LITTLE TOKYO, INC: The Sale of Keiro — Oyasute no Hi?


Jonathan John KajiBy JONATHAN KAJI

In Japan, Sept. 21 was “Keiro no Hi,” or “Respect the Elderly Day.” It seems ironic that the details of the pending sale of the Keiro Senior HealthCare facilities were divulged last month.

An open public forum was held at Centenary United Methodist Church on Sept. 29. The social hall was full of concerned individuals, including residents, family members, Keiro volunteers, and community activists. The crowd was a predominantly senior crowd.

There was an overwhelming sense of fear, anger and confusion in the room. An unspoken tenseness and helplessness, like the evacuation photographs lining the walls of the Japanese American National Museum. An abandoned people.

The Keiro management, under the leadership of President and CEO Shawn Miyake, and with the support of the Keiro Board of Directors, has entered into a conditional agreement to sell the facilities to Pacifica Companies LLC for $41 million. (Or, by one financial metric, $67,000 per head multiplied by 615 beds.)

In reviewing the documents provided to the state attorney general, it’s a great deal for Pacifica, which already plans to outsource management of the Keiro facilities to two firms. Each firm will pay a monthly ground lease to Pacifica. Pacifica can place debt on the real estate while financing the acquisition based on the ground lease revenue generated by each facility.

As they say in the business, “great upside potential for growth” (i.e., greater revenue through increasing fees and rental rates). And it’s likely that at some point in the future, Pacifica will sell out its interests to another firm, perhaps a real estate investment trust or fund manager for a pension fund with billions of dollars ready to deploy to acquire healthcare facilities on the West Coast.

Concurrently, plans are already in the works for the “New Keiro” to open offices in the medical office building located at Third and San Pedro streets.

Assuming an annual 5% return on a portfolio composed of the net proceeds of $37 million, or $1.85 million, the “New Keiro” will provide Mr. Miyake and those other fortunate senior staff members and board members with a sinecure, a stable stream of income, to support salaries, benefits, perks, executive offices, company cars … free of operating Keiro facilities or caring for elderly residents.

While Mr. Miyake and the Keiro Board trumpet the deal as a great accomplishment, the contrasting feelings at the public forum were akin to the death of a loved one. No one was buying into the Keiro press release spin. Just the opposite.

There were many, many questions aired into a vacuum of silence. Mr. Miyake says in his Rafu Shimpo interview, “It’s on the website.” In response to requests for answers, Keiro management, rather than being welcoming, open and transparent, has taken on an adversarial and secretive posture.

Why? When did the relationship between Keiro leadership and the community decline into “us versus them?”
Is there an assumption by Keiro leadership that a senior care operator from outside of our community can do a better job of taking care of our senior citizens? Had Keiro leadership exhausted every possible option before choosing, what many believe, is a step taken only if the corporation is on the verge of bankruptcy?

Everyone knows that the cost of everything is subject to market fluctuations. Whether it’s a loaf of bread, a cup of coffee or a gallon of gasoline, pricing is variable. This is especially true in the healthcare industry.

It’s absolutely no surprise that rising healthcare costs, combined with the reduction in Medicare and Medi-Cal reimbursements, have widened the financial gap between revenues and expenses. Fundraising via the annual dinner, golf tournaments or other donations barely covered the shortfall before the implementation of Obamacare. Apparently, the gap has now become a chasm.

However, did Keiro management ever have an open discussion with the residents and family members about how the Keiro family could collectively cover the costs? Were price hikes ever instituted? If not, why not?
While the Keiro/Pacifica deal may meet certain legal requirements under the state attorney general’s conditional approval, the ethical and moral obligations of this decision impose a higher standard on the Keiro management and board. Most community members cited that access to the attorney general’s Keiro file was difficult if not impossible to obtain, thereby greatly reducing any public input during the public comment period. (And, no, the files were not uploaded on the Keiro website.)

One could argue that the original intent of the founders of Keiro was to provide a safe and peaceful place for our Nikkei seniors to live out their golden years. Generations of Nikkei entrusted the care and welfare of their beloved family members to Keiro.

These same families have also provided the base of support for the hundreds of volunteers who donate their time, talents, funds and energies to ensure that Keiro truly honors our elders as they age, grow frail and pass away.

Does an implied moral and social contract exist that requires the Keiro management to either maintain the current facilities for the residents or provide new facilities in suburban areas such as the South Bay, the Valley, Orange County or Ventura County?

In a different scenario, let’s say that the Keiro Board announced the sale of the old facilities. The net proceeds would go towards the purchase of new facilities and cover the relocation costs for all the residents. Under these conditions, the residents would see an upgrade in their living conditions and the general community would likely wholly support such a move.

Or, in another hypothetical scenario, the Keiro Board holds an open community meeting. Mr. Miyake states, “申し訳ございません。We are truly sorry. As you know, we’ve implemented pricing hikes, we’ve spun off some of our four facilities with great regret, we’ve economized, we’ve done everything possible to keep Keiro operations going. On behalf of the Keiro Board, I wish to thank everyone for their hard work and best efforts. We have tried our best.

“However, it is with great sadness that we have to announce that we are unable to sustain current operations. Yet, because Keiro Senior Health Care truly cares for each one of you and your family members, we promise to help each of our residents to find other facilities in the area, pay for your move and negotiate an agreement to ensure that your costs are kept within your ability to pay.”

While painful, the Keiro community would completely understand that every possible step had been taken by all hands to ensure the survival of the institution. Then, “shikata ga nai.” People would understand.

We have to believe that if Keiro leadership openly and clearly communicated both the financial challenges, laid out a clear path of action and gained a consensus from the residents and the community, we would not be faced with this current crisis of leadership.

Perhaps, the reason why the Keiro Board has been playing “hide and seek” with the community is their knowledge that, while the deal itself may be legal, the reasons for the sale fail to meet the moral and ethical obligations owed to the Keiro residents and family members.

Back in the days when my maternal grandfather, Dr. Kikuwo Tashiro, worked out of the Japanese Hospital of Los Angeles located in Boyle Heights or out of his medical offices in Gardena, I heard many stories of how some of his patients, too poor to pay for his medical services, brought gifts of fruits, vegetables, fish and eggs.

Typically, like other old-school doctors, he would either accept the gifts or wave them off, telling them next time would be fine. Everyone helped each other. From tanomoshi investment clubs to koden at funerals, the community pulled together.

Those Issei and Nisei doctors would be absolutely shocked and appalled to see how Keiro Senior HealthCare, the successor to the Japanese Hospital and City View Hospital, has now “commoditized” and monetized the elderly, taking the proceeds and leaving the residents behind.

What will happen after the five-year “grandfather clause” expires? It doesn’t take a genius to see the writing on the wall. After all, the buyer is a for-profit corporation. If residents cannot pay the market rate for healthcare, an eviction notice will be forthcoming. We all know that Medi-Cal/Medicare reimbursements are insufficient to cover costs. Is the ultimate solution to cut them all loose?

For those elderly residents who have no living family members or children, what happens next? Is that when that 90-year-old senior whips out his/her smartphone from the wheelchair and clicks on the Keiro “Umbrella of Care” app? What about that $41 million? Any of that cash set aside as a reserve to cover any future resident funding shortfalls?

Mr. Miyake and the board have created their own “credibility gap” with the community they’ve been entrusted with protecting. Can Keiro management convince a mistrustful and skeptical audience that this deal is truly in everyone’s best interest, while they see Mr. Miyake and a select few making off in a $41 million “lifeboat” and abandoning a sinking S.S. Keiro?

The audience may be respectful and restrained for now; however, as the clock ticks down, questioners are stonewalled by legal counsel’s talking points, and the probability of the deal closing grows near, frustration will lead to anger and community action.

If the deal closes in its current form, the event should be memorialized by a new term.

Instead of “Keiro no Hi” (敬老の日) or “Respect the Elderly Day,” how about “Oyasute no Hi” (親捨ての日) or “Abandon the Elderly Day”?

In ancient Japan, during times of famine, some villages took their elderly deep into the mountains or to a desolate place and left them there to die of starvation, dehydration or from exposure to the elements.

Mr. Miyake, how do you respond?

Jon Kaji is president of Kaji & Associates, a real estate firm based in Gardena. He is a member of the Board of Governors of the Japanese American National Museum and a member of the Board of Directors of the International Visitors Council of Los Angeles. Opinions expressed are not necessarily those of The Rafu Shimpo.


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