Cutting Corners for Profits
Studies and investigations have shown that private equity owned nursing home facilities are “tunneling funds” to hide profits as fees to related entities or affiliated companies. These companies are common ownership or common control. Facilities claim they are broke but they are actually pocketing the money towards real estate and management fees. The taxpayer money provided should be used to resident care or safe staffing.
Investors of nursing homes cut corners to increase their profits. For example, Landmark of Louisville Rehabilitation and Nursing is one of 58 facilities that is run by parent company, Infinity Healthcare Management. Landmark has been tagged deficient in 29 different areas. Residents are being harmed by CNAs and other residents. Infinity has paid nearly $10 million in fines since 2021 and has been cutting corners to increase their profit. Investors like Infinity further their profit through the transfer of money through different complex corporate networks. This allows them to increase profit even when their nursing home facility is performing to a low standard.
CMS has proposed a rule that will aim to help the transparency of nursing home ownership by collecting more information on facility owners. Private investors often hide who controls the facilities through limited liability corporations, related companies, and hidden family relationships. These hidden adjustments reduce liability, capitalize favorable tax policies, diminish regulatory scrutiny, and disguise nursing home profitability.
Although in 2023, CMS began to require identification for all private-equity and real estate investment trust investors and for releasing all related party names, this still didn’t reveal the financial transparency. Another investor owns land under nursing homes, and an example is REIT. REITs and their owners drain cash from nursing homes through a triple-net lease and contracting a façade to gain the owner’s trust.
Investors can hide themselves through joint ventures and continue profiting from nursing homes. Since facilities are not required to provide details of service or the specific profits and administrative costs, there is a lack of transparency regarding expenses. For example, the owner/operator of the Portopiccolo Group purchased many facilities during the pandemic. The owners of a North Carolina nursing home set up a convoluted network of business entities and used them to charge the nursing home for services and property. Since 2021, their affiliated entities have totaled $12 million in fines. The facility was kept understaffed and under-supplied in order to maximize profit.
The ability to drain out cash from nursing homes makes it difficult to assess cost reports. Nursing homes hide profits through practices that allow them to block regulations that improve the quality of care and demand higher government payments. Since there is no oversight, dishonest nursing home owners have the power to take money from Medicare and Medicaid while being empowered to claim their financial needs.