For several years Keiro NW has experienced financial losses. After examining several alternatives, the Board of Directors has made the difficult decision to phase out several of its programs, including the rehab and skilled nursing facility. This action is necessary to allow the best possibility of building a sustainable business and ensure continued community control.
We are very saddened by the decision to close KRCC. The Japanese American community should be so proud of what was built years ago by the Magnificent 7 and the thousands of people we have served over our 40 year history.
Update: The effort led by Tomio to raise $5M in 60 Days (to evaluate and assess how to use the 1601 E. Yesler property as well as cover the operational shortfalls of the remaining programs) has expired. No funds were raised.
Community Update 7/12/19
The Keiro Northwest Board and its Management Team appreciate the patience and understanding by the residents, their families, the Keiro staff, and the community that has always so generously supported our mission as we navigate through these trying times.
As you likely already understand, our current position is dire. The newly reconstituted Board is doing its best to deal with the situation and identify the best options for moving forward. Presently the organization is losing money at a rate that has narrowed the range of the choices we have to create a positive outcome, but we do have options to put Keiro Northwest on a positive trajectory.
The Board is committed to an outcome that prioritizes our mission and the well being of all of the residents we serve, our staff, and the Keiro community. We understand the emotions and stress this situation has caused, and for that we are truly sorry. Many of the Board members as well as staff have a strong emotional and personal bond, having family and friends cared for at the Keiro facility. We are pursuing the following plan of action, knowing that time is of the essence and that everyone involved with the Keiro community deserves clear and transparent answers.
· We are thoroughly exploring a number of options with respect to the future of the Keiro Rehabilitation and Care Center, its programs, and the facility.
· We are in close contact with the Department of Social and Health Services as we work to place residents affected by the closure, and we are working with the Attorney General’s office on our options for continuing to fund the organization.
· We are exploring potential opportunities and developing a plan to ensure the sustainability of Nikkei Manor and Kokoro Kai. These plans are dependent on near term decisions that are being made related to KRCC.
· We are working with local community groups to potentially transition our Transportation & Nikkei Horizon programs.
· The corporate staff are working diligently to separate out many shared services that have been in existence for several years.
This work is laborious, and we commend all of the staff for staying to help make this transition for all programs possible.
The Board and Management understand that there is a high need for clear and timely communication, as well as the reality that in these circumstances, what we are able to communicate will feel insufficient. It is important that we not undermine ongoing discussions with potential partners or unintentionally give mixed messages or false hope to our residents and community. We are committed to sharing decisions and outcomes as soon as we can do so at each step of the transition process.
Our goal is to provide the best outcomes for the current Keiro residents, staff, and community, and to continue the Keiro mission.
What does this all mean?
After reflecting on all possible alternatives, Keiro NW Board of Directors has made the difficult decision to phase out several of its programs over the next twelve months. The action was made necessary because of unsustainable financial losses that date back to 2012.
What programs are affected by this decision?
- Over the next 6 months, Keiro NW will phase out its skilled nursing and rehab program, affecting approximately 100 residents who are currently receiving long-term skilled nursing services.
- Keiro NW’s Home Care program will also end, affecting 13 clients.
- Keiro NW’s Continuing Education program will phase out through the end of the year, affecting approximately 700 participants.
- Keiro NW’s Catering program will close sometime this summer.
- Keiro NW’s Transportation program will close mid-summer, impacting the 1,300 trips we make each month.
- Keiro NW’s support staff, corporate staff, and Senior Leadership will also phase out through the end of this year, impacting our annual events, outreach, and philanthropy.
What will happen to the people served by those programs?
All of those affected by the program phase outs will be given time and support in finding alternative arrangements. Keiro NW is working closely with the State of Washington to ensure a safe and compassionate transition of all long term residents.
What happens to employees?
Employees affected by these changes will have access to professional outplacement services to prepare them for new employment opportunities. In addition, Keiro is working with other local facilities to hold a job fair to also provide greater opportunities for our employees to easily transition during this time. Our employees are the heart and soul of Keiro. There are no words that can adequately express our gratitude for their services and devotion to our clients and residents.
What will happen to the other programs?
The organization will continue to serve the community through its assisted living facility, Nikkei Manor.
How did Keiro finances get to this point?
The financial stability of Keiro NW has always been fragile, but it experienced its most significant financial challenges over the last decade, triggered by the Medicaid Shortfall of 2008-2010. Most challenging has been the continued operation of the Rehabilitation and Care Center due to the following factors:
- Federal actions have markedly diminished the availability and predictability of Medicaid resources for skilled nursing, and is slated for another set of reductions and more stringent eligibility guidelines this October
- Keiro NW has had difficulty absorbing the financial impacts of regulatory requirements such as the 24/7 RN Coverage Requirement and Seattle’s 40 Hour minimum wage requirement
- In an effort to address its financial condition in 2014, Keiro NW made a number of costly investments that did not attain their original financial expectations.
- Deferred maintenance at the Rehabilitation and Care center and Nikkei Manor has resulted in the need for several unanticipated but costly repairs
What will happen to the Nikkei Manor (Assisted Living) and Kokoro Kai (Adult Day Programing)?
This has been a difficult period of change for KNW, the KNW Board reaffirms that this decision was made with much difficultly. KNW is committed to its foundational legacy to provide services to our aging family members who are in need of culturally sensitive services. These two programs will remain active.
What if I have further questions?
If you have additional questions, please continue to email them to AskKNW@keironw.org.
Unanswered Town Hall Questions
|Unfortunately, we were unable to hear all of the questions during our time together at the Town Hall on May 14th. We have compiled your unanswered questions and would like to dedicate this section of the Keiro Konnector to answer a few of them every week. |
1. As minimum wage needs to be absorbed what is the financial gap between the highest and lowest paid employee?
a. The organization does not publish the salaries of individual employees, regardless of position.
b. Top position salaries of a non-profit are public information via the IRS form 990.
c. In 2018, management conducted an exercise to ensure compliance with minimum wage requirements, in addition to a market analysis of all positions within the organization. All employees’ salaries were changed to reflect this work by 12/31/2018, with the only individual employee to not receive any adjustment to pay as a result of that work (including no cost of living adjustment), and despite taking on the responsibilities of 3 positions, was the current CEO.
2. What is the bottom line? Board wants to save what?
a. The Board wants to ensure the continuation of serving our mission: “We empower our Asian Pacific Island Community through a continuum of exceptional healthcare services that are culturally sensitive.” The Rehab & Care facility will NOT be saved.
3. Is Keiro NW in danger of bankruptcy?
a. Yes, which is why these decisions are being made now.
4. Does closing these programs guarantee survival of Nikkei Manor and Kokoro Kai?
a. No. There will have to be several other changes to ensure the continuation of those programs.
5. Can we approach wealthy families (Gates, Blamer, Allen) for support?
a. Through the 40 More Years campaign, many individuals and companies were approached for support.
b. Unfortunately, many foundations and charitable organizations have aligned their philanthropic efforts towards causes that do no align with our mission.
6. What can the state government do to help?
a. The Department of Social and Health Services (DSHS) will be assisting us to help place residents.
b. The State and Federal government are strongly supportive of those programs that help our elderly age through the use of Home and Community Based Services.
7. Why close Nikkei Horizons and not Kokoro Kai?
a. Kokoro Kai also serves as the activities function for Nikkei Manor, which is required for an Assisted Living facility.
b. With the closure of the Rehab & Care Center, the sale of the Washington Medical Center (WMC), and the phase out of Keiro NW’s support staff, corporate staff, and Senior Leadership, Nikkei Horizons is logistically affected more than Kokoro Kai.
8. We were told that Kokoro Kai loses money – Nikkei Horizons benefits more people than Kokoro Kai. Where’s the logic?
a. Nikkei Horizons currently benefits 192 people and Kokoro Kai benefits 30 people.
b. Both programs, unfortunately, have historically been under-priced and haven’t covered costs.
c. Kokoro Kai also serves as the activities function for Nikkei Manor, which is required for an Assisted Living facility.
d. With the sale of the Washington Medical Center (WMC) and the phase out of Keiro NW’s support staff, corporate staff, and Senior Leadership, Nikkei Horizons is logistically affected more than Kokoro Kai.
e. Nikkei Horizons operates in a completely different industry (continuing education and international travel), which requires different support to be sustainable for the future (e.g., marketing, program development, revamped website, new system/software, cash management, and financial support).
f. Nikkei Horizons is a valued and much-loved program, and management would encourage a committed community member to evaluate whether the program could spin-off as its own non-profit entity.
9. Were funds misappropriated? If so, who is accountable?
a. No funds have been misappropriated.
10. How did LA Keiro get major donors from Japanese companies? Can we get backing from similar companies in Seattle?
a. Through the 40 More Years campaign, many individuals and companies were approached for support. Unfortunately, many foundations and charitable organizations have aligned their philanthropic efforts towards causes that do not align with our mission.
11. Is there any possibility to address the gap between cost and reimbursement at the state level for Medicaid?
a. The State and Federal government are strongly supportive of programs that help our elderly age through the use of Home and Community Based Services. The organization made changes through 2018 to address some of our reimbursement. In late 2018/early 2019 we were beginning to see positive changes as a result of these efforts. However, given the short time horizon, these changes were not material enough to make up for the accumulated losses over many years in such a short period of time. In addition, conversations with government officials supported the efforts of moving towards Home and Community Based Services.
12. Why has Keiro gone from 5 Star to 2 Star?
a. Early in 2018 the organization realized that material changes needed to be made to operations to stabilize the organization. A Directive from the Board was that maintaining our 5 Star status was not a priority – ensuring continuation of care was. Significant changes were made to staffing levels, processes, and operations to turn around the situation; which had an adverse impact to the ratings.
Are Board members willing to publicly pledge against personal financial gains by its actions? Especially the Board Chair?
We will internally discuss if the Board of Directors would be willing to take this request under consideration.
What steps have been taken to reduce costs and administrative overhead?
Steps to reduce costs:
- Consolidated redundant systems (time-tracking, payroll) and banking relationships.
- Evaluated and changed key vendor relationships with rehab, pharmacy, oxygen, and cell phone providers to decrease costs.
- Established new staffing ratios that fluctuate based on census.
- Converted most functions to being 90% paperless.
- Doubled employee premiums to reduce benefit costs.
- Re-organized resident placement according to acuity, reducing the need to have high staffing ratios everywhere.
- Monitoring and reporting on agency and overtime usage.
- Steps to reduce administrative overhead:
- Had one individual perform the CEO, CFO, COO, and CAO roles.
What actions have been taken to streamline operations to increase efficiencies?
- Centralized purchasing, inventory management, cash receipts, accounts payable, and IT.
- Implemented new system functionality to increase efficiencies (e.g., credit card management, scheduling, direct carrier feeds for employee benefits, retail lockbox, pharmacy integrations, and electronic lab results).
- Leveraged existing software functionality to automate tasks (e.g., employee benefits administration, care plan library triggers, electronic assessments).
- Enabled new payment options for customers, including paying via ACH, Square, and PayPal.
Where has all of the money gone that was donated through the years?
The organization has used the monies to help serve and support our programs.
If you knew years ago, why did you not share the information and only give the community 60 days to respond?
The Board of Directors and Management have done their best to reach as many constituents as possible over the past 18 months to convey the severity of Keiro’s position, including using local publications, several town halls, newsletters, open houses, weekly communications, etc.
What is the action plan and who will implement the plan for the next 60 days?
The Board of Directors, led by Board Chair Tomio Moriguchi, have led the efforts to the 60 Day Plan.
What is WMC? Why is it necessary to sell to fund the closure?
WMC is Washington Medical Center. This property is across the street from the KRCC facility.
It is unfortunately necessary to sell this property in order to fund the closure.
The town hall meetings in May reported that there were approximately 13 clients receiving Keiro’s Home Health services, and approximately 100 residents receiving long-term skilled nursing care at Keiro. These clients and residents need to be transitioned to other care options before programs end in the next six months. How many clients and residents receiving care have transitioned to other care providers to date? How many clients and residents remain?
Home Care: By the end of June, the remaining 13 clients from Home Care have transitioned to new care takers (or have worked out private contracts with their current care givers).
Skilled Nursing: We will be around 40 residents for the skilled nursing facility by the end of July. We are ahead of our projections and the transitions have gone smoothly thus far.
Can a designated fund be established to accept donations to assist those clients and residents transition into other care?
Designated Fund: We are working with Ayame Kai to develop programs to help residents and families with this transition. In addition, Ayame Kai will have donated funds to help ensure staff have incentive to stay during this transition. We are open to fundraising for additional programs and would love to hear your ideas.
What outplacement services have been offered to employees?
Every Thursday and Friday (and sometimes Wednesdays) we have brought in other facilities (from all over the PNW) to do Job Fairs and on campus interviews. In addition, we engaged an outplacement coach who is working with all employees on resumes and interviewing skills. This was so popular, we will be using some of the Ayame Kai funds to help bring back in these resources as staff have overwhelming asked for more assistance. We will also be setting up a small computer lab so staff can real time work on their resumes and get feedback, as well as apply for jobs online (as some do not have resources at home to do so).
What communications are employees throughout Keiro Northwest getting about the closure updates and services available?
Every employee has had a 1:1 meeting with HR to understand their individual employment status and how this will impact them. We have monthly Employee and Manager Meetings to ensure consistent communication. Team leaders across the organization meet on a daily basis to manage this process dynamically.
The water cooler conversations among employees indicate that clear and timely communication has been insufficient.
That is unfortunate and we’re sorry to hear this. We’re communicating daily and on an individual basis to try and mitigate this concern. If folks are looking for an answer as to a plan, we are working regularly with the Board to understand their strategy / decisions.
Can a designated fund be established to accept donations to assist employees in their employment transition? How can the community be involved in thanking those employees?
We have continued to receive donations and are very grateful. We are thankful that the community has already donated more than $5K for the Keiro Celebration and Farewell last month.
What communication has there been with outside service providers about program closures to ensure orderly transition of those services and communication with patients – like dental care that are being provided at the Keiro nursing facility?
We have over 300 vendors and we have communicated with all of them in regards to transition. Based on service provided – conversations have varied (i.e., in some cases we’re breaking contracts early and we’re in the process of negotiations). We’re proactively communicating with impacted parties and trying to best manage while the Board finalizes what the future of the organization looks like.
As for Dental specifically, we will continue to provide this service while we remain open.
The Keiro Northwest website no longer identifies a Board nor Board members.
Please click on this link: [http://www.keironorthwest.org/about-us/board-of-directors/]
Has there been recent changes to the Board membership? Who are the current Board members and officers?
Since the Board decision was made on 4/3/2019 we have had 6 Board resignations. We have had had 9 resignations in 2019.
Currently the Board members are as follows:
Tomio Moriguchi (President)
Sue Taoka (Vice President)
Ted Tomita (Secretary)
J-F Mannina (Treasurer)
Keiro Northwest has set larger fundraising goals with different purposes in the last nine months. In August 2018, the CEO reported a goal to raise $2m in the Northwest Asian Weekly in the next three to four months to “buy them time, so they could implement operational changes to help them in the long run.” The CEO assured the community that there were no plans to sell Keiro, and “her number one goal is to bring transparency to the organization’s financial situation.”
Yes, management implemented operational changes, however (most material being reimbursement rates which take 9-15 month to realize) we were forthcoming with the Board that funds needed to be raised in order to allow us to see changes from a P&L perspective. The Board was insistent that no partnership, sales, etc. would be assessed, that they were committed to raising the funds.
In October 2018, the CEO reaffirmed the need to raise $2m in three or four months in the Northwest Asian Weekly to “stabilize operations temporarily, so the leadership can implement ways to save money in the future”. The paper reported a $2.5m operating loss in 2017. The CEO expressed a desire to avoid selling facilities.
What was communicated to the Board is that funds had to be raised by the end of 2018/early 2019 to buy time or their only options (as presented to them April 2018) would be that they would have to sell all or part of the organization. In addition, the Board began to move towards potential strategic partnerships with a non-profit alliance. This dramatically shifted when the organization changed 50% of the Board makeup at the beginning of 2019.
In the fall of 2018, Keiro Northwest announces a 40 more years $4m campaign with the goals to “Help us grow our programming to meet this need (People want to age in place)”, and “Continue offering culturally sensitive services. Avoid aging services becoming what they were 40 years ago”.
The number was changed (upon feedback from professional funders) to also grow the Endowment that that would give donors assurances for the future. Several community leaders were a part of these discussions and this campaign. Our current Board Chair chaired this campaign.
In May 2019, a $5m fundraising goal was announced in the next 60 Days to evaluate and assess how to use the 1601 E. Yesler property as well as cover the operational shortfalls of the remaining programs.
Management was not privy to this fundraising goal.
With the increasing fundraising goals and the decision to consider other uses of the Keiro nursing home, it appears the financial condition of Keiro NW is deteriorating faster than anticipated.
It is not our understanding that this is deteriorating faster than anticipated. Prior management, per our understanding, communicated regularly that our cash flow situation was not manageable and we were not sustainable. Although the information was not reliable, management raised their concerns. Current management communicated to the Board of Directors that (based on cash on hand) we had only months before running out of cash. Once current management re-financed and implemented immediate operational changes they were informed that in early 2018 that money would run out at the end of the 2019 (this included the sale of physical assets). At that time we made clear that the org needed to sell all or parts of the organization or raise funds if they wanted time for changes to be made. We are on track for what was projected.
Is Keiro NW’s financial status deteriorating?
KNW’s financial status has been on a downward trajectory since around 2011.
What is the status of raising $5m?
Per our donor records there are no funds raised upon the completion of the 60 Days.
What are the implications is the $5m goal is not being met within 60 days?
We will be in the same position we have been in for 18 months where tough decisions need to be made.
The Board of Directors announced on May 14 at a Town Hall meeting that plans to research sustainability options for Nikkei Manor and Kokorokai. That effort was looking to raise $5M in the next 60 Days to evaluate and assess how to use the 1601 E. Yesler property as well as cover the operational shortfalls of the remaining programs. What options are being studied? What decisions and when do those decisions need to be made and actions required to achieve the goal of sustaining Nikkei Manor and Kokoro Kai?
Internally we are trying to detangle the two entities as the shared services/corporate staff will also be laid off as a part of this decision.
What is the plan for the Washington Medical Clinic property?
As a part of the closure of the skilled nursing facility our losses will be significantly worse (fixed expenses stay while our revenue is materially decreasing). We are borrowing against our Endowment and will replenish the Endowment against the future sale of WMC. This is a necessary move to ensure that we are able to continue to meet payroll during this transition.
The Keiro Konnector sent on May 31 referred to Keiro’s IRS 990 report for more information about salaries. Keiro Northwest’s IRS 990 report for 2018 has not been posted on the IRS website. I believe that report was due to the IRS on May 15, 2019. Can that report be made available to the public by Keiro Northwest?
KNW files the 990 in October of the relevant year.
The same publication acknowledges that bankruptcy is a possibility. What is the timeline where that decision will need to be made to avoid bankruptcy?
Bankruptcy by the end of the year (2019) has been projected without some kind of liquidity event in the near future.
The publication says, “there will have to be several other changes to ensure the continuation of those programs (Nikkei Manor, Kokorokai)”. What are those changes?
We are looking at possibilities to use third parties to help run the remaining programs. In addition, the Board of Directors is looking at opportunities to fundraise to help Nikkei Manor.
What are the plans to provide Nikkei Manor and Kokoro Kai with the administrative support services that are now being provided by Keiro NW?
We are looking at possibilities to use third parties to help run the remaining programs. In addition, the Board of Directors is looking at opportunities to fundraise to help Nikkei Manor.
What are the plans and time frame to extend the land lease for Nikkei Manor?
It is our understanding the last agreement made (2016) was a verbal agreement. The Board of Directors has been tasked with working with the family and their broker to get a signed lease agreement in place.
Should families prepare for fee increases at Nikkei Manor? How much? When?
The Board of Directors has discussed raising fees to break even. On average this will be an increase of fees around 50-60%. When Nikkei Manor went to the Level of Care increases a few years ago, the Board made the decision not to raise rates to reflect the actual level of care being provided. They cut the care increases by 50%. This created a compression in that we’re providing greater care as our residents have aged, but have not raised rates in order to pay greater wages or staff appropriately. In addition, our care cost (per point) is $35. As a point of context other like facilities charge $60-$65 per point (under the Level of Care system).
Will the Board look at creating a separate, independent non-profit for Nikkei Manor and Kokoro Kai containing and shielding it from financial exposure of Keiro Northwest, yet allowing for surplus assets to be gifted to the new non-profit?
This is a great suggestion and we will look into it.
A meeting was called on May 22 at Keiro of community supporters to provide strategic input to a fundraising proposal. Why were participants of this meeting asked to sign a Non-disclosure Agreement (NDA)? What was the nature of the information that required a NDA?
It is our understanding participants were asked to sign a NDA because sensitive and confidential information was being shared, including financial information. At the time, the Board had voted to not issue the 2018 Audit Financial Statements, and thus financial information would be considered confidential.
What additional communication and engagement are planned as the Board deliberates on options? More communication and engagement is paramount.
The Board of Directors are internally discussing how best to keep the Japanese American community updated.
The Board has stated that they have had revenue shortfalls since 2011 to date ~ yet Keiro Propublica IRS information shows revenue for 2011-2014 ~ why the difference and where is the accountability for the surplus monies and current expenditures?
What was stated is that “operating revenue” has a shortfall. Unlike many other charities/non-profits, where contributions + investment income is the primary source of revenue, Keiro Northwest has 94%+ of its revenue generated from program services. Thus, when looking at “operating net income”, contributions and investment income must be excluded. If that is considered, here’s what the operating net income looks like for 2011 to 2014.
Net Income (A)
Investment Income (C)
Operating Net Income (A – B – C)
Were Board Bylaws followed for making decisions and was there a legal quorum?
Questions about the CEO severance and whether the $1M figure is true or not? If true ~ who decided this and why?
This is not true.
Are Medicaid reimbursements the primary cause of the deficits?
Like any business, revenue must outweigh expenses in order for the business to survive. Medicaid reimbursements accounts for the majority % of our revenue, so in that sense they have contributed to the cause.
How much would Medicaid families have to contribute to offset the deficits?
This is illegal, thus not an option. Setting contribution expectations means by default we would be discriminating against Medicaid patients that cannot/are not willing to pay the additional amount.
Why was Administrative staff doubled and Licensed nursing staff (i.e. RN, LPN, NACs) being decreased causing concern for patient care, safety?
The current administrator (Esther) personally cannot attest to why, when and if Administrative staff was doubled. But she can say that any decreases in floor/nursing staff have occurred since my arrival (March 2019) have never been decreased to a level that would cause concern for patient care. KRCC has also historically always had a high (good) staff to resident ratio compared to industry standards/average.
As a stand-alone SNF, KRCC absorbs both standard administrative SNF roles and roles that would typically be absorbed by “corporate/regional office” by facilities that are not a stand-alone building. This is something to keep in mind when comparing the operational structure of Keiro and other facilities that have a parent organization.