Transparency and Accountability

Transparency and Accountability in Nursing Home Ownership and Finances

Nursing Home Related Party Transactions

Consumer Voice and the Michigan Elder Justice Initiative released a report, Public Funds into Private Pockets: How Nursing Homes May Be Hiding Profits and Depriving Residents of Care and Quality, revealing that Michigan nursing homes funneled $1.2 billion through related party companies from 2021–2023, potentially hiding profits while providing substandard care.

The report urges federal and state regulators to mandate increased financial transparency, particularly regarding related party transactions.

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Each year nursing homes funnel billions of dollars through related party companies (companies they own) with little to no oversight by the Centers for Medicare & Medicaid Services (CMS).

The reference guide, Related Party Transactions and CMS’s Role in Regulation, provides an overview of how nursing home owners use related party transactions for their own benefits and suggestions for how CMS can use its regulatory power to hold nursing homes accountable.

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The report, Where Do the Billions of Dollars Go?: A Look at Nursing Home Related Party Transactions, provides a detailed look at related parties and how nursing homes potentially use them to hide how much money they are making and to give the illusion that their facilities are not profitable. The report uses cost data submitted to the federal government by nursing homes to illustrate the industry-wide practice of related party transactions and how at the same time, residents face inadequate staffing and poor care.

In April 2023, Consumer Voice sent a letter to CMS regarding increased transparency of nursing home ownership.

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How Private Equity Firms and Other Nursing Home Owners Harm Residents

Over the past several years, private equity firm ownership of nursing homes has drawn significant attention from advocates, academics, and legislators. A study released in February 2021 found that private equity ownership of nursing homes increased the short-term mortality of Medicare residents by 10%, resulting in 20,150 more deaths over a twelve-year period. Private equity nursing home owners are concerned with profit. They use complicated, but legal, economic practices to divert Medicare and Medicaid dollars away from residents’ care and into their own pockets. However, many of the economic practices of private equity firms are used by many nursing home operators in the United States.

What is Private Equity?

Eileen O’Grady, Healthcare Research & Campaign Manager for the Private Equity Stakeholder Project details common practices such as sale-leasebacks, management fees, related parties, and dividend recapitalizations that private equity owners use to extract as much money out of nursing homes as possible at the detriment to residents’ health and well being.

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Common Practices of Private Equity Owners and the Nursing Home Industry at Large

What Private Equity Ownership Means for Resident Care

All of these practices ultimately result in poorer health outcomes for residents. In the following clip, Eileen details the problems that occur for residents and talks about some particularly egregious instances of private equity ownership.

A Simple Solution: Transparency

In her final clip, Eileen talks about how many of these practices are designed to hide who really owns nursing homes and how much money they are making. She calls for more transparency in nursing home ownership and finances.

How Nursing Homes Understaff to Maximize Profits

In this clip, Ernie Tosh, Trial Attorney at Tosh Law Firm, details the steps nursing homes take to siphon funds away from nursing home staffing. Short-staffing has plagued nursing home for years, resulting in neglect and poor resident health outcomes. The COVID-19 crisis laid bare how important staffing was to protecting residents, and how unprepared the nursing home industry was for the pandemic.

Consolidated Cost Reports

The common refrain from the nursing home industry is that they do not get paid enough money by the federal government to provide care. Despite receiving billions of tax dollars each year, there is little to no oversight of how nursing homes spend this money. In this clip, Ernie discusses consolidated cost reports, which would result in nursing homes having to report to the federal government where tax dollars are used. We cannot keep giving billions of dollars to nursing home owners without knowing how it is spent. Consolidated cost reports would solve this problem.

What Can Be Done To Protect Nursing Home Residents

Until steps are taken to address these ownership practices, residents will continue to suffer poor health outcomes. Consumer Voice calls on CMS and Congress to:

Require all nursing home owners to provide annual audited cost reports. Until there is transparency in how the billions of taxpayer dollars are spent each year, we will not know if money is going towards care or fattening the wallets of owners and operators.
Institute criteria for nursing home ownership and operation. Currently, there are few requirements to own and operate a nursing home. As a result, private equity firms and others with a history of providing poor care continue to be allowed to purchase and/or operate nursing homes. Nursing home owners and operators should be required to demonstrate an ability to provide quality care, and those with histories of poor care should not be allowed to purchase or operate nursing homes.
Impose limits on expenditures by owners that do not go towards resident care. As made clear in the videos above, some nursing home owners/operators game the system to siphon off money from resident care. By imposing caps on how much money can go to profits and other non-care related expenses, Congress and CMS would be ensuring tax dollars go towards resident care.