The Business Model

A newly filed lawsuit in New Jersey puts a spotlight on a business model that plaintiff attorneys have been confronting for years: nursing home owners using related companies to drain Medicaid dollars out of facilities while residents are left in chronically understaffed and unsafe conditions.

The state’s Office of the Comptroller has sued the owners of Hammonton Center for Rehabilitation and Healthcare and Deptford Center for Rehabilitation and Healthcare, alleging a multi year scheme to misuse nearly $124 million in Medicaid funds. According to the complaint, the owners routed money through a network of companies they owned or controlled, inflated rent and service payments to themselves, concealed related party transactions, and stripped the facilities of resources that were supposed to be used for resident care.

At the same time, both facilities were repeatedly cited for failing to meet staffing requirements and were designated as Special Focus Facilities, a category reserved for the most persistently troubled nursing homes in the country. State investigators tied the financial misconduct directly to real world harm, including residents left in pain and filth, serious safety failures, sexual assaults, and a resident’s death. This was not a paperwork problem. It was a care problem created by deliberate financial decisions.

For plaintiff attorneys, this case draws a straight line between corporate self dealing and predictable resident harm. Medicaid dollars are intended to fund staffing, supervision, and basic care. When owners turn nursing homes into revenue pipelines for their own real estate and management companies, the first thing that suffers is staffing. Fewer nurses, fewer aides, and less oversight means more falls, more missed care, more untreated conditions, and more residents placed in danger.

This lawsuit also exposes how weak financial transparency and slow regulatory enforcement allow abusive ownership structures to persist long after warning signs appear. Repeated citations and Special Focus designations did not stop the underlying business practices. Residents continued to live in facilities designed to extract profit, not deliver care. When ownership structures reward understaffing and self enrichment, neglect is not an accident. It is the foreseeable result of how the system is built.