Lawmakers spent big to keep Minnesota nursing home in private hands. It didn’t work.

Lawmakers are demanding more information about the ownership and finances of Minnesota’s nursing homes, after spending taxpayer dollars on the rescue of a for-profit Red Wing facility that ran out of money anyway.

Problems at Bay View Nursing & Rehabilitation Center were worse than lawmakers knew last spring when they approved a higher level of reimbursement to keep it open. The state took control of Bay View in December after it stopped paying workers and reported that its owner had millions more in debts, left elevators and other equipment broken, and couldn’t afford oxygen and other essential supplies for the facility’s vulnerable residents.

State Sen. John Hoffman, DFL-Champlin, responded this month with legislation that requires nursing homes to publicly report more financial information, in part so lawmakers know if their investments actually improve facilities and residents’ care. The proposal advanced through Senate and House committees this week.

“My heart hit the floor” after learning of Bay View’s continued disrepair, he said. “That’s not OK. We need to assure that people are getting the services they need. This bill will make darned sure that they get it.”

The transparency legislation comes at a critical transition for Minnesota’s nursing home industry, which has shrunk despite rising demand from an aging population. The state has lost more than 3,000 nursing home beds since 2020 because facilities have closed or reduced operations, according to Care Providers of Minnesota, an industry lobbyist.

Investors have emerged to take over facilities, but advocates are worried that some are enriching themselves while neglecting aging nursing homes and residents. Some are under fraud investigations in other states, said Kristine Sundberg, executive director of Elder Voice Family Advocates, which lobbies on behalf of older Minnesotans.

Ephram Lahasky has been accused by New York’s attorney general of diverting excessive funds from his nursing homes to contractors in which he has financial interests. He has taken partial ownership of four Minnesota nursing homes, in St. Paul, Duluth, Worthington and Lamberton, over the past decade, and all have Medicare’s lowest one-star quality rating. He couldn’t be reached for comment on Friday.

“When you see that kind of pattern, you obviously have to ask the question: where is the money going?” Sundberg said. “Especially in Minnesota, where the average cost of nursing home care per year is $90,000, what’s that money paying for?”

Lawmakers last spring hoped they were paying to save Bay View, because it is unique in its care of highly vulnerable residents who are dependent on ventilators or throat tubes to breathe.

All nursing homes benefitted last year from a $300 million infusion of state funding, but Bay View was singled out with legislation that also provided it with more favorable state reimbursement. The switch provided an extra $250,000 for Bay View last year, and will continue through 2025.

Owner Sam Weinberg was viewed as a hero in 2019 when he acquired Bay View from a bankrupt operator. His facility later provided vital support, taking residents from a Cannon Falls, Minn., nursing home that closed after a roof collapse.

Weinberg blamed the state for taking too long to provide the increased reimbursement to Bay View, which as a result couldn’t pay workers in December and was placed under state control by a court order. But new debts were uncovered after the state hired a separate agency to temporarily manage Bay View, including a $2 million loan that Weinberg hasn’t begun to repay. The home’s temporary administrator, Peter Schuna of Pathway Health, also reported a defective boiler, flood damage, two shuttered elevators, and workers who were undertrained to care for complex, ventilator-dependent residents.

“Bay View’s finances have been, at a minimum, significantly mismanaged,” Schuna said in court records last month, urging that the facility remain in state control. “The level of debt that Bay View has accrued and the trail of vendors who are no longer willing to work with Bay View as a result leaves Bay View in a precarious financial situation.”

Bay View’s collapse was frustrating for Steven Lee, 71, a retired farmer who stayed at the nursing home for two years. Workers weren’t responding as quickly to his calls this winter, Lee said, and then they asked him to move across town because of staffing shortages. Two hours after he agreed, he found himself with a handful of belongings in a new nursing home. He misses friends back at Bay View.

“They were good to me,” he said. “I can’t say they were unkind or inattentive. It’s just that they got stretched pretty thin.”

Hoffman’s legislation comes amid federal efforts to inform the public about who owns nursing homes. The state legislation requires owners to turn over two types of financial reports, and identify instances in which their nursing homes pay rent or hire contractors from companies in which they have financial interests.

An analysis this month suggested that some nursing home owners are concealing more than half of their actual profits by “tunneling” money to contractors and leasing companies that they also own. The report said that nursing home owners “substantially inflated” rent and service costs they paid to their own companies, increasing their personal profits while simultaneously making it look like their nursing homes were struggling.

The Minnesota legislation could help reveal owners’ total profits and undercut some of their claims that their nursing homes need more taxpayer support, said David Kingsley, a Kansas-based health care analyst. “This explodes their whole argument that they need more money.”

Weinberg, who owns no other nursing homes, said Friday he supports transparency and that he never hired contractors in which he had interests. He said he remains eager to work with the state to resume management of Bay View. He argued that the home is more costly for taxpayers while in receivership, and isn’t taking admissions, which further restricts options for high-need Minnesotans.