November 16, 2015
Ms. Tania M. Ibanez
Senior Assistant Attorney General
Attorney General’s Office, California Department of Justice
300 South Spring Street, Suite 1702
Los Angeles, CA 90013
Subject: KEIRO SENIOR HEALTHCARE SERVICES
Dear Ms. Ibanez:
We write this in response to your letter dated November 5, 2015, in which you advised that the AG had approved Keiro’s proposed sale of assets to Pacifica and could not retract its approval. We have very grave concerns: (1) the AG’s approval of Keiro’s sale was without conducting any public meetings at which there could be proper disclosure to the community and important input from the community before any approval is given, and (2) if public meetings were conducted, there could have been an objective review of Keiro’s proposal to ensure fairness to Keiro and adequate protection to the current and future residents of the Keiro facilities.
As to the AG’s decision to waive any public meetings, of course we are aware that the AG has such statutory authority. However, that does not waive the AG’s obligations to protect the interests of the beneficiaries, the community and the public at-large. In fact, it is only the AG that has any standing to protect our interests. It is deeply concerning that a major reason for the AG’s waiver of any public meetings is based on Keiro’s assertion that they had already conducted 60 community meetings. A close look at those meetings reveals that they all pre-date Pacifica’s involvement with Keiro and, in fact, pre-date Keiro’s proposed sale to Ensign – a sale that was rejected and disapproved by the AG. How could any meetings that predate the proposed sale to Ensign be adequate notice to the community of the current proposed sale to Pacifica?
The Ad Hoc Committee’s second concern is that if public meetings were conducted, there could have been a more objective review of Keiro’s proposal. For example, a review of the transaction discloses the outdated appraisal used to justify the fair market price of the facilities. Moreover, the appraisal used predates Keiro’s proposed sale to Ensign! (Here would be good to add a very brief sentence based on findings of the increase of property values since the 2013 appraisal.) Another example is the question of Pacifica’s deficiencies, based on North Carolina Department of Health and Human Services’ investigation into Pacifica’s violations of state statutes and rules regarding Pacifica’s adult care license. The community would like to know whether these issues were explored by the AG. Clearly, if public meetings were held, these issues could have been disclosed and addressed.
The following is a summary of our findings to date:
- We understand that pursuant to Corp. Code § 5914(a), Keiro is required to obtain the consent of the Attorney General’s office before a sale of non-profit corporation assets to a for-profit corporation can occur. We further understand (1) that included within your discretion to consent are factors such as effect on the availability or accessibility of health care services to the affected community and the public interest (Corp. Code §5917), (2) that you are required to conduct one or more public meetings prior to issuing your written decision (Corp. Code §5916), and (3) that pursuant to § 5914(c), you can waive the requirement of §5914(a), which effectively waives the requirement that you conduct one or more public meetings. Your office had issued a waiver to Keiro without conducting a public hearing. Such a waiver, however, does not waive the responsibility to protect the current and future beneficiaries, the community and the public at-large. In fact, you are the only one who has standing to provide such protection.
- Keiro’s facilities are the only ones of their kind that provide bilingual services targeting the needs of Japanese-speaking members of our community. No other institution in the United States has the cultural and language capability to do so. Many Keiro residents sold their primary homes to take up residence at Keiro. The Retirement Home residents faithfully pay out-of-pocket for their stay at the facility. They will face increased rent, which many will not be able to afford. This has created a devastating situation financially and emotionally for the residents since they have no homes to return to. Residents have been quoted as saying, “I wish to die before the 5 years.”
Two-thirds or 66%-70% of current residents at the two Keiro Skilled Nursing Homes and the Intermediate Care Facility have Medicare and Medi-Cal to cover their expenses. The rest are unsubsidized. Other nursing homes have a higher percentage of Medi-Medi-Cal residents and a higher potential for financial failure. With millions of dollars in the endowment and a loyal, generous donor base, Keiro is in a better position to weather through any financial downturns than other nursing homes.
Pacifica is a for-profit real estate development corporation and its core business is not to serve the retirement needs of the Japanese American community but to generate a profit. We must recognize that this is a sale, not just a transition in services. Of course, you may require such service temporarily as a condition of the sale; however, the only purpose for temporary service would be to phase out such service. What will happen after the temporary service is terminated? Abandoning the elderly is an ethical and moral violation and the mental pain, anguish and distress induced by loss of affordable and culturally sensitive institution constitutes a form of institutional elder abuse.
- There is the question of false or misleading solicitations of charitable donations by the Keiro administration. Most donors made their donations for the purpose of maintaining and continuing the retirement home and the nursing homes. When accepting donations, it was and is Keiro’s responsibility to inform the donors of the change in their mission; however, this was not done in an open and transparent manner.
- False argument used to justify the sale. Keiro has insisted that the change in demographics of the Japanese American community and decreasing donations from the community have led to their decision to sell. They have insisted that the passing of the generations and lack of interest by the subsequent generations would entail decreased demand for Keiro services. Contrary to their argument, the demographics indicate that 80% of current residents are Japanese-speaking elderly who have relocated to the U.S. after the war. The needs of the post-World War II immigrants from Japan are being fulfilled by Keiro and they are faithfully paying their rent and medical costs. Demographic changes have occurred from the pre-war immigrants to the new immigrants, but the demand for bilingual, retirement and nursing care services continue as each generation ages. Until recently when the announcement of the sale was made, there was a waiting list of Japanese and Japanese American elderly who wanted to enter Keiro.
- Keiro’s Board and Management anticipates a future financial deficit as a direct impact of the Affordable Care Act. However, Keiro has never operated at a loss, maintains a credit line which it has never utilized, and has sufficient cash and cash equivalents available to fund current and future operations.
- The California Corporate Code bestows on the Attorney General the responsibility to be the protector of the public’s best interest in the handling of matters involving non-profit corporations in California; not only as to sales but also as to their conformity to their mission. In this regard, the Attorney General is required by Code to conduct a complete independent review of all Code specific issues when it comes to the sale of a non-profit health facility. This independent review insures that the best interest of the People of California is properly protected.
The sole reliance on the representations submitted by Keiro does not represent a complete independent review. An important issue to be reviewed is the Fair Market Value of the assets to insure that the public is receiving a fair price for the assets.
A close examination is the date of the appraisal of the assets, October 2013, was obsolete prior to the submission to your office. This gap of time is well beyond the standard appraisal practice of one year. There is no evidence of staff requesting or obtaining an updated appraisal. Instead, we believe this appraisal report was submitted by Keiro as an integral part of the proposed sale to The Ensign Group, which your office rejected in October, 2014. The real estate market in Southern California is a dynamic market and changes occur rapidly. A transaction of this magnitude cannot be judged in the best interest of the People of California without close compliance with the California Code sections 5917 and 5923. In adherence to the purpose of the herein referred Code sections, the waiver your office approved should have been denied in favor of a complete independent review as called for in the Code.
- Regarding paragraph 2, sentence 2, “This included a thorough review of more than 2,000 pages of information, which featured a detailed history of approximately 60 community meetings over the course of two years regarding the sale.”, the Ad Hoc Committee to Save Keiro has completed our own review of Appendix J. List of Community Meetings Held for the expressed purpose described in SECTION 999.5(d)(10) “A description of applicant’s efforts to inform local government entities, professional staff and employees of the health facility, and the general public of the proposed transaction.
First of all, all of the meetings listed in Appendix J predate Keiro’s failed Ensign transaction making it practically impossible to present meaningful details about the Pacifica transaction. In addition, no meetings or publications after the failed Ensign transaction and within the timeframe the Pacifica transaction was taking place are listed in Appendix J. No meetings or publications to inform the employees and the general public of the proposed transaction with Pacifica are known to have taken place between the time of the announcement on June 2, 2015 and the close of the public comment period on June 26, 2015.
Nonetheless, we set out to thoroughly review as many of the meetings as possible with first-hand accounts from meeting attendees, documented minutes, announcements, flyers or agendas. We received complaints by Japanese-speaking residents of not comprehending what was being presented to them by the Keiro administration. In summary, all people we interviewed either specifically recall that no information regarding the sale was discussed or they did not specifically recall if the sale was discussed — not one person specifically recalled sufficient information being presented in order to form an opinion of support or opposition to the Pacifica sale. (See Attachment).
- Your letter states that you are “confident” that the quality of care to the Keiro patients and residents will be protected. What is the basis of your “confidence”? In reviewing the public records, while Keiro’s facilities have never been cited for performance violations of the course of more than 50 years of operation, Pacifica facilities have incurred numerous violations cited by the Department of Social Services. How will your office monitor Pacifica’s performance and what provisions do you have to take any action if their performance does not meet the agreement?
- Upon the close of escrow, all of the 700-plus employees will be terminated. Pacifica may extend employment offers to the employees; however, Keiro has not negotiated any guarantees that seniority will be recognized, including any benefits, accumulated sick or vacation days, or salary/hourly rate based on the individual’s current position. This could mean the loss of valuable, long standing, bilingual staff without whom the facilities will not be able to serve the residents.
- After the sale, the Keiro administration will remain to oversee the funds received from the sale by placing them in investment funds. Supposedly, the interest generated from the funds would be used for educational programs and conduct research for the senior community, but this in no way benefits the current residents who would suffer from the consequences of the sale. The residents will face exorbitant rent prices and inflated costs for medical treatment without any protection. Additionally, Keiro’s use of the sales proceeds and the other investments of the corporation now completely lack the confidence and trust of the community and have inadequately defined how those funds will be spent.
For these reasons, we strongly urge you to reconsider your grant of consent and waiver and allow the community members to provide input by way of one or more public meetings before escrow closes. A further investigation by your office is the only means for protecting the interests of our fragile and disenfranchised elderly community. Additionally, absent any rationale for the sale, we urge your office to determine the true intent by Keiro to sell off this community institution.
We thank you for your careful consideration of this matter and look forward to cooperating with you and your staff
Dr. Charles Igawa
Ad Hoc Committee to Save Keiro
Attachment: Analysis of Section 999.5(d)(10) Community Meetings Held to Inform General Public of Proposed Transaction