The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General selected the Hidden Lake Care Center for review based on a news article entitled “Poorly Rated Nursing Homes Got HUD Guaranteed Mortgages Anyway,” published by the Center for Public Integrity.  The article stated that 240 facilities in 38 States and Washington, DC, received HUD-backed mortgages worth nearly $2 billion a month after receiving a low, one-star rating from the Federal Government, and Hidden Lake Care Center was one of the nursing homes identified.  The audit objective was to determine whether the Hidden Lake Care Center operator complied with its executed regulatory agreement and HUD requirements.

The Hidden Lake Care Center operator generally complied with its executed regulatory agreement and HUD requirements.  The operator made its lease payments, met HUD’s liability insurance requirements, had no unresolved State or Federal inspection deficiencies, and maintained the project in good condition.  However, it did not properly establish its management agent and management agreement.  It did not receive prior approval from HUD for its management agent and agreement as required.  Also, the management agreements did not contain a required provision.  The management agent and management agreement deficiency occurred because the operator was not aware of HUD’s guidance regarding management agents and management agreements.

We recommend that HUD (1) require the operator to place the required provision in the management agreement and submit the required management agent and management agreement documentation to HUD for approval and (2) ensure that the operator receives training on management agents and management agreements.