Nursing home owners drained cash during pandemic while residents deteriorated
Published in News & Features
After the nursing home where Leann Sample worked was bought by private investors, it started falling apart. Literally.
Part of a ceiling collapsed on a nurse, the air conditioning conked out regularly, and a toilet once burst on Sample while she was helping a resident in the bathroom, she recalled in a court deposition.
“It’s a disgusting place,” Sample, a nurse aide, testified in 2021.
The decrepit conditions Sample described weren’t due to a lack of money. Over seven years, The Villages of Orleans Health & Rehabilitation Center, located in western New York near Lake Ontario, paid nearly $16 million in rent to its landlord — a company that was owned by the same investors who owned the nursing home, court records show. From those coffers, the owners paid themselves and family members nearly $10 million, while residents injured themselves falling, developed bedsores, missed medications, and stewed in their urine and feces because of a shortage of aides, New York authorities allege.
At the height of the pandemic, lavish payments flowed into real estate, management and staffing companies financially linked to nursing home owners throughout New York, which requires facilities to file the nation’s most detailed financial reports. Nearly half the state’s 600-plus nursing homes hired companies run or controlled by their owners, frequently paying them well above the cost of services, a KHN analysis found, while the federal government was giving the facilities hundreds of millions in fiscal relief.
In 2020, these affiliated corporations collectively amassed profits of $269 million, yielding average margins of 27%, while the nursing homes that hired them were strained by staff shortages, harrowing injuries, and mounting COVID-19 deaths, state records reveal.
“Even during the worst year of New York’s pandemic, when homes were desperately short of staffing and their residents were dying by the thousands, some owners managed to come out millions of dollars ahead,” said Bill Hammond, a senior fellow at the Empire Center for Public Policy, a think tank in Albany, New York.
Some nursing home owners moved money from their facilities through corporate arrangements that are widespread, and legal, in every state. Nationally, nearly 9,000 for-profit nursing homes — the majority — outsource crucial services such as nursing staff, management, and medical supplies to affiliated corporations, known as “related parties,” that their owners own, invest in, or control, federal records show. Many homes don’t even own their buildings but rent them from a related company. Homes pay related parties more than $12 billion a year, but federal regulators do not make them reveal how much they charge above the cost of services, and how much money ends up in owners’ bank accounts.
In some instances, draining nursing home coffers through related parties may amount to fraud: Along with The Villages’ investors, a handful of other New York owners are facing lawsuits from Attorney General Letitia James that claim they pocketed millions from their enterprises that the authorities say should have been used for patient care.
Deciphering these financial practices is timely because the Centers for Medicare & Medicaid Services is weighing what kind of stringent staffing levels it may mandate, potentially the biggest change to the industry in decades. A proposal due this spring is sure to spark debate about what homes can additionally afford to spend versus what changes would require greater government support. Federal Medicaid experts warned in January that related-party transactions “may artificially inflate” the true cost of nursing home care in reports that facilities file to the government. And the U.S. Department of Health and Human Services’ inspector general is investigating whether homes properly report related-party costs.
©2023 Kaiser Health News. Visit khn.org. Distributed by Tribune Content Agency, LLC.