Some of the primary issues that desperately need attention in the nursing home industry are staffing shortages, overuse of antipsychotics, and especially transparency. Specifically, it is becoming more and more important for nursing facilities to be completely transparent about where the federal, state, and insurance funding goes. Billions of dollars are allocated to nursing homes through Medicare and Medicaid. Unfortunately, this money is not followed through the nursing home system, allowing it to potentially be lost, mismanaged, or even funneled through related parties by facility owners.
As resident care continues to stagnate or become worse, Consumer Voice continues their commitment to transparency. Recently, Consumer Voice released a report investigating related party transactions and making a case for greater financial transparency across the board.
What Are Related Parties?
In this case, related parties are, essentially, single purpose corporations owned by the owners of nursing homes. In the early 2000s, it became common practice for owners to set up a single purpose corporation for the real estate side of the nursing home, separating that from the operations side of their business. This would help protect them from civil liability for negligent care, but it would also allow them to charge rent for the facility and report a loss for the nursing facility itself. Because the related party is owned by the nursing home owners, they would essentially be paying themselves, funneling money away from resident care.
“There is an emphasis on separating the ownership of the real estate from the ownership of the operating entity that holds the license and Medicare and Medicaid provider agreements. This is normally achieved by having the operating entity lease the facility from the real-property entity. This can be accomplished even where there is identical ownership and control between and among the real-property entity and the operating entity.”JE Casson & J. McMillen, Protecting Nursing Home Companies: Limiting Liability Through Corporate Restructuring.
Consumer Voice’s Latest Report
By law, nursing homes must report the amount of money sent to related parties to CMS and Medicare. Additionally, worksheet A-8-1 must be filled out reporting the cost for the related party to provide services, and the nursing home must report how much it actually paid to the related party. However, the Consumer Voice report found that these numbers don’t often match up. And it doesn’t appear that CMS has any system for auditing the accuracy of the reports. Nor is there any evidence that CMS or Medicare are aware of how those funds are used by the related parties.
Additionally, the cost reports, from both nursing homes and related parties, are vague. Instead of breaking down what services were rendered and paid for, expenses and costs are filed under broad categories. As a result, any audit of these reports would be complicated by the fact that CMS would not be able to compare the costs of services to others on the market, nor be able to tell if the nursing home was being prudent with their money.
Perhaps the most prominent issue with this reporting system is that there is often no explanation asked for when money is spent. Meaning the money is not followed as it is being spent, leaving owners to profit from related party transactions with no questions asked.
“To illustrate, Pruitt Health, a nursing home chain that owns roughly 90 nursing homes, reported related party costs of nearly $482 million for the years from 2018-2020. At the same time, Pruitt reported paying to these related parties roughly $570 million dollars, a payment in excess of 18%. The cost report provides no information on why Pruitt made nearly $90 million in excess payments to its related parties.”Consumer Voice, Where Do The Billions of Dollars Go?
To learn more about his issue and review the case studies conducted by Consumer Voice, read the whole report here.
If you or a loved one has been the victim of nursing home abuse or neglect, call Gharibian Law (877-875-1119) today for a free consultation and the best legal representation.