Death And Deals: Children With Special Needs Suffer, Private Equity Profits
NEW YORK — One nurse slept on the job. Another didn’t show up at all. A third scalded a child so badly that her skin peeled.
Still another failed to check on a toddler who depended on a breathing tube. By the time the nurse returned, the child’s hands and feet were purple.
The little girl was dead.
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All of these incidents have something in common: the dark side of private equity.
The nurses worked for Aveanna Healthcare LLC, a company assembled through a series of corporate takeovers, with two goals in mind. One is to provide quality at-home nursing for those who are sick or have disabilities, mostly children who may need near around-the-clock care to stay alive. The other is to maximize profit.
The outcomes, at times, have been devastating. Under the control of two prominent private equity firms, Bain Capital LP and J.H. Whitney Capital Partners LLC, Aveanna has left a trail of injury and death in some of the biggest states where it does business, Bloomberg News found.
More than 1,000 pages of state health documents, many released under public-records laws, show Aveanna has had a disproportionate number of safety violations.
At least seven children have died in Texas, Pennsylvania and Colorado. In these fatalities, reported over the past year, health officials found that Aveanna’s nurses failed to check vital signs, follow emergency procedures, appear for their shifts or give the proper doses of medicine. Aveanna says injuries and deaths on its watch, while unacceptable, are rare, and that it cares for more seriously ill children than other companies.
But internal company documents reveal financial incentives that favor corporate growth and cost-cutting over clinical care. In interviews, more than a dozen former Aveanna employees described how the pressure to meet financial goals jeopardized the quality of care for children.
Despite misgivings, some families say they have little choice but to keep hiring Aveanna’s nurses. The company is so big that it dominates children’s at-home care. Now, it’s about to buy one of its largest rivals.
“It is a game they play with our kids’ lives,” said Lynda Leising, who uses Aveanna nurses to care for her six-year-old son, Noah, who has a condition that combines Down syndrome, autism and Tourette’s. “And it is really about how they can make more money.”
What is happening at Aveanna illustrates how private equity is penetrating every corner of U.S. health care and, in the process, transforming American medicine. Bain Capital, whose co-founder is Utah Republican Senator Mitt Romney, has, or had, investments in everything from mental health management to dialysis centers to methadone clinics.
Wall Street is aggressively remaking a health care system once the domain of independent-minded doctors and nurses. In 2018 alone, private equity firms made $63.1 billion in medical deals, up about 50 percent from the year before.
While private equity has managed to turn around some failing businesses and industries, the health-related acquisitions are coming so fast that the American Medical Association has scrutinized these deals because of concern that patient care might get shortchanged.
Aveanna executives said the company’s safety record should be viewed in the context of the millions of hours of nursing that it provides annually across the U.S. They cited surveys of thousands of patient families that found 97 percent were satisfied with their care.
“We have the utmost focus on providing the best care possible to thousands of clients,” said Chief Clinical Officer Beth Rubio. “Aveanna has one of the strongest programs in health care.”
Bain and J.H. Whitney said Aveanna puts patients first.
“Aveanna is meeting a pressing need in home health care by focusing on delivering high quality care for a very fragile patient population and their families,” Bain and J.H. Whitney said in a statement. “With our support, Aveanna is investing to continually improve clinical outcomes and places the highest priority on training, patient safety and raising the standard of care in our industry.”
The record shows a more complicated picture.
In Texas, Aveanna’s biggest market, the company accounted for 85 percent of what the state calls “deficiencies” at the 10 largest pediatric home health agencies from September 2016 through May 2019, even though the company served only 23 percent of those organizations’ patients, a Bloomberg analysis found.
Meantime, the company’s 200-plus U.S. branches were expected to hit targets on cases opened, nurses hired and hours staffed. While some employees said they sought to put patients first, others said such financial expectations inevitably caused friction.
Under a branch-office incentive plan, Aveanna ties 90 percent of bonuses to earnings growth, the hours of patient care it provides and cash collection, according to a company document viewed by Bloomberg. Under the arrangement, instituted after Bain put together its 2017 deal, customer satisfaction and clinical outcomes each make up only 5 percent.
The company would often decline to send nurses if it was short-staffed and had to pay overtime, according to Andrew Wiggins, who said he left Aveanna in October 2018 after working as a scheduler for 3 1/2 years.
“If I had a 20-year-old in Temple, Texas, on a ventilator who needed care during the weekend, to avoid paying overtime we would tell the patient we don’t have it even if we had three or four nurses available,” Wiggins said.
Wiggins was one of several former employees who said the company intensified its financial focus after Bain became an investor. “There was much more pressure after the merger,” he said. “It was clearly obvious the goal was to hit the numbers. The goal was to make money.”
When booking nurses, some former employees described a focus on maximizing the cut Aveanna got from insurers and filling shifts, rather than matching appropriate caregivers with patients.
State inspection reports documented instances when the company failed to conduct background checks, face-to-face interviews or check references.
Cody Carter, a nurse recruiter who said he was laid off in September 2018, said Aveanna essentially had two requirements for nurse hires: “If you were breathing and had a nursing license.”
Darien Zimmerman, a former vice president who oversaw 26 U.S. offices, claimed that the company lied to the state about its compliance with nurse training requirements, according to a March lawsuit she filed in federal court in Pennsylvania.
Zimmerman alleged she faced pressure to keep operating a center that the state wanted to shut temporarily because of compliance violations. She claimed that Aveanna fired her in part for investigating a bathtub scalding of a five-year-old child.
She was determined to make “the tough decisions to do the right thing,” her suit said. The company was not looking for her “to lead if it compromised the company’s income flow.”
Aveanna, which recently settled the case for an undisclosed sum, denied Zimmerman’s allegations. Company officials said they have a rigorous employment screening process that includes a skills and knowledge test. Aveanna, which disputes rejecting necessary overtime or mismatching patients and nurses, said it may withhold bonuses for poor clinical outcomes.
Executives said financial measures also reflect quality of care. For regional clinical leadership, outcomes and patient satisfaction account for 45 percent of payouts, they said. The company provided a report from an outside law firm it hired that said Aveanna has a “highly professional” and “well-regarded” compliance program.
In Texas, patients, parents and others involved in children’s care have lodged more than 40 complaints against the company since September 2016, compared with seven at the other nine largest pediatric health agencies combined, records show. (The company said the state didn’t substantiate most of the complaints.) Bloomberg interviewed 10 families, each of which had concerns about nurses’ reliability or expertise.
Jennifer Alvarado was typical. In Kyle, Texas, a half-hour’s drive from Austin, Alvarado lives in a brick ranch-style house with an inflatable kiddie pool and swing in her backyard. Inside, a spare room resembles a hospital supply closet: wheelchairs and plastic tubs marked with labels for tracheostomy ties — which hold breathing tubes into the neck — oxygen washers, alcohol pads, cough-assist filters, suction catheters, feeding extensions and syringes.
On a recent weekday afternoon, the house was quiet, except for cartoons on the TV and a constant swooshing sound coming from the breathing tube in the throat of her seven-year-old daughter, Sophia.
Her dark brown hair tied up in a pink band, Sophia was propped up by a pillow on a couch with an iPad in her lap. Sophia wore a pirate hat, reflecting an interest she shares with her dad, a Tampa Bay Buccaneers fan who drives a truck for United Parcel Service Inc.
Sophia has a rare genetic disorder, called actin myopathy. Though her mind is sharp, she can’t speak or move.
When her Aveanna registered nurse, Jessica Huff, came by for one of her six-hour, three-day-a-week shifts, she said she had never treated a patient on a ventilator.
Asked whether Aveanna had trained her, Huff replied: “Not really,” adding that she just showed up and Alvarado oriented her.
Some readings on Sophia’s ventilator mystified Huff. “I still have a lot of learning to do,” said Huff, who started working for the family this summer. “Jennifer has been my trainer.”
Alvarado must be vigilant. Sophia’s nose needs to be suctioned at least once an hour, her equipment repeatedly changed out or sanitized. Several times a day, Alvarado, 5-foot-4 and 42 years old, takes her 50-pound daughter in her arms to move her from a couch to a chair in front of the TV.
At one point, Alvarado told Huff to change the humidifier chamber, which keeps Sophia’s lungs moist. At another, she told her to cut 11 pieces of tubing for her daughter’s cough assist machine.
“We need to suction her trach,” Alvarado said.
“I’m glad you can sense it,” Huff replied.
Oni Brown, Aveanna’s deputy general counsel, said Huff has 13 years of experience and extensive training that included gastronomy tube care, suctioning, tracheostomy and ventilator care. Aveanna’s Rubio said the company requires instruction specific to each patient, simulation labs, regular supervision and continuing education. Rubio said a nationwide nursing shortage poses a recruiting and staffing challenge — a situation that the company said it makes clear to families.
Home health care is considered an especially promising private equity investment because it can save on expensive hospital stays, while generating revenue for years. Private equity firms bought a record 17 U.S. pediatric home health companies last year, according to PitchBook Data Inc.
Bain put together Aveanna in 2017. That March, the investment firm bought Dallas-based Epic Health Services and combined it with Atlanta-based PSA Healthcare. PSA had another private equity backer: J.H. Whitney, a New Canaan, Conn. firm whose founder was an heir to the Vanderbilt-Whitney industrial fortune. Bain, which ended up with a 49.2 percent stake in Aveanna, said the purchase price was $1.4 billion, according to an internal document.
The company that became Aveanna has already proved valuable for a previous private equity owner, Waltham, Mass.-based Webster Equity Partners, which bought Epic in 2010. As is typical in the industry, Webster paid itself a $30 million dividend three years later by having Epic take on more debt. That enabled Webster to more than recoup its initial investment.
One of its funds ended up making almost 10 times its money after Webster sold to Bain. David Malm, who leads Webster’s health care investment business, said that the firm focused on clinical success.
Bain and J.H. Whitney are taking an active role at Aveanna, holding four of nine board seats. Directors include Christopher Gordon, who oversees Bain’s North American health care holdings.
Aveanna plans to close on a $1.25 billion deal to buy the home health division of Columbia, Md.-based Maxim Healthcare Services and has its sights on selling shares to the public.
Including Maxim, the company would generate about $250 million in annual earnings, according to bond rater Moody’s. About 80 percent of Aveanna’s revenue comes from taxpayer-funded Medicaid or Medicare programs, Moody’s said. But Moody’s also notes the company’s heavy debt burden, which will total nearly $2 billion after the Maxim deal.
Aveanna said it increased outlays on training and technology for nurses and other caregivers after the merger of Epic and PSA. The company said it provides a tablet computer for every caregiver and spent $25.6 million in 2018 on training and oversight in Texas and Pennsylvania.
But, in Texas, state officials documented at least five fatalities related to Aveanna’s care over the past year. Only one other pediatric company had a single one, according to a state tally of reports related to neglect or abuse.
In one instance, in McAllen, Texas in 2018, a former Aveanna administrator alleged that the company’s branch leadership had discouraged the staff from reporting deaths and other injuries, according a complaint filed with the state. The company said it wasn’t required to disclose the fatality because it happened at the hospital.
In Texas, Florida, Pennsylvania and Colorado, the four states that Bloomberg examined, Aveanna tended to have more violations than similar large companies, except for Colorado’s and Florida’s branches of Maxim, which it is in the process of acquiring. Regulators determined that Aveanna and its predecessors were responsible for a raft of offenses: missed shifts, unqualified staff, lack of training and supervision. Nurses lifted children incorrectly, resulting in emergency room visits; gave the wrong drug doses; or slept on shifts.
In a Pittsburgh suburb, Tessa Richards, a 24-year-old nurse’s aide, lowered a five-year-old boy with spina bifida into scalding bathwater. The child spent a month in the hospital, undergoing skin grafts and transfusions.
At the time, the nurse worked for PSA, a predecessor to Aveanna. Zimmerman, the former executive who sued Aveanna, said in her lawsuit that the company fired her in part because she pushed to investigate this incident.
In August 2018, Richards pleaded guilty to state charges of reckless conduct and was later sentenced to five years of intensive supervision with a year of home electronic monitoring. Richards said Aveanna had told her to wear gloves, so she couldn’t feel the temperature.
After the Pennsylvania case, Aveanna nurses in Texas scalded three other patients in baths or showers, records show.
In the Pennsylvania scalding, Brown, the deputy general counsel, denied that Aveanna told the nurse to wear gloves. The company requires nurses to check water temperature manually and with a thermometer, she said. “Had Richards followed the policy, it is unlikely this tragic event would have occurred,” Brown said in a statement.
From what she’s seen of Aveanna, Jennifer Alvarado, the mother in Kyle, Texas, said she can never let down her guard. She’s gone through at least 30 nurses, mostly with the company and its predecessor, PSA.
Last December, while Alvarado was out getting groceries, a nurse called in a panic. Sophia’s oxygen was dropping, and the caregiver didn’t know what to do. Alvarado rushed home to show the nurse how to clear her daughter’s lungs.
Without reliable nursing support, Alvarado, who has a degree in social work, doesn’t feel comfortable getting a job. As a result, the family can’t afford to install a roll-in shower for Sophia, and Alvarado has to give her daughter a sponge bath on the living room floor.
In late September, Alvarado decided she would no longer work with Aveanna, which the company confirmed. “I can’t leave my daughter alone with these nurses,” she said.
© 2019 Bloomberg News
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