'This can't go on': Troubled provider of care to Minnesotans with mental illness falls into financial disarray

The operator of three Minneapolis facilities that provide care for adults with mental illnesses has fallen into financial disarray, with employees calling on state health regulators to intervene to protect vulnerable residents.

A state audit found that Mission Directed Health Care Inc., which owns homes that care for about 160 people with mental illnesses and other health problems, is failing to pay vendors for essential services such as food, internet service and medical supplies. The facilities collectively owe hundreds of thousands of dollars to vendors, and have been making unauthorized withdrawals from resident accounts, according to an audit completed in January by the state Department of Human Services (DHS).

Even as the company struggled to pay its bills, owner Stephen Kaminski of Minneapolis has withdrawn more than $150,000 from one of the facilities since last October, according to the audit. The facility lacked records showing why Kaminski withdrew the money, auditors found. Kaminski also paid himself a bonus of $75,000 from a federal grant program designed for staff retention at care facilities. Auditors determined that Kaminski was not eligible for the government payments — often referred to as "hero pay" — because he does not work on-site.

Kaminski has declined multiple requests to comment on the audit and his company's finances.

The situation has become so dire in recent weeks that some of the company's staff and administrators are urging state regulators to take swift action to take over the facilities, to avoid their closure and the potential displacement of residents, including many who struggle with serious psychiatric disorders and were previously homeless.

Last October, the Minnesota Department of Health asked a Ramsey County District Court to appoint a receiver to operate the facilities, citing a pattern of failure to pay vendors for items such as food, drugs, staffing and insurance. In a written statement, the agency said it cannot initiate a receivership until one is ordered by the court, which has not occurred. Three court hearings on the receivership have been canceled since mid-November; the next one is scheduled for April 26.

The Department of Health noted that it's highly unusual for the agency to take control of long-term care facilities through receiverships. In a recent statement, the agency said receiverships are reserved for "extraordinary situations" that require the agency to preserve the health and safety of residents and families. The agency has declined to comment further on the case.

"It's appalling that an owner of a care home can get away with not paying its vendors, and I don't understand why the state Health Department does not act more proactively in correcting this," said Dr. Robert Sonntag, the longtime medical director at Grand Avenue Rest Home, a 20-bed facility for women in south Minneapolis that is owned by the company. "Eventually residents are going to suffer."

Sonntag added, with a tone of anger, "This should not go on this way. This can't go on."

The three homes — Bywood East Health Care, Birchwood Care Home and Grand Avenue Rest Home — are licensed as boarding care homes, which resemble nursing homes but typically have less skilled nursing care and other medical services. Many of the residents of the three homes have serious psychiatric disorders and have previously been homeless. Some are estranged from their families and would have nowhere to go if the facilities closed, according to staff and administrators.

"We serve a population that has ... the most vulnerable people in Minneapolis," said Vickie Holtz, director of nursing at Bywood East Health Care.

Some employees at the homes said the provider's financial woes are already starting to disrupt service to residents, though these workers stress that essential medical care has not been affected.

In January, staff at the Grand Avenue Rest Home suddenly discovered they were unable to access resident health records because the facility's internet service bill had not been paid. At Birchwood Care Home, residents were unable to leave on recreational outings or trips to the store because insurance on vehicles had gone unpaid. And at Bywood East Health Care, the largest of the care homes with 96 beds, electricians have stopped coming because they haven't been paid, auditors found.

Facility staff told DHS auditors that they "have not always been sure where payroll was going to come from or if they would even be paid," the audit report said.

Brittany Soquet, former director of therapeutic recreation at the Birchwood Care Home, said she could no longer cope with the "constant uncertainty" of whether essential bills would be paid. She resigned last week and has taken a job at a different health care setting. The "final straw," she said, was when residents could not go on outings or buy supplies because a debit card that was linked to resident accounts was denied due to insufficient funds, she said.

"It's very upsetting," Soquet said. "A lot of the staff are wonderful and very committed to the residents, but it's hard to work under conditions like that."

According to the audit report, the state of Minnesota distributed $529,865 from American Rescue Plan Act (ARPA) emergency funds to two of the homes, Bywood East and Birchwood Care. The use of the funds was limited to payments for hiring and retaining eligible staff, the audit says. However, according to the audit, Kaminski "paid himself a bonus" of $75,000 from the ARPA funds, which DHS auditors found was not an allowable payment.

"DHS has determined that Mr. Kaminski was not eligible for this bonus payment as he does not work on-site at the nursing facility," the audit says.

Sophie Dwyer described the payments to Kaminski as "sickening" and among the reasons she resigned this week from her position as a social worker at the Grand Avenue Rest Home, a job she was passionate about. She also cited concerns over poor benefits, lack of paid holidays for nonmanagement staff and the "general uncertainty" about the future of the company that owns the care homes.

"I fear that if no one intervenes, I will not be the only one to make this decision," Dwyer wrote in a resignation letter she submitted early this month. "The environment created by the owner is jeopardizing employee retention, which ultimately hurts the residents."

Nancy Soderbeck and her husband, Allen Soderbeck, of Prior Lake said they sold the care home on Grand Avenue to Kaminski in March of last year, and Kaminski has since defaulted on multiple payments. The small boarding care home had been in the family's hands since 1968 and the couple kept in touch with many of the residents and staff.

"It was truly like a family," Allen Soderbeck said. "Everyone cared."

Now, the couple regret selling the property, and said they fear that resident care will deteriorate if the state does not intervene soon and stabilize its finances.

"The big concern is what's going to happen if this boat keeps sinking," said Nancy Soderbeck, who worked at the home in various roles for more than 40 years. "Residents will be displaced, and they won't have the homes they've had for a long time. ... Ultimately, someone needs to be held accountable."