Buy Back Keiro: A Ridiculous Idea?

By administrator|May 14, 2017|Advocacy, Articles, Feature, In the News|

[KSCA submitted the following article to The Rafu, which published the English version on May 3, 2017.
Japanese translation available below.]


Matsumoto 2Let’s think about this for a moment.

Years preceding the sale, Keiro was not in financial difficulties according to the annual financial statements.  Keiro was making money.  Keiro had a waiting list for the retirement home until the announcement to sell.  Keiro had about $14 million in endowment designated specifically for the continuance of the nursing home and intermediate care facilities and had about $20 million in liquid investments before the sale.  Keiro benefitted from decades of volunteer services translating to millions of dollars of donations.  Keiro profited from decades of monetary donations from Japanese Americans and Japan.  Keiro enjoyed the unwavering loyalty and trust of the Nikkei community.

What were Keiro’s arguments to justify the sale? Keiro mentioned demographic changes; generational and mixed race indifference, lack of future demand and need, and changes in Medicare and MediCal future payment challenges.  Afraid of the unknown future? Afraid to meet the future challenges?  Convinced that they cannot succeed? Ensign Group, Pacifica, and Aspen were not afraid nor hindered by these future challenges.

On November 19, 2013, the United States Justice Department reported that Ensign Group paid $48 million to settle allegations of Medicare fraud. On July 16, 2014, Keiro selected and announced the sale of the facilities to Ensign Group for $44 million.  On October 13, 2014, this sale was rejected by the California Attorney General albeit Keiro gave no specific reason for the rejection.

In September of 2015, Keiro selected and announced the sale of the facilities to Pacifica Companies for $41 million.  During the time between the Ensign debacle and the sale to Pacifica, properties appreciated in value.  Why sell Keiro for $3 million less?  In selecting Pacifica, did Keiro know that on April 10, 2015, the North Carolina Department of Public Health and Human Services suspended admission and sent a notice of intent to revoke the license for Pacifica Senior Living facility in Wilmington, N.C.?   Originally Pacifica only bid for the retirement home which is not affected by Medicare, MediCal, or Obama Care mandates or reimbursements.  All the residents at the retirement home pay privately.  The retirement home was solidly profitable.  Why sell it?  Separately, Aspen only bid for the nursing homes which according to the financial statements were making money.  Making money and backed by an endowment, why sell it?  In the end, Keiro insisted on one buyer for the facilities: Pacifica.  Pacifica is now the landlord and leases out the management of the facilities to Aspen and Northstar and collects over $2.4 million per year in rent.  Like Pacifica, Keiro could have kept ownership of the facilities and contracted out the management to Aspen and Northstar.  With competent management, creativity, courage, and the steadfast loyalty of the Nikkei community, Keiro could have solved all the future financial and demographic challenges.  The sale of Keiro was a ridiculous idea.

Buying back the former Keiro facilities is the most expedient and cost effective means of recommitting to the original mandate of Keiro: to provide healthcare facilities for the Nikkei seniors.  To rebuild the facilities de novo, it will take ‘years’—versus taking only months to buy it— and it will be costlier.  Rebuilding will face numerous headwinds: feasibility studies, finding a location, architectural planning, construction costs and delays, accounting costs, legal costs, licensing, post-construction cash flow problems, annual inflationary degradation of monetary funds, finding new patients and residents, and the possible loss of community interest and engagement.   Keiro now has about $70 million which include a $14 million albatross: the ‘Legacy’ endowment fund.  At the Keiro’s 50th-anniversary event in 2011, donors gave nearly $800,000 for this endowment to the ensure the continuance of the facilities through problematic changes in Medicare and MediCal reimbursements.  For Keiro to spend a dime from this endowment fund for any reason other than for the continuance of the facilities, Keiro will violate the trust of the donors.  The rest of the $70 million presents the decades of investments, other donations, volunteer contributions, the operation of the facilities, and the sale proceeds.  Keiro should use the $70 million to repurchase the former Keiro facilities from Pacifica.

The new leadership of Keiro with Ms. Leona Hiraoka as CEO and President has the unique opportunity to regain the trust and to unite the community toward a hopeful future for our aging Nikkei.  The new Keiro leadership is not bound by the decisions and direction made by her predecessor, Mr. Shawn Miyake.  The opportunity exists now to repurchase and rebuild a new Keiro dedicated to our cultural tradition of love, honor, and care for our elders: the Shin Issei, the various generations of Nikkei, and the mixed-race Nikkei.  Let’s create a new Keiro that will be the envy and model for other ethnic groups.  Reinvigorate and unite the Nikkei community. Buy back Keiro!


Takeshi Matsumoto, M.D.

President, Koreisha Senior Care & Advocacy

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President 松元健 医師