-19 death rate than many competitors. Regardless, the company’s board approved the seven-figure “retention payment” and at the same time set aside $2.1 million for officer bonuses.

It turns out the payment wasn’t even effective: Genesis HealthCare CEO George Hager Jr. retired in January of 2021. He was sent off with a $650,000 bonus and a consulting contract with the company worth $300,000. Though Mr. Hager will be “repaying” some of the $5.4 million for tax reasons, the company plans to reimburse him over the next few years for all the money he returns.

When asked to explain the reasoning behind this bonus, the company pointed out Mr. Hager’s base salary had stayed fixed since 2017. However, on top of the $900,000 he earns yearly, Mr. Hager collected a bonus of $935,000 in 2020, presumably a pattern matched by past years.

How Much Assistance Do Nursing Homes Need?

While the pandemic has cut into nursing homes’ profit margins in observable ways, it’s hard to say how much help the industry needs at the time. Losses brought on by an increase in staffing and overtime pay and a decrease in patients have been countered by aid including federal and state handouts, deferred taxes, and even advance payments from Medicare. With the complex business relationships that often involve payments to other related companies (owned by the same investors) for “services,” tracing nursing home finances is nearly impossible.

During the pandemic, the Centers for Medicaid and Medicare Services (CMS) changed its rules, allowing nursing homes to re-classify patients whose bills were paid by Medicaid. If the homes could show these patients needed “skilled care,” they could switch the patients to higher-paying Medicare services, and keep them there for twice as long—200 days versus the typical 100. According to Dave Grabowski, who teaches healthcare policy at Harvard, this rule change would allow facilities to “quadruple [their] revenue overnight for those residents.”

A Financial Free-for-All

Despite objections raised by watchdog groups and patient advocates, CMS did not evaluate nursing home finances or attach any restrictions to the bail-out funds before sending them out. Pandemic aid could be spent at a company’s discretion—practically an invitation to for-profit operators to pocket large sums of the money themselves.

Aside from the millions Genesis HealthCare spent on its executives, publicly traded companies have been found continuing to pay shareholder dividends. Also among the recipients of federal aid: Nursing homes that have paid seven-figure settlements to the government after allegations of Medicare fraud.

Advocates agree the funding should be spent on increasing the numbers of staff and registered nurses at nursing homes—the factor that has been proven most effective in preventing COVID-19 outbreaks and other acts of patient neglect or abuse. Nursing assistants are famously underpaid; their median salary in 2019 was $13.38 per hour. Even registered nurses, who can make around $70,000 annually, have much better earning prospects elsewhere. Increasing wages would help these facilities attract and retain much-needed caregivers. Instead, many nursing homes that received federal funding have refused to pay employees’ sick leave—even when they’re quarantining after being exposed to COVID-19 at work.

Keeping the Pressure on For-Profit Nursing Homes

Senator Warren’s letter to Genesis HealthCare, which included a line saying its leadership “should not be seeking additional public funds while giving departing executives multimillion-dollar bonuses,” has hopefully put the company—and all for-profit nursing homes that failed to put CARES act payments toward patient care—on notice. The government has the authority to investigate companies that received taxpayer money, but given the lack of restrictions in the CARES act, it may be hard to hold nursing homes accountable for shuffling money through their systems to shareholders or executives.

On our part, we continue to hold nursing homes accountable when their profit-chasing leads to patient harm. The for-profit nursing homes that pay executives exorbitant amounts are often the facilities that are understaffed and not run to state or federal standards.

While our firm does not have standing to challenge Genesis HealthCare for its choice to award its CEO over $5 million during a deadly pandemic, we want nursing homes to know we are watching. We will not let their misconduct be swept under the rug.

Contact Brown & Barron, LLC at (410) 698-1717 if you have a nursing home abuse or neglect case. We provide free and confidential consultations.

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