The Tampa Bay Times had a great article about the difficulty in holding nursing homes accountable and collecting judgments from oowners and operators especially when no insurance exists. Complex corporate networks insulate owners from legal claims. Money is shifted around. Private investment firms come and go.
The article reports "At times, even nursing home regulators cannot tell who is raking in the profits and calling the shots. The estate of Elvira Nunziata is putting that protective shell to the test."
Nunziata and her family was recently awarded $200 million by a jury after she toppled down a stairwell to her tragic death in 2004 while strapped to a wheelchair. She was unsupervised and passed through an unsecured door without an active alarm.
The company that operated Pinellas Park Care and Rehab Center at the time no longer exists. Another company had bought the nursing home’s income streams. Another related company inherited its liabilities. The defendant left so few traces that it was left with no lawyer at trial.
The real battle is tracking the money. Motions and countermotions are flying in state and federal courts in Florida, Maryland and Georgia. How and why did Defendant proceed to trial without an attorney? In this case, the sole remaining defendant was a shell.
Trans Health Management Inc. had operated 200 homes in 22 states. A Chicago private equity firm and others had created it in 2002 to take over the IHS bankrupt chain. By the time Elvira Nunziata’s estate sued in 2005, "Florida had revoked Trans Health’s corporate status for failure to file annual reports. It was unclear whether the company still ran the Pinellas Park nursing home or if it even existed."
Wilkes & McHugh proceeded with the lawsuit anyway because they hoped to collect from others who bore responsibility. The related companies fought the lawsuit. By 2009, though, only the defunct Trans Health Management remained as defendant. However, Wilkes & McHugh had discovered intriguing (and possibly illegal and fraudulent) movements of money.
According to expert forensic accountant Brad Rush, Trans Health’s operations were sold for only $100,000 in 2006 to companies using the same office complex as Trans Health and the same phone number. Fundamental Administrative Services LLC ended up with Trans Health’s management contracts, 35,000 employees and the cash flow, Rush testified. Fundamental is part of the Fundamental Long Term Care Holdings L.L.C. which is owned by Murray Forman and Leonard Grunstein. Another one of their companies–Fundamental Long Term Care Inc.– inherited the liabilities including potential lawsuit claims — then failed to file corporate reports and disappeared.
"The only purpose of the Fundamental companies … was to strip assets away,” he said. "No addresses or phone numbers or emails changed. Just the letterhead.”
"Trans Health Management also had a parent company — Trans Healthcare Inc. — that also might be targeted. It still enjoyed income from other subsidiaries, but had entered into receivership in Maryland, a legal status akin to bankruptcy."
"After a Baltimore receivership judge banned further legal action against the parent company, its lawyers stopped defending the Nunziata case. But Wilkes & McHugh saw a possible opening. The receiver had paid GE Capital $55 million to wipe out a loan. Rush testified that loan provisions gave GE tight control over Trans Health’s cash flow. If the receiver had played favorites with GE Capital, maybe Nunziata could tap into that $55 million."
"In 2010, a jury rendered a $114 million verdict against Trans Health companies for a death at an Auburndale nursing home. Same lawyers, same alleged money shuffling, same no-show at trial. After the verdict, Wilkes & McHugh won court approval to depose executives and examine documents of GE Capital, Fundamental and a private equity fund that created Trans Health."
"Lawyers for Fundamental Administrative Services told the Polk court that the statute of limitations has passed on its acquisition of Trans Health assets."
Nursing home ownership is now split into layers of different companies ultimately owned and operated by the same company or person. "One might own the building. Another would lease the building, hire staffers and pay the bills. Profits might flow to other corporate parents, holding companies or private equity investors, which have jumped into the field in recent years."
"Charlene Harrington, a professor emerita at the University of California at San Francisco, has studied the nursing home industry for 30 years. Last year, she examined the nation’s 10 largest for-profit chains and found up to five layers of ownership."
"You can’t tell who owns” many nursing homes, Harrington says. "It’s like tracking a problem mortgage when you don’t know who owns the bank.”
"Even the federal government can’t figure it out. Medicare and Medicaid pay most of the nation’s nursing home bills and require homes to disclose their ownership structures. But when the General Accounting Office looked at six big chains in 2010, the information those chains had provided Washington gave no indication of which affiliated companies controlled what."
Lack of transparency can contribute to bad care, said Evin Isaacson, a fellow at the National Senior Citizens Law Center. If regulators can’t decipher who ultimately makes decisions, it’s hard to levy fines and sanctions. And that removes incentive to plow money into care rather than profits.