Five years ago, New York City’s long-troubled adult home industry appeared to be facing a slow, painful death — a fate it had earned after four scandal-ridden decades of housing mentally ill residents for profit.

The homes were once envisioned as an alternative to the state’s notoriously inhumane psychiatric hospitals. But in 2002, The New York Times exposed how they had become flophouses, rife with neglect, exploitation and despair. Residents threw themselves from rooftops and died of heatstroke in rooms that lacked air conditioning.

Disability rights advocates filed a class-action lawsuit, arguing that the state had violated residents’ constitutional rights. After 10 years of litigation, the case was finally settled by the administration of Gov. Andrew Cuomo, who, while on the campaign trail, had called the state’s oversight of the homes a “fundamental government failure.”

Under a court order, state-contracted mental health assessors would now have the authority to enter the homes, evaluate residents’ capacity and desire to live on their own and usher those who qualified into subsidized apartments, in a system called supported housing.

For a business built on the state and federal dollars that paid for each patient’s care — roughly $1,200 per resident per month, multiplied by as many as 350 beds in each home — the potential financial losses were devastating.

But documents and interviews show that while members of Cuomo’s administration negotiated the terms of the settlement, they were also developing a plan to keep the adult home industry alive, giving operators a second chance with a new, more lucrative population in the form of the elderly and infirm.

The state would invite the homes to apply for licenses to operate what’s called an Assisted Living Program. Dating back to 1991 in New York, assisted living was designed for elderly people who could get by with minimal assistance and did not need the rigid structure and costly medical staff of a nursing home. Some adult homes already had assisted living beds; others had tried and failed to get the necessary credentials.

James Introne, the state’s deputy secretary of health from 2011 to 2013 and principal negotiator of the settlement, came up with an idea to give the homes affected by the litigation a new opportunity to apply for such licenses. In interviews with ProPublica, he recalled his thinking at the time: He knew some might be forced out of business, leaving residents homeless. He also knew that the adult homes would fight the settlement. He saw assisted living as a way to “avoid their active resistance,” he said.

To get licenses, the homes would have to make significant improvements to their staff and structure.

“The idea was carrot and stick,” Introne said. “The bad ones you want to close. The good ones, you give them a chance.”

The state closed one home by emergency order in 2017. But at least 12 of the remaining 22 homes affected by the litigation have been granted 50 or more assisted living beds, with several more awaiting final approval. Some of those beds are occupied by people with mental illness, but now the adult homes can bill Medicaid for additional services at a higher rate. Documents indicate that each home could make nearly four times more money per resident.

Some of the system’s watchdogs are concerned that the licenses are going to homes that obstructed the settlement and now can take advantage of their ability to bill more. They want to know what the residents will get in exchange and how the state will ensure the safety of a new, equally fragile population when it has failed those with mental illness, both inside the homes and in supported housing.

In response to questions from ProPublica, Department of Health spokesman Jonah Bruno defended the Assisted Living Program. He pointed out that homes across the state, not just those affected by the litigation, were eligible to apply for assisted living licenses and many had run such programs for decades. He said the program is closely regulated and addresses a critical need.

“An ALP provides a broad range of services to our senior citizens, allowing them to live in the least-restrictive environment,” he said. “Without these ALP services, many residents would potentially need to move to nursing homes, which are restrictive, institutional-like settings that provide, in some instances, similar services but at a greater cost to the Medicaid program.”

Amy Kennedy, the executive director at the New York State Center for Assisted Living, which represents adult home operators in Albany, said the shift to assisted living was important for people whose needs were intensifying as they aged in adult homes. “The ALP Program was designed so that residents of adult homes who would normally qualify for a nursing home level of care, at their option, could choose to stay in the adult home and age in place,” she said, adding that her organization’s “members include many adult homes that offer excellent care and services to their residents.”

But Introne, who left his government job just before the settlement was implemented, now looks back on his idea with a mix of frustration and regret, saying the state gave away the licenses without getting enough in return.

“They blew it,” he said.

Change, Challenged

In 2013, state legislators passed a law requiring large adult homes to reduce the number of mentally ill people living in their homes beneath 25%. Under the settlement, the Department of Health would have to collect compliance plans from the homes showing how they intended to achieve that goal.

In 2014, the state offered the adult homes a way to meet the mandate while keeping their beds full.

“Our understanding was that the conversion was intended to allow Transitional Adult homes to attract new geriatric residents to replace the Seriously Mentally Ill residents who were vacating,” Lisa Newcomb, another adult home industry leader, said in an emailed statement to ProPublica.

Since then, at least 12 homes have obtained assisted living licenses. However, six years after the settlement, most of these homes still have a census of mentally ill people above 25%. At some, they make up the majority of residents.

Adult home representatives say the census is largely out of their control. They say the residents who remain either don’t want to leave or have been told they should not by clinicians who have found that they are too medically or mentally fragile to live on their own in supported housing.

However, Clarence Sundram, the independent monitor assigned by the court to oversee the transition, has found that the staff of many of the homes has discouraged people from moving out. The incidents are documented in his yearly reports.

Sundram learned that the staff at one home had called residents’ relatives to express concern about the residents’ interest in supported housing. At another home, a staffer scared a resident by suggesting the person would likely wind up homeless.

At New Haven Manor in Far Rockaway, Queens, administrators drafted a form letter signed by 74 residents saying they did not want to move, Sundram wrote. Some residents told Sundram they did in fact want to go, but they simply wanted time to ease into the transition. Administrators did not respond to a reporter’s phone calls or emails to discuss these allegations. Newcomb, whose trade group began representing New Haven this year, said the home has new leadership, but to her knowledge, the previous administrator drafted no such letter.

At Mermaid Manor in Coney Island, Brooklyn, the Department of Health substantiated four separate allegations of administrators discouraging residents from moving into supported housing. One staff member, reached by phone, told ProPublica these allegations were not true, but he refused to give his name and said administrators might call if “they feel like it” to discuss further. Nobody did.

Overall, the state remains behind in its deadlines to move residents out. In the first year of the settlement, only 40 residents moved; the next year, 245; the third, 491. Within four years of the settlement, the state had intended to assess some 2,500 residents and move out those appropriate. As of this month, five years later, they have only moved around 800.

Despite complaints of obstruction, Mermaid Manor was approved for assisted living, while New Haven Manor is awaiting final approval. Bruno, the Department of Health spokesman, said that “it would be inappropriate for us to require compliance with the settlement before facilities can be awarded ALP beds” because the beds were also offered to homes that were not part of the litigation. He said all homes must be in “substantial compliance” with regulations before being granted a license, including Mermaid Manor, which submitted “a plan of correction” and has had no further issues.

Jeffrey Sherrin, an Albany-based attorney who represents many adult homes, including Mermaid Manor, said in an email that the “claims of interference” there are years old, and “stale.” He said that the “failures of the State to meet its targets … have nothing to do with non-compliance, but rather everything to do with misunderstanding life in these homes, and the needs and preferences of the residents in them.”

“There are no secret deals or devious attempts to evade regulations,” he said. “The system is working how it was supposed to — residents are receiving the care they need, and the State is saving money and avoiding nursing home admissions.”

Sherrin has challenged the settlement in lawsuits filed in state courts all over New York. In one, he argued that a regulation central to the settlement prevented a single, anonymous resident from moving back into an adult home after struggling in supported housing.

Instead of simply allowing that man to move back, the state agreed to suspend its own regulation, effectively reopening the door for adult homes to take in people with mental illness.

U.S. District Judge Nicholas Garaufis, who is presiding over the settlement, was livid. At a hearing in March 2017, he called in top state officials and upbraided them. “I will not allow the kind of political, legal activity that is going on in this case behind my back and behind the backs of the plaintiffs to continue,” he said.

The only person it may have angered more was Introne.

“My whole plan went to hell,” he said. If Introne’s idea was carrot and stick, the state had given away the carrot without ever wielding the stick.

Questionable Services

Recent reports from Sundram show that hundreds of mentally ill adult home residents covered by the settlement have been certified as assisted living recipients, allowing adult home operators to bill more for their care. In three homes that recently gained licenses, more than 60% of their assisted living beds were filled by people with mental illness.

Sundram has raised questions about how their level of care has changed and whether it was improving their quality of life.

In his 2018 report, he examined the experiences of 13 residents enrolled in assisted living at six adult homes.

They had a variety of physical and psychiatric diagnoses, including diabetes, heart-related diseases, a history of stroke, seizure disorder and hypertension. The services they were supposed to receive consisted of supervision with bathing, grooming, ambulation and toileting and reminders to be compliant with medication.

He found that “for the most part, there was no distinction between overall services provided by the adult homes for residents in ALP beds or regular adult home beds other than the enhanced personal care services. Most of the class members did not know they were receiving any different services than anyone else in the adult home.”

In some cases, he reported, patients had been signed up for services they said they didn’t need; in others, the services residents said they were getting did not match what they were promised. Some felt their aides were helpful.

A similar, far more expansive report from 2007 by the Commission on Quality of Care found evidence of abuse. That report looked at a sample of 78 residents in adult homes with assisted living beds and found that their needs were often exaggerated so the homes could bill for more services. “Overall, the Commission found that the amount of Medicaid funding provided was far in excess of what it actually cost to provide ALP services,” the report concluded.

It also said the homes operated in an opaque system and it was difficult to gain a clear portrait of profits. The homes often set up relationships with outside providers. Those transactions were not documented in their financial reports to the Department of Health. To gain a deeper understanding, the commission had to “look behind the many related party transactions that are commonly found at the homes,” the report said. “Such transactions tended to mask the true costs of the program.”

Sundram’s recent investigation did not go that far. The Department of Health would not say if a more wide-ranging effort is underway, but Bruno said it is “routinely evaluating the effectiveness of existing policies and regulations and revising those policies as appropriate.” He also said that “the enhanced personal care services people receive in Assisted Living Programs are significant and have a major impact on quality of life.”

ProPublica asked the state for all of its audits of adult homes that had been awarded assisted living licenses in the last five years. It provided two summaries of two audits, and neither found any evidence of overbilling. The audits are not done on a regular basis. Their frequency is determined by complaints, unusual billing practices, claim activity and other factors. The state said these particular audits were not generated by complaints, but it did not specify what prompted them.

It’s difficult to tell just how much more money adult homes can earn once approved for assisted living. Adult homes can bill Medicaid anywhere from $90.26 to $151.87 per day per resident for assisted living services, depending on their level of need. If a resident is not in assisted living, the homes bill roughly $42 a day through Social Security, which covers food, board and other services. Without more detailed information on which residents are enrolled at which rate, it is difficult to assess profit. The homes are privately run and their financial records are not readily available to the public.

The applications they submitted to obtain their Assisted Living Program licenses only show estimated projections of profit, not profits for previous years. A ProPublica review of 18 of those applications indicates that each home expected to gain profits in one year of between $78,000 and $2.3 million through assisted living.

Introne, the former state official, agreed to review one of the applications and said it “reflects what I guess is the prevailing [Department of Health] view that Assisted Living is more of an enhanced revenue stream than a program.” He said he did not see enough evidence of an investment in services or physical changes in the building that would lead to quality care for frail, elderly residents.

In emailed statements and interviews, adult home attorneys and trade group representatives defended the Assisted Living Programs and said the facilities were too tightly regulated for them to overbill.

Newcomb said in an emailed statement that Sundram’s reports minimized the importance of “enhanced personal care services” and failed to appreciate “the official role that personal care and in turn the ALP plays in reducing nursing home admissions.”

She said that the additional profits can be used to help pay for services that often do not currently exist in adult homes, including the salary, benefits and training for a registered nurse, more credentialed home health aides and medical supplies.

Amy Kennedy, the executive director of another trade organization that represents adult homes in Albany, said assessments of residents’ needs are performed by qualified registered nurses. “The services that an ALP resident receives are based on the clinical determinations of licensed professionals,” she said. “Not the views of a facility’s administrator or operator.”

Asked about the cases in Sundram’s report, Sherrin, the adult home industry attorney, said it was “highly unlikely that the ALP is billing for a service it is not providing. Whether the resident fully understands what services are being provided and billed for is another question.”

A Regulator Barred From Regulating

In 2012, the Cuomo administration established the Justice Center for the Protection of People With Special Needs. It was his response to another series of scathing stories in the Times about care for developmentally disabled people.

Its mission statement suggests it would protect people who live in adult homes: “The Justice Center is committed to supporting and protecting the health, safety, and dignity of all people with special needs and disabilities through advocacy of their civil rights, prevention of mistreatment, and investigation of all allegations of abuse and neglect so that appropriate actions are taken.”

But the legislation that created the Justice Center contains a special exemption for adult homes with a certain number of beds designated for assisted living. The Justice Center only oversees homes that meet these specific criteria: “Adult care facilities licensed by DOH that have over 80 beds, and where at least 25% of the residents are persons with serious mental illness and where fewer than 55% of beds are designated as Assisted Living Program beds.”

According to Department of Health figures, at least 12 of the adult homes impacted by the court settlement have enough ALP beds to be exempt from Justice Center oversight.

ProPublica interviewed several current and former lawmakers who sponsored the legislation. They blamed the governor for the loophole.

Former Republican state Sen. Martin Golden, a co-sponsor, said the bill “came down from the governor in the last few weeks of session, and we were either going to pass it or get no bill. We thought it was important to pass the bill.”

Golden has received tens of thousands of dollars in campaign contributions from adult homes. In 2014, he wrote a letter of recommendation for one of his donors, the Garden of Eden in Bensonhurst, Brooklyn, to become an assisted living provider, calling it a “superior provider of housing for at risk adults.”

At the time, the home was in the thick of a yearslong court battle during which the administrator was accused of forcing residents attend a day treatment program of his choosing. At one point, Sherrin, who was representing the home in the matter, wrote to the administrative law judge presiding over the case and urged him to come to his decision because it was holding up the assisted living application process. Ultimately, the judge found that the home had failed to provide “courteous and respectful care and treatment” for several residents and ordered the home to pay a $25,000 fine.

Reached by phone, Golden said that he had no special connection to the home. He said that he accepted donations from a number of local businesses. “They were looking for someone good to be in office and do good things.”

He said there are tens of thousands of seniors looking for housing in New York City and many adult homes are closing because of inadequate financial support.

“I am not in favor of anybody that is hurting residents or not following regulations in the way they should be,” he said. “Our focus is to make sure that our seniors are safe, and that’s what we were doing and that is what we continue to do.”

The Garden of Eden obtained its assisted living license in May 2017.

As for the loophole exempting adult homes with a certain number of assisted living beds from oversight, he said: “Unfortunately, you are pointing out something I had no idea about. I don’t know where that number came from.”

Cuomo, who has accepted contributions from political action committees run by lobbyists and law firms that represent the adult home industry, blamed Senate Republicans.

“The Republican Senate threatened to block the agency’s creation as originally proposed by the governor unless its expansive jurisdiction over adult homes was significantly reduced,” said governor’s office spokesperson Don Kaplan. He shared the original bill, which contained broader protections.

“Republican senators even shut down negotiations several times specifically over the issue of Assisted Living Program jurisdiction,” he said.

ProPublica sent that statement to Roy McDonald, a former Republican state senator who was the lead sponsor of the bill, and spoke with him about it by phone. He said, “I didn’t have anything to do with changing that information,” but that it was easy for Cuomo to blame Republicans now that the Senate is controlled by Democrats.

He also said he lacked expertise on the industry, but was passionate about protections for the vulnerable because he has two grandsons with disabilities.

“The concept was: something is better than nothing, and up until that point nothing was getting done,” he said. “I don’t know all the curves, like in baseball. … I don’t know the language that would exempt certain facilities. I tried to do something rather than just have one bullshit meeting after another.”

Kaplan pointed out that Cuomo proposed a bill in 2016 to amend the original and expand coverage of adult homes. He shared a copy of it.

“It is difficult to justify providing the protections of the Justice Center to residents of a facility on one day, and not the next, based on a minor change in the population of patients at a particular facility, and based on a factor that likely has little to do with the safety of patients at the facility,” the bill said.

The 2016 bill never advanced beyond the Mental Health and Developmental Disabilities committee. Neither Golden nor McDonald were on that Committee.

The bill was picked up by former Republican state Sen. Kemp Hannon in May 2016. Records show his campaign, too, accepted donations from entities representing the industry in the months before and after.

Hannon told ProPublica he doesn’t know why the bill never advanced, but his intention was to expand the agency’s powers.

“I didn’t have any say over what was put on the agenda,” he said, adding he felt it was “dishonest” for Cuomo to blame Republicans. “They love to do it because we are no longer there. … But it’s now 2019. We have had three legislative sessions since then, including one where Democrats were in the majority. If they felt it was important why not pick it up again and go from there?”

Kaplan said Cuomo, a Democrat, “would consider” doing just that.

In an emailed statement, state Sen. David Carlucci, a Democrat who co-sponsored the original legislation, said such change may be necessary. “It’s important that we examine these oversight agencies to ensure they are keeping patients or residents safe, and if it’s found to not be the case, then we must identify where changes must be made,” Carlucci said in a statement.

The Justice Center, meanwhile, has come under fire in recent years for not being aggressive enough in pursuing investigations into abuse and neglect.

For their part, adult home representatives pointed out that nursing homes are also excluded from Justice Center oversight and regulated by the Department of Health, and therefore it made sense that adult homes with a significant number of ALP beds — catering to a similar population — would be too.

A Long Transition

In early 2018, Garaufis invited adult home residents to testify with respect to their concerns over the transition to supported housing. Every adult home involved in the litigation received a letter well in advance, requiring administrators to post an announcement.

Residents at nine adult homes complained that administrators did no such thing. The Department of Health investigated the complaints and found that in fact 10 homes, including the Garden of Eden, had failed to adequately communicate the timing of the hearing; four now have assisted living licenses.

“It is extremely troubling that four years into the implementation of the original settlement agreement there are still such blatant attempts by some adult homes to interfere with the work being done,” Sundram wrote.

To speed the transition, the state and plaintiffs agreed to disperse a team of “peer bridgers,” trained mental health professionals assigned to work with individual adult home residents interested in moving to supported housing. They are concerned about adult homes failing to provide them with a private space to speak with residents and demanding a list of residents that the bridgers want to speak to.

Sherrin said that the Department of Health has praised both Mermaid Manor and the Garden of Eden, which he also represents, for their cooperation with peer bridgers. The Department of Health would not confirm that.

Plaintiffs have complained that the state has not forced adult home staffers to stay out of their way. Garaufis made his opinion of this notion clear at a hearing in February. “An adult home is not a prison,” he said. “And you shouldn’t need the permission of the operator, the landlord, if you will, to visit anybody who lives there.”

He invited plaintiffs to subpoena adult home operators who they believe have obstructed the settlement, so that he can personally force them to stand down.

“If the state won’t do it, I will. And no one will be happy about it,” he said. “I want this to end before my 97th birthday.”