Keiro’s potential deal with Transforming Age questioned

By Mahlon Meyer
Northwest Asian Weekly

Keiro Northwest building (Photo by John Liu)

As concern over a possible deal between Keiro and Transforming Age roils the Japanese American community, a family member of a resident in Nikkei Manor has filed a complaint with the Attorney General about mismanagement.

Terry Yoshikawa, whose 97-year-old mother lives in Nikkei Manor, sent a complaint to the Attorney General questioning management practices at Keiro. He is concerned over impending changes and frustrated with what he says is a lack of transparency on the part of the Keiro board.

Uncertainty over the future of Nikkei Manor has spurred him to question the fate of the now vacant Keiro nursing home and its land, which is valued at $12.7 million by King County.

Yoshikawa also questioned the alleged $750,000 in taxes that Keiro had to pay on the sale of the Washington Medical Clinic, a deal that he says “never should have happened.”

“I asked Brandon why he wasn’t able to structure it so it remained part of Keiro, and he said, ‘We didn’t have time,’” said Yoshikawa. Brandon Nelson is the Senior Director of Strategic Operations at Keiro, according to his LinkedIn profile.

But the major sticking point in community concern about the land is whether or not its sale will be used to help bolster Nikkei Manor, said Yoshikawa, who has received no formal response from the Attorney General as of press time.

Accompanied by Colin Fukano, whose 101-year-old mother lives at Nikkei Manor, Yoshikawa asked Nelson about the future of the building and land as the Sept. 19 Nikkei Manor Family Forum was ending.

“‘We’re giving it to Transforming Age,’” he said Nelson replied.

Questions seeking to confirm each of these points were put to the current Keiro board and CEO Bridgette Takeuchi.

“At this time, Keiro is not providing any comment. We will be sure to let you know when we have any news to share publicly,” said Takeuchi in an email.

Other community members worry that if Transforming Age were to take over the operation or ownership of Nikkei Manor in some way, the unique culture would change.

“I’m worried about a mainstream company coming in and taking over,” said Gordon Shoji, whose father lived at Keiro for over a decade.

“My father was a Kendo man,” he said, referring to the traditional Japanese art of wielding bamboo swords. “After he had a heart attack and stroke, he couldn’t do Kendo and he wanted to die. But at Keiro, they had Japanese and Asian culture and food, and it kept him alive.”

“I’m not sure a mainstream retirement home would be the same,” he said. He cited Keiro’s long history of community volunteers providing an additional layer of cultural programming and identity.

Shoji had the same concerns about the current residents of Nikkei Manor. And like other members of the community, he had been counting on Keiro and Nikkei Manor as an option for his own retirement.

Economies of scale

Yoshikawa and others want to know the justification for pursuing any deal.

“The main question we want to know is, if Keiro was unable to run Nikkei Manor successfully, why does it think Transforming Age would be able to do it better?” he said.

Keiro has declined to publicly comment on the issue.

Still, in the notes to a Nikkei Manor Family Forum on Sept. 19, obtained by the Northwest Asian Weekly, Keiro said it was negotiating with Transforming Age to take over management of Nikkei Manor, at which time it would pay an unspecified “management fee.” It said such a deal might be reached by the end of September.

In the industry of eldercare, a main justification that has sometimes been given for selling or, in some manner, affiliating with a larger entity with multiple facilities has been economy of scale.

This means that firms merge or combine to create a larger firm, which, in theory, creates increased production and efficiency, which in turn decreases the average cost per unit, or service provided.

But one major academic study, “The Economies of Scale for Nursing Home Care,” that appeared in the journal of Medical Care Research in March 2004, showed that economy of scale does not apply to assisted living communities.

“This makes sense because custodial (personal) care is a non-skilled service or care, like helping to bathe, dress, or eat, and the delivery of these services focus on medical workers over technology,” said Jerome A. Dugan, a professor in the School of Public Health at the University of Washington (UW), in an email.

“That is to say, there is not strong evidence that the cost of residents receiving care will fall if the number of residents receiving personal care increases. So even a firm like Nikkei Manor, despite the fact they are private pay, would have difficulty cutting costs or expanding their operations to generate economies of scale,” added Dugan.

Keiro in Southern California

For many members of the Japanese American community here, the fate of the Japanese American nursing home in Southern California, Keiro (Los Angeles) has loomed like a warning.

The first sale was stopped by then-Attorney General Kamala Harris, according to Traci Toshiyuki Imamura, a former board member of Koreisha, which oversees Keiro. Critics of the second sale say they wished that Harris, who was running for the U.S. Senate at the time, would have stopped the second sale as well since it was mired in contentious legal issues.

Keiro (L.A.) was sold off in 2016 to a for-profit company, Pacifica Companies, LLC, for $41 million. But ongoing protests, legal action, and a state committee still overshadow the transaction. According to Imamura, the status of over $82 million in assets is still being questioned.

Moreover, as in the Seattle area, many Japanese Americans were counting on an Asian-focused retirement community.

“Many people in our community were counting on a culturally appropriate community,” said Dick Obayashi, who grew up in Seattle but is active in the Japanese American community in Southern California and has been a donor to Keiro (L.A.).

“It was not just people like me, who are not millionaires but all the new Japanese immigrants — the Shin Isseis — who have been holding lots of protests and marches,” he said. He was referring to the Japanese Americans who had immigrated to the area after World War II.

Protests and a recent lawsuit have also encompassed the handling of funds donated to Keiro (L.A.) by community members over the years, including houses, cars, and volunteer hours.

According to Inamura, after Pacifica took over, the quality of care changed.

“On day one after the sale, when all the employees at the facility became employees of the new operator, all of those employees lost their seniority and they all became employees as if they had been there for only one year,” she said.

“They had the same salary, but benefits were drastically reduced, and a lot of the old time employees started leaving right away,” she added.

Echoing this observation, another academic study seems to be suggestive that larger nursing home chains deliver lower quality of care nationwide.

In this case, a 2011 study tracked the largest for-profit nursing home chains and those owned by private equity companies. The study found that “the 10 largest firms reported lower registered nurses and total nursing staff hours than government facilities,” said Professor Dugan.

“The 10 largest firms also reported 36 percent higher deficiencies (violations of regulations) and 41 percent higher serious deficiencies than government facilities,” he said.

“This study speaks directly to concerns about possible differences in the quality of care delivered in nursing homes that are members of a large network,” he added.

The future of Nikkei Manor

In the minutes leading up to the Sept. 19 forum, Keiro said that closing Nikkei Manor was also a possibility.

It was not clear if this could be part of a larger deal with Transforming Age.

On one hand, the minutes noted that “nearly all discussion [with Transforming Age] has been about Nikkei Manor.”

But they also noted a “plan B” in which Nikkei Manor would close.

In a conversation witnessed by another regular visitor to Keiro, Jim Trieste, Yoshikawa said that Nikkei Manor Administrator Lisa Waisath told him that more than half a dozen rooms were being left vacant at Nikkei Manor because of the possibility that the assisted living community might be closing and would only have 60 days to move out residents.

According to Yoshikawa’s first complaint to the Attorney General, Nikkei Manor, according to tax records for 2017, is fully capable of functioning on its own.

“Nikkei Manor is profitable as a separate business, contrary to what Keiro Northwest states. They have very competent on-duty operations staff, but questionable management, e.g. there are 191 people on the waiting list and seven or eight empty rooms. The balance sheet reflects $1.5 million in receivables, $11 million in publicly traded securities, $4 million in endowment funds,” the letter states.

The only filings publicly available are for the year 2017. Keiro has said it publishes its tax returns in October, so 2018 is not yet available. The current Keiro board has repeatedly stressed the importance of keeping negotiations secret for risk of derailing them.

Mahlon can be reached at editor@nwsianweekly.com.