Hacienda HealthCare: Can They Overcome Their Shocking and Appalling Past?

From time to time at Healthcare Weekly we like to take a deeper look into prominent players in the healthcare industry. Today, we are going to focus the spotlight on the Phoenix, Arizona-based Hacienda HealthCare.

Hacienda HealthCare at a Glance

Company Name: Hacienda HealthCare, Inc.

Year Founded: 1967

Location: Headquartered at 1402 East South Mountain Avenue Phoenix, Arizona 85042, with two other locations in Phoenix, AZ, and Mesa, AZ respectively.

What They Do: A not-for-profit healthcare organization, Hacienda HealthCare offers a diversified portfolio of specialized social and healthcare services to Arizona’s chronically ill and medically fragile young adults, teenagers, children, and infants, including those with developmental & intellectual disabilities.

Website: www.haciendainc.org

Company History

Established in 1967 by Phoenix native Ilene Butler, the healthcare company was initially called Hacienda de Los Angeles (Spanish for “Home of the Angels”).

Butler’s ample experience working with special needs children proved instrumental from the humble beginnings of the organization. Since then, Hacienda HealthCare has woven through a colorful, storied, celebrated, and to some extent controversial history spanning more than half a century.

Here’s a timeline of key highlights in the history of Hacienda HealthCare:

1967: Ilene Butler was surprised to find out that state regulations at the time didn’t permit her to adopt kids, simply because she was unmarried. Determined to become a foster parent, Butler made a bold appeal to the state of Arizona to reconsider this position, especially for abandoned and institutionalized children with disabilities.

The state was quick to give her the green light to adopt three children — a three-year-old girl suffering from hydrocephalus–then also known as ‘water baby syndrome’–and two more kids with physical & developmental disabilities. It wasn’t long, either, before she took yet more children with special needs into her mobile home in Phoenix, enlisting the help of relatives as well as hiring a few nurses.

Having faced zoning problems at a mobile home park, Butler, with the help of her lawyer Steve Friedman, obtained an institutional license and registered the “children’s home” as a 501(c) (3) nonprofit organization. That’s how Hacienda de Los Angeles was born.

1970: By 1970, Ilene Butler, volunteers, and a staff of ten were caring for a total of nineteen children with diverse disabilities and special needs. In the next few months, the number of children grew so much that they had to switch to a bigger home that she aptly christened the “Home of the Angels”.

1976: A philanthropic member of Butler’s local church donated 6-acre prime land at 1402 E. South Mountain Ave. in Phoenix, Arizona (still Hacienda HealthCare’s current location). Subsequently, the organization’s first assisted-home-living facility for children with special needs was constructed on the western edge of the property with the support of a $40,000 kitty raised by a group of women in Ms. Butler’s church.

Upon completion in late 1976, the first lot of thirty-five children moved into the new 8,000-square-foot Hacienda de Los Angeles home.

1988: Another facility was put up on the immediate east of the first building in perfect timing to meet the just-passed federal regulations. These two adjacent buildings were to go on serving as the core social and medical care facilities for Hacienda de Los Angeles for the next 12+ years.

In 1989, Bill Timmons was hired as the first CEO of Hacienda HealthCare. He went on to become the company’s longest-serving CEO and chairman before resigning unceremoniously in early 2019.

1994: In 1994, nearly three decades after its inception, Hacienda set up Arizona’s first and only independent sub-acute children’s hospital in the city of Phoenix. It’s currently licensed with the Arizona Department of Health Services as Los Niños Hospital Innovative Home Health Care.

1997:  A number of favorable developments made 1997 one of the most defining moments for Hacienda.

First of all, the traditionally nonprofit institution established, for the first time in its history, a for-profit company under its healthcare umbrella. Called South Mountain Health Supply (SMHS), Inc., the company purchases pharmaceuticals and medical supplies in bulk and resells them to its nonprofit wing as well as to businesses and other assisted/skilled-living facilities and homes.

At about the same time, Arizona lawmakers eliminated licensing requirements for the nonprofit, allowing Hacienda to operate without the regulations, oversight, and inspections other healthcare facilities in the state were subjected to.

2003-2004:  In a bid to expand space available for patient care, Hacienda’s Board of Directors gave clearance for the construction of a new building. The work began immediately, and the fifty-eight-bed skilled-nursing facility for young adults, teens, children, and infants was opened in 2014.

2006: In 2006, the nonprofit organization changed its name from Hacienda de Los Angeles to its current brand, Hacienda HealthCare, Inc.

A few weeks later, Hacienda HealthCare established Innovative Home Health, the for-profit company offering a wide range of at-home nursing services for infants, children, teenagers, and young adults, as well as individuals with special needs. The company also offers Private Duty services across the Grand Canyon State, as well as short-term visits throughout Phoenix.

In the same year, several accusations and complaints were leveled against Hacienda’s then CEO Bill Timmons for allegedly sexually harassing a female employee, as well as verbally abusing, bullying, and threatening others.

While Timmons was kept in the job, the Hacienda HealthCare Board of Directors ordered him to undergo refresher training, and Hacienda has continued to gain traction since.

2015: In July 2015, Hacienda HealthCare opened the new, 20,900-square-foot Hacienda Children’s Hospital sub-acute facility in Mesa, Arizona, to offer services to the East Valley. The twenty-four-bed, four-wing facility sits in a two-acre plot at the Eastgate Business Park close to the Country Club Drive and Baseline Road.

The one-story facility offers non-surgical, non-emergency, and step-down healthcare (collectively called sub-acute) services to babies and children. It also provides hands-on, supervised training programs for parents.

With a robust team of nurses, doctors, and speech, occupational, physical & respiratory therapists, the Mesa-based Hacienda Children’s Hospital was designed to bridge the gap between patients being discharged from an acute-care hospital and settling back at home.

At the beginning of 2018, Hacienda’s intermediate-care facility for individuals with developmental and intellectual disabilities — based at its East South Mountain Avenue campus — had thirty-nine out of its full capacity of sixty beds occupied by patients aged between sixteen and sixty-eight. They were attended to by eighty-three employees, twelve of whom were licensed practical nurses, alongside nine registered nurses.

Between 2015 and 2019, Hacienda HealthCare encountered an onslaught of criticisms, complaints, and investigations across a variety of grounds, including rape, sexual harassment, mistreatment of patients, and bullying allegations.

After taking care of some of these burning issues, it was re-certified as a medical care provider under the federal Medicaid program in July 2018. But Hacienda HealthCare’s troubles were to be far from over.

The situation escalated so much at the start of 2019 that its longtime CEO & President Bill Timmons tendered his resignation on January 7 after serving the nonprofit for over three decades. Four days earlier, Arizona regulators had also suspended new patient admission at the facility.

The Current State of Hacienda HealthCare

In the face of criticism, complaints, and repeat investigations from local, state, and federal regulators, the company has experienced a significant decline in growth and fiscal health in the past two years. Even so, Hacienda HealthCare still remains a major provider of care facilities in Arizona for “medically fragile and chronically ill” persons ranging in age from infants to young adults.

At the moment–in April 2020–it boasts facilities across fifteen locations throughout the state of Arizona, with more than 560 employees offering comprehensive medical and social care services to over 2,550 patients daily.

Even though Hacienda’s health care delivery system is focused on Arizona, it’s not uncommon for the facility to attract interests and patients from other states, especially those flanking the Copper State.

At the core of Hacienda HealthCare’s business are four distinct nonprofit units:

• Hacienda Children’s Hospital
• Los Niños Hospital
• Hacienda Skilled Nursing Facility
• Hacienda Inc.

Together under the Hacienda corporate umbrella, these entities run more than forty specialized programs and services geared toward chronically ill and medically fragile babies, teens, children, and young adults.

Hacienda’s services and programs fall under six categories, all of which are provided by the nonprofit entities in conjunction with their for-profit arms of the organization.

Pediatric Care & Services take center-stage of Hacienda HealthCare’s core business model. One of the most recognized pediatric programs in Arizona–and perhaps in the nation–these services are offered through:

•     Hacienda Children’s Hospital, the only non-tertiary and free-standing children’s hospital in the state. It takes care of sub-acute children who haven’t recovered enough to be taken home.
•     Hacienda Skilled Nursing Facility, catering to pediatric patients, including children and infants with special needs. It’s Southwestern US’s only pediatric facility of its kind, offering eclectic home care to children, including palliative, respite, short-time, and long-term care.
•     Los Niños Synagis® Clinics, multi-location clinics that use Synagis® (Palivizumab) injections to make sure high-risk babies in Arizona are safe during the Respiratory Syncytial Virus (RSV) season. These clinics are located in Colorado, Prescott, Flagstaff, Gilbert, and Tucson.

In-Home Care & Services is another high-profile branch of the company, pushing its agenda of delivering individualized and specialized health and social services to the state’s chronically ill and medically susceptible.

It works through two entities:

•     Los Niños Home Medical Services, the state’s leader in supplying home respiratory care and home ventilators.
•     Innovative Home Health Care, its for-profit firm offering a broad range of at-home nursing services geared toward medically vulnerable infants, teens, children, and young adults, as well as those with special needs.

Autism Programs & Services at Hacienda HealthCare are provided through its Autism Vocational Training Program. It’s a dual program designed for young adults diagnosed with ASD (autism spectrum disorder), allowing them to experience diverse work environments before they choose their career paths.

Hacienda does offer world-class long-term and intermediate care services via its Hacienda Skilled Nursing Facility for individuals younger than forty-five, as well as through Hacienda Intermediate Care Facility, a fifty-bed facility providing specialized medical and habilitation care for infants, children, teens, and young adults.

Residential services at Hacienda encompass medical, non-medical, training, and caring programs designed to offer personalized support to individuals with developmental disabilities. It includes Phoenix’s only Daytime Treatment & Training for Adults (DTA) program for persons with learning and developmental disabilities.

From a financial standpoint, Hacienda HealthCare is fragile itself, having reported a series of net losses in the last handful of years. Although the company operates a mix of for-profit and nonprofit organizations, it has suffered significant capital funding shortfalls, and in some cases, has relied heavily on short-term donations, state grants, and handouts.

On a more positive note, the company has made major financial and management overhauls in the past two years, but it’ll unavoidably take several months before it comes out of the red.

Patrick White replaced long-serving CEO Bill Timmons at the helm in early 2019 amid rape claims pertaining to the assault of a patient by nursing staff, but he subsequently resigned at the end of February 2019.

Another set of ten top-level employees terminated their contracts with the nonprofit a month later, including Nancy Salmon (VP Corporate Communications), Kayte del Real (COO-Clinical), Valerie Brehm (Director of Nursing), Joe O’Malley (CFO), Kevin Payne (COO-Operations), Tina Meredith (Director of Healthcare Support Services), McKenzie Gillies (Director of Patient Care Services), Marianne Love-Day (Director of Corporate Compliance), and Kevin Berger, M.D. (Board Member of Hacienda HealthCare Inc.)

Currently, Perry Petrilli serves as the acting CEO of Hacienda HealthCare following the en masse resignation of the ten members of the company’s leadership team. Mr. Petrilli was a longtime Director of Social Services of the Intermediate Care Facility-ID before assuming the position.

With the hurried departure of Tom Pomeroy, Kathryn L. Del Real, Ralph Wallwork, Kevin Berger, and Patrick White in March 2019, Hacienda’s Board of Directors has shrunk to a bare three-person team comprising Gary Orman (Executive Vice President), Thom Niemiec (Board Member) and Mike Wade (Secretary).

Where Hacienda HealthCare Made Headlines

In recent years, Hacienda HealthCare has been in the news, and predominantly not for the right reasons. Let’s take a look at some of the recent cases where the nonprofit made significant headlines:

Hacienda HealthCare reaches a settlement with CMS to keep its Medicaid contract

In January 2020, the facility reached a settlement with U.S. Centers for Medicare & Medicaid Services to maintain its earlier Medicaid agreement. The CMS had issued a notice of intent saying it would stop paying its share of Medicaid money to Hacienda HealthCare on July 3, 2019, following reports of two unacceptable incidents.

The settlement was clearly a big win for the deadlocked Phoenix-based facility.

A 29-year-old disabled patient gives birth to a baby boy amid rape claims

On December 29, 2018, a seriously disabled twenty-nine-year-old female resident of Hacienda’s intermediate-term care facility suddenly went into labor and delivered a full-term baby much to the surprise of the nursing staff. Unaware that the patient was pregnant all along, the nurses on call had to call 911, fearing the baby was having breathing complications.

The incapacitated woman in question was mostly bedridden and non-verbal, but her identity was naturally never revealed since she’s a rape survivor.

It was later established through rigorous police investigation and DNA evidence that her thirty-six-year-old main practical nurse, Nathan Sutherland, was responsible for the pregnancy. Further investigation revealed that Sutherland may have raped the victim repeatedly for several years, undetected.

Sutherland was arrested in January 2019 and charged with vulnerable adult abuse and sexual assault. He pleaded not guilty to both charges.

The sudden birth and rape case elicited outrage throughout Arizona and in the community, with some of the staff being heckled on their way to/from work. The situation became so dire that management had to hire four full-time police officers and take down external signage that identified the facility.

Following the incident, attorneys of the victim’s family filed a claim seeking $45m from Hacienda Inc. and the state of Arizona. The case is still pending a ruling.

Consequently, CEO Bill Timmons resigned in the heat of the matter.

State issued a notice of intent to revoke Hacienda HeathCare’s license after maggots were found underneath a patient’s wound dressing

In June 2019, just six months after the unfortunate rape & birth incident, Arizona’s health department issued a notice annulling Hacienda’s license. The intent was issued after a respiratory therapist reported that she found between six and twelve maggots under the gauze bandage of a twenty-six-year-old patient at the facility.

In the notice, the state officials claimed that the “infestation” was “likely due to inadequate and/or poor … hygiene.”

In response, Hacienda HealthCare management ordered the facility to be inspected and sterilized by a pest control company. They also hire a contractor to install doorway blower fans to keep flies and insects from entering the premises.

The intent to revoke the facility’s license gave the state’s health department more control and oversight over the sixty-bed facility, considering that grounding it to a halt would have displaced its highly vulnerable residents.

Following the maggot incident, the federal government took an even more drastic measure against Hacienda HealthCare for failing to meet basic safety and health requirements. The Centers for Medicare & Medicaid Services (CMS) decided to terminate their Medicaid contract with the facility, a move that Hacienda HealthCare contested in court.

Where Hacienda HealthCare is Going

With stricter state and federal oversight as well as the mass exodus of employees, it’s fairly safe to say that the future of Hacienda HealthCare is likely hanging in the balance. But there seems to be light at the end of the tunnel for the embattled healthcare facility.

The Arizona Department of Health Services announced on 16 January 2020 that Hacienda HealthCare would keep its state-issued license after issuing the intent of revoking it in mid-2019. The federal government, through CMS, has followed suit.

This gives the company the much-needed clearance and “breathing space” to continue to operate and push its core initiatives forward.

With Perry Petrilli in the driver’s seat, we project that the company will continue regaining state, patient, employee and public trust, albeit gradually.

As Hacienda is Arizona’s only free-standing nonprofit providing residential care for persons with intellectual and physical disabilities, this may work in its favor. Some of Hacienda HealthCare’s residents and patients are so chronically ill and medically fragile that relocating them could be detrimental to their health and wellbeing.

Most families with loved ones at Hacienda also agree that the facility plays a crucial role and should stay open. Its comeback, however, will not be a walk in the park.

Despite removing the “bad actors” among the management team and staff, it may still take Hacienda HealthCare months before it can return to its prime.

The reversion of the Medicaid agreement is unquestionably a step in the right direction, and one of the many bold moves the nonprofit will have to take to instill confidence in state actors, talented employees, and compassionate volunteers, as well as to start encouraging new admissions once again.

Three Big Questions for Hacienda HealthCare

1- How would an overhaul of Medicare or the healthcare system impact Hacienda HealthCare?

As more lawmakers call for reforms in the healthcare sector, radical proposals such as ‘Medicare for All’ and the revamp of the Medicaid Funding Distribution System may have a significant impact on independent residential care facilities like Hacienda HealthCare.

Yes, any substantial reform would need major realignment of the entire sector, which is currently the biggest employer in many states including Arizona. Because Hacienda intermediate-care facility relies heavily on Medicaid contributions, the facility will probably lose part of its income.

It’s worth noting that the organization runs a few for-profit entities that operate as middlemen in the supply of home ventilators and home respiratory care services. These intermediaries are some of the biggest targets of reforms in the way prices for drugs and medical devices are negotiated.

All up, it’s still too early to predict how the company’s core business will be affected.

2- How equipped are they to handle any big-picture technological shifts that impact their business?

Healthcare technology is a rapidly evolving industry with major capital investments put in place across many new services and products, backed by emerging technologies such as Artificial Intelligence (AI), Big Data, and Virtual Reality (VR).

Hacienda HealthCare, however, operates in a niche sector. In light of the fact that there’s little research to this end, it’s not clear which technology disruptions will have the biggest impact or potential in terms of this facility.

For example, reimbursement for long-term and intermediate care technology from private insurance companies, state and federal payers is still minimal.

Reimbursement aside, there’s a great opportunity for emerging residential care technologies to improve care delivery, improve employee efficiency, and enhance the quality of life of residents at Hacienda HealthCare.

3- What are the next best opportunities for growth for the company?

Currently, the company operates four high-profile nonprofit entities under its corporate umbrella: Hacienda Children’s Hospital, Los Niños Hospital, Hacienda’s Intermediate Care Facility for the Intellectually Disabled (ICF-ID), and Hacienda Skilled Nursing Facility.

As soon as it goes beyond its muddled recent past, perhaps the best opportunity for growth is to increase resident enrollment and ramp up fundraising initiatives.

With facilities already in place, it may also benefit from diversifying into offering long-term, skilled, and intermediate care services for older adults with intellectual and physical disabilities.

A Final Word

Hacienda HealthCare is a one-of-a-kind healthcare facility in Arizona, offering specialized social and medical services to chronically ill and medically vulnerable kids and young adults. It also offers short-term, intermediate, skilled, and long-term care for individuals with disabilities (ID).

The nonprofit just came out of a scathing period marked by reports of rape, financial irregularities, and patient abuse. However, since then, the vast majority of the Board of Directors have resigned, the CEO has changed twice, and some residents have been moved elsewhere. In addition, it seems fair to assume that there will be greater scrutiny from external bodies, moving forward.

With reforms in the leadership team, Hacienda HealthCare is surely on the course of recovery. Looking into the future, the facility will likely expand its pediatric, autism, residential, and home-care services beyond Arizona.

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