“Related party transaction” refers to a financial practice that diverts funds in for-profit nursing home chains. A recent article discussed the improper diversion of taxpayer funds to shell companies owned by the operator of the nursing home. These entities are known as “related parties or entities”. These related entities have common ownership or control.
The profitable practice involves common ownership of the nursing home and the services used to operate a long term care facility. These services include rent or lease payments, management fees, administrative costs, laundry, dietary, housekeeping, and ancillary services.
Each of these transactions comes with a profit margin for the owners that are paying into their own pockets. At the expense of vulnerable adults and overworked caregivers. The related entities siphon taxpayer money away from the facility, staff and residents to companies owned by the same individuals that own the nursing home.
The owner/operator can charge an exorbitant amount for worthless or nonexistent “services” from these related parties. Then the owner can claim insolvency and blame Medicaid reimbursement. The lack of liquidity causes the facility to maintain unsafe staffing levels and high turnover rates. This leads to burnout, abuse, and neglect.