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.
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.
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.
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.
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.
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.
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.
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.
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.
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:
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