Care Suffers as More Nursing Homes Feed Money Into Corporate Webs

A Kaiser Health News analysis of nursing home financial records revealed that nearly three-quarters of all nursing homes in the U.S. are owned by people who also have vested interest in companies that in turn sell services and goods to these same nursing homes, according to a New York Times article.

These business dealings are known as “related party transactions.” These transactions enable a nursing home owner to arrange contracts with their related businesses above a more competitive price, allowing them to turn around and siphon off the extra profit.

As an additional benefit, creating these corporate “webs” provides a layer of legal protection to nursing home owners. When a nursing home is sued, it is often very difficult for victims and their families to collect from the other related companies an owner holds stake in, thereby allowing them to “shore” away money.

Unfortunately, nursing homes which deal in “related party transactions” tend to have significant shortcomings which specifically affect their patients. The Kaiser Health News analysis showed that nursing homes which outsource to related organizations “have fewer nurses and aides per patient, have higher rates of patient injuries and unsafe practices, and are the subject of complaints almost twice as often as independent [nursing] homes.”

These arrangements are also associated with a wide array of deficiencies that may lead to negative health outcomes for residents.  Kaiser Health News’s analysis of inspection, staffing and financial records nationwide found shortcomings at other homes with similar corporate structures:

•  Homes that did business with sister companies employed, on average, 8 percent fewer nurses and aides;
•  As a group, these homes were 9 percent more likely to have hurt residents or put them in immediate jeopardy of harm, and amassed 53 substantiated complaints for every 1,000 beds, compared with 32 per 1,000 beds at independent homes;
• Homes with related companies were fined 22 percent more often for serious health violations than independent homes, and penalties averaged $24,441 — 7 percent higher.

For-profit nursing homes utilize related corporations more frequently than nonprofits do, and have fared worse than independent for-profit homes in fines, complaints and staffing, the analysis found. Their fines averaged $25,345, which was 10 percent higher than fines for independent for-profits, and the homes received 24 percent more substantiated complaints from residents. Overall staffing was 4 percent lower than at independent for-profits.