The New York Times had a great article explaining how and why for profit chains game the system by siphoning funds to owners instead of to patient care.  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.  A Kaiser Health News analysis of inspection and quality records reveals 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.  For-profit nursing homes utilize related corporations more frequently than nonprofits do, and have fared worse than independent for-profit homes in fines, complaints and staffing, the analysis found. 

“In what has become an increasingly common business arrangement, owners of nursing homes outsource a wide variety of goods and services to companies in which they have a financial interest or that they control. 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, saying it is an efficient way of running their businesses and can help minimize taxes.”

“These arrangements offer an additional advantage: Owners can arrange highly favorable contracts in which their nursing homes pay more than they might in a competitive market. Owners then siphon off higher profits, which are not recorded on the nursing home’s accounts.”

“Such corporate webs bring owners a legal benefit, too: When a nursing home is sued, injured residents and their families have a much harder time collecting money from the related companies — the ones with the full coffers. Courts set a high bar for plaintiffs to bring these ancillary companies into their cases.”

“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.”

Kaiser Health News’s analysis of inspection, staffing and financial records nationwide found shortcomings at other homes with similar corporate structures:

■ 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.

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