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Nursing-home entrepreneur Tom Clarke is the owner of Massachusetts-based Lenox Healthcare, Inc. the second-largest privately owned nursing-home chain in the country. Clarke's company is at the forefront of a trend in which nursing-home care is evolving from a smattering of mom-and-pop enterprises to a hugely profitable national industry.
Clarke began building his empire in 1990, after he was dismissed by Berkshire Medical Center in Pittsfield when the western Massachusetts hospital accumulated tens of millions of dollars in debt following an expansion into the nursing-home market, according to an article in the Boston Business Journal.
Clarke swiftly built a sprawling, 16-state nursing home empire worth $400 million. According to financial documents prepared by Lenox Healthcare and filed with the Commonwealth of Massachusetts Department of Public Health, the company's growth strategy appears voracious. Company ledgers show that Lenox acquired at least 36 nursing homes in 1996, either buying the buildings outright, or buying the business and its license, and leasing the building. In 1997, Clarke acquired another 17 nursing homes in California. Clarke's acquisitions around the country have been financed through a crazy quilt of limited partnerships, financing corporations, and acquisition trusts with names such as Stockbridge Investment Partners Inc., Pinellas Healthcare Investors Inc., Walkulla Acquisition Inc., and Monterey Investments, Inc. Most of the holding companies are either wholly or majority-owned by Clarke and his wife, Linda.
Like Clarke's other California nursing home investments, the Mill Valley Healthcare Center was owned by Lenox Healthcare Inc., 100 percent owned by the Clarkes. The California homes were each structured as independent entities, limiting liability to the assets of each individual home.
Lenox's strategy appears to be one of classic, 1990s-style leveraging. While apparently profitable enough to fuel a stunning expansion drive, the strategy hasn't been without drawbacks. A $100 million lawsuit filed in Florida, for example, charges that a Lenox subsidiary there, York Hanover, failed to provide such basics as hot meals and clean sheets to its elderly patients.
The bottom-line strategy appears to also have had immediate practical effects at the Mill Valley Healthcare Center, which rapidly spiraled downward after it was bought by Lenox.
Almost as soon as Lenox took over the home in 1997, the facility suffered an exodus of employees, residents say. For the types of wages ordinarily paid at nursing facilities such as Mill Valley Healthcare, workers simply could not afford to live in Marin County.
Lenox acknowledged the problem in a memo to patients and family members a year after it took over the home. "Since acquiring the operating rights of Mill Valley Healthcare Center on March 1, 1997, Lenox Healthcare Inc. has experienced great difficulty in recruiting full-time staff members to care for our residents," read the letter, which was printed on Lenox letterhead and included the tag line "Lenox Healthcare Inc.: Caring for People."
According to family members of former residents, the turnover immediately spawned problems at Mill Valley Healthcare Center. Patients in some cases were not fed, or were given food they could not safely eat, according to allegations in affidavits filed along with a lawsuit in 1997 that sought to stop Lenox from evicting patients. Other claims said one man's body was left dirty with feces; and several patients became speckled with bed sores because workers weren't turning them frequently enough. Some were left unbathed. Others were improperly medicated, the affidavits say.
"It is deeply disturbing to see the level of care here deteriorate so badly. Every day, it seems, there is a new nurse or employee taking care of us. Many of the good staff, who were also friends, have left. I do not know who will be caring for me tomorrow or whether the care will be provided," lamented former Mill Valley patient Elfriede Pennington in a court affidavit. "If I were not mentally alert, asking questions, and looking after my own care, I would probably have suffered greatly from mistakes made here."
"I saw a man die right in front of my eyes," she says. "One man was in his room facing the door. He was coughing, and then I walked and looked at him and he didn't look good, but how am I supposed to know that he's choking or whatever? I said something to the nurse and they finally went in and they're running around to look for oxygen, but they didn't have the mask with the oxygen, and they couldn't find the mask. Finally they find the mask. By the time they found the mask, the man was gone. While they were trying to get him going, some guy was trying to pound on his heart. The nurse said, 'Let's call 911,' but another nurse said, 'Let's wait.' Finally they called 911, but by the time the Fire Department got there, he was gone. The fireman said to me, 'You'd better get your mother out of this hellhole.' "
In October 1997, eight months after Lenox had bought the home, the state Department of Health Services inspected the facility and found it had too small a staff and inadequate food service. Restraints were being improperly used on patients, the inspection found, and there was insufficient treatment of bed sores. A follow up visit in April, 1998 showed that Lenox had not corrected the problems.