A New York Times article published January 2nd uncovers the self-dealing practice of nursing home corporate owners outsourcing goods and services to companies that they also control or have a financial interest. These so-called “related party transactions” are a way of avoiding accountability for neglect and abuse. These arrangements allow owners to put together advantageous contracts in which their nursing homes pay higher rates for rent, supplies, and services while the owners pocket the higher profits, which aren’t recorded on the nursing home’s accounts. These complicated undisclosed “arrangements” make it difficult for neglected and abused residents to be compensated for injuries caused by the related companies for siphoning money intended for the care and well-being of the nursing home residents.
An analysis from Kaiser Health News revealed that “nursing homes that outsource to related organizations tend to have significant shortcomings: They have fewer nurses and aides per patient, they have higher rates of patient injuries and unsafe practices, and they are the subject of complaints almost twice as often as independent homes.”
■ Homes that did business with sister companies employed, on average, 8 percent fewer nurses and aides.
■ As a group, these homes were 9 percent more likely to have hurt residents or put them in immediate jeopardy of harm, and amassed 53 substantiated complaints for every 1,000 beds, compared with 32 per 1,000 beds at independent homes.
■ Homes with related companies were fined 22 percent more often for serious health violations than independent homes, and penalties averaged $24,441 — 7 percent higher.
“Almost every single one of these chains is doing the same thing,” said Charlene Harrington, a professor emeritus of the School of Nursing at the University of California, San Francisco. “They’re just pulling money away from staffing.”
Ernest Tosh, a lawyer in Texas who helps other lawyers untangle nursing company finances, said owners often exerted control by setting tight budgets that restricted the number of nurses the homes could employ. Meanwhile, “money is siphoned out to these related parties,” he said. “The cash flow gets really obscured through the related party transactions.”
“Nearly three-quarters of nursing homes in the United States — more than 11,000 — have such business dealings, known as related party transactions, according to an analysis of nursing home financial records by Kaiser Health News. Some homes even contract out basic functions like management or rent their own building from a sister corporation.
Contracts with related companies accounted for $11 billion of nursing home spending in 2015 — a tenth of their costs — according to financial disclosures the homes submitted to Medicare.