Nursing home domain debated Landlord wins ruling over director, forcing county home to close

Bed rights go with land

Rent case grows to one that could 'undermine state's authority'

December 08, 1997|By Joan Jacobson | Joan Jacobson,SUN STAFF

After six years, nursing home director Lois McGovern was put out of business by a judge's ruling that could jeopardize similar nursing home operations in Maryland -- and the state's ability to regulate them.

McGovern closed her Catonsville Nursing Home last month after a Baltimore County judge ruled that her right to operate a 96-bed nursing home belongs to her landlord -- a man convicted of Medicaid fraud and banned from running a nursing home.

The decision by Baltimore County Circuit Judge Alfred L. Brennan Sr. -- that "bed rights" go with the land, not with a licensed nursing home operator -- kept McGovern from moving her operation and put her out of business just as her lease was to expire.

Brennan's unprecedented ruling -- being appealed by McGovern and by state officials -- affects any nursing home on rented

property that has been in operation since before 1978, when the state adopted new nursing home regulations. Kurt J. Fischer, an attorney for landlord Joseph H. Loveman, said the judge's ruling preserves his client's property rights -- which always included the rights to the beds.

But McGovern says the judge's ruling has ruined her livelihood and taken away a $300,000 investment she made by purchasing the "bed rights" and equipment from a previous nursing home operator that rented Loveman's building.

"Who would have thought you could pay and work for something and with a stroke of a pen, a judge could take it all away?" McGovern asked recently, after the last patients had moved out.

McGovern's predicament began as a seemingly simple landlord-tenant dispute over rent.

Since 1991, McGovern had rented a building at 333 Harlem Lane in Catonsville from Loveman, who had once run Shangri-La Nursing Home there.

In 1981, Loveman was barred from operating a nursing home when he pleaded guilty to Medicaid fraud. The state had accused him of using Medicaid funds to pay dues for the Center Club and the Baltimore Symphony Orchestra, to pay his housekeeper's salary and veterinarian bills.

Since then, Loveman has rented the building to several nursing home operators -- most recently to McGovern. After Loveman suffered a stroke nine years ago and was himself moved to a nursing home, his wife, Aurelia Loveman, took over guardianship of his business affairs.

McGovern, upset over increased rent and an aging building, planned to move the nursing home -- and her rights for 96 beds -- to another site when her lease ran out Dec. 20.

But Mrs. Loveman sued to stop McGovern, claiming the bed rights stayed with the property. Without them, she argued, the building -- constructed as a nursing home -- would be worthless.

Mrs. Loveman's lawyers argued that because the property had been used as a nursing home before 1978, when new state regulations for nursing homes were adopted, the bed rights were "grandfathered" and permanently attached to the property.

And although Mr. Loveman has been barred from operating a nursing home, as landlord he should be allowed to lease the property to a licensed nursing home operator, his lawyers said.

In April, the judge agreed, comparing nursing home bed rights with "the nonconforming use granted to a gasoline station operating in a residential area before zoning laws," he wrote in his opinion.

The state recently allowed Loveman to sell the right to the 96 beds to a former partner of McGovern's.

The decision has drawn criticism from McGovern's lawyers, state health officials and others who follow health care law.

In written arguments before the appeals court, state health officials say the decision is contrary to state law requiring that the owner of a nursing home's bed rights also be a licensed nursing care operator.

By giving the bed rights to a property owner not covered by the nursing home regulations, Brennan's ruling could "undermine the state's authority to sanction nursing home operators. It's hard enough to do that as it is," said Joan O'Sullivan, a professor of health care law at the University of Maryland Law School.

Paul D. Raschke, who is McGovern's lawyer, said that landlords could use the ruling to put some nursing home operators out of business. "It also means you lose all equity in the operation," he said. "The patients are the ongoing business. If you can't transfer those patients to another site, you're out of business."

After Brennan's April decision, McGovern told her patients' families she was going out of business and a new nursing home operator would take over the Catonsville property. Patients' families began hastily making plans to move their elderly relatives. The building emptied by early last month.

Arlene Lane moved her 86-year-old great-aunt to another home because she could not predict the quality of future management at Catonsville.

Before McGovern took over the nursing home, "people had been neglected. They were lifeless. I could envision that happening again," Lane said, adding that "Ms. McGovern and her administration breathed life into the people."

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