The Colonial Heights Scandal – the Tip of a Very Large Iceberg

Colonial Heights Rehabilitation and Nursing Center is the public face of a much larger ownership puzzle. The facility, bought in January 2020, later saw criminal charges filed against 19 employees in connection with alleged wrongful deaths of patients. The chain behind it is described as the largest nursing-home group in Virginia, and it is tied to partners based in Lakewood, New Jersey, who operate homes in five states.

The business pattern, reported by James C. Sherlock, is not subtle. Many of the operators are young, often related or longtime associates, and many trained or worked first in family facilities before moving into chain management. Credentials sometimes rest on a year or two inside a building. Seed money is described as coming from a small set of limited-liability companies and trusts, including private equity, rather than from conventional bank loans. The operating model pairs thin staffing with occupancy well above the industry average and with residents assessed as needing unusually high levels of care, which raises daily insurance payments and authorized length of stay. State inspectors have documented humiliation, suffering, and premature death inside facilities run this way.

Names have multiplied faster than the public databases that are supposed to track them. In 2020 the group bought six Virginia facilities under Innovative Healthcare Management. It later acquired 30 more from the Fralin family of Roanoke, in Virginia and North Carolina, a batch city property records suggest may have cost on the order of $300 million, with no traditional lender visible in the sample the author reviewed. Those homes were reported as Medical Facilities of America, a name purchased from the Roanoke seller, and now appear in federal records as LifeWorks Rehab. Integrated Healthcare Management LLC is listed as voluntarily cancelled, yet the federal PECOS enrollment system still attaches that inactive name to the six Virginia buildings bought in 2020.

Colonial Heights itself has been marketed, after the scandal, as Innovative Healthcare Management, then Medical Facilities of America, then LifeWorks Rehab. PECOS still places it in the Integrated Healthcare Management chain, and the public listing carried no abuse warning months after arrests. Public websites for Medical Facilities of America and LifeWorks Rehab overlap only in part. All 68 facility websites in the set carry LifeWorks logos, while advertisements still promise “new ownership, new leadership, new vision” at Colonial Heights and the original Innovative homes.

Counted by the author, the group has 68 locations: 37 in Virginia, 12 in North Carolina, 10 in Maryland, two in Delaware, and one in Pennsylvania. Six of them do not appear under any chain name in Centers for Medicare and Medicaid Services data. The same Lakewood partners, Israel Birnbaum and Michele (Michael) Netzer, are described as owning all three chain names. Government files have not kept up.

Two federal systems are supposed to record this. The National Plan and Provider Enumeration System issues a National Provider Identifier used for payment. The Provider Enrollment, Chain, and Ownership System, PECOS, is the source for most CMS publications, including Medicare Compare. They are not integrated. A legal name in one system is an “organization name” in the other, and the two fields often disagree. PECOS can still say a legal business name is unavailable a year after NPPES has it. CMS refreshed provider files this month, but spelling errors, omissions, and ownership percentages that sum past 100 percent remain. One Virginia building, Chesapeake Health and Rehabilitation Center, is described as having indirect investors reported at 453 percent. Exact-match search rules, including punctuation, make the files even harder to audit.

The financial picture undercuts the industry’s standing plea that nursing homes are on the brink and that the cure is higher Medicare and Medicaid rates plus repeal of federal minimum-staffing rules. Some homes are stressed. This chain’s 37 Virginia facilities, Sherlock’s tally showed average operating margins of 11.5 percent for fiscal 2023 and 11.3 percent for fiscal 2022, with returns on assets in some cases as high as 25 percent. Those figures came from owner-reported data. Virginia’s health-information contractor later made the financial files harder to reach online.

The spreadsheet Sherlock assembled is, in his telling, built from what the owners themselves submitted. That is the iceberg under Colonial Heights: a chain that can change names faster than CMS can record them, report ownership that does not add to 100 percent, and still post double-digit margins while inspectors write up the human cost.

Email the Roanoke City Council:
Joseph Cobb, joseph.cobb@roanokeva.gov,
Terry McGuire, terry.mcguire@roanokeva.gov,
Peter Volosin, peter.volosin@roanokeva.gov,
Nick Hagen, nick.hagen@roanokeva.gov,
Evelyn Powers, evelyn.w.powers@roanokeva.gov,
Phazhon Nash, phazhon.nash@roanokeva.gov,
Vivian Sanchez-Jones, vivian.sanchez-jones@roanokeva.gov