In what has become an increasingly common business arrangement, owners of some nursing homes outsource a wide variety of goods and services to companies in which they have a financial interest or that they control. Nearly three-quarters of nursing homes in the United States – more than 11,000 – have such business dealings, known as related party transactions, according to an analysis of nursing home financial records by Kaiser Health News, a nonprofit news service committed to in-depth coverage of health care policy and politics.

In these related party transactions, owners can establish highly favorable contracts in which their nursing homes pay more for basic services than they might in a competitive market. Owners then siphon off higher profits, which are not recorded on the nursing home’s accounts. Some homes even contract out basic functions like management, or rent their own building from a sister corporation, saying it is simply an efficient way of running their business and can help them minimize taxes.

But a Kaiser Health News analysis of federal inspection and quality records reveals that nursing homes that outsource to related organizations tend to have significant shortcomings: They have fewer nurses and aids per patient, they have higher rates of patient injuries and unsafe practices, and they are the subject of complaints almost twice as often as independent homes. In fact, Kaiser’s analysis revealed that these nursing home companies, on average, employed 8 percent fewer nurses and aids, were 9 percent more likely to hurt residents or put them in immediate jeopardy of harm, were fined 22 percent more often for serious health violations, and received 24 percent more substantiated complaints from their residents than were independent nursing homes.

“Almost every single one of these chains is doing the same thing,” says Charlene Harrington, a professor emeritus of the School of Nursing at the University of California-San Francisco. “They’re just pulling money away from staffing.” Ms. Harrington’s statement was substantiated by the allegations in a Tennessee lawsuit. In that lawsuit, nurses and aids testified about how their nursing home corporation would add staffing for state inspections while the rest of the time their pleas for more staffing to care for residents went unheeded.

These corporate webs and related party transactions bring the nursing home owners a legal benefit in addition to financial benefits: When a nursing home is sued, injured residents and their families have a much harder time collecting money from the related companies – the ones with the full coffers. This seems to be an industry-wide strategy. In 2003, an article appearing in the Journal of Health Law encouraged owners to separate their nursing home businesses into detached entities to protect themselves if the government tried to recoup overpayments or if juries levied large negligence judgments against the nursing home. Further, at a 2012 conference for executives in the long-term health care industry, one presentation boasted that such complex corporate structure was advantageous because in lawsuits brought on behalf of residents harmed by the nursing home’s negligence discovery of the true corporate structure will be “too expensive and time consuming,” and “financial statements in punitive damages phase shows less income and assets.”

Despite the nursing home industry’s efforts to avoid accountability and protect their profits at all costs, lawyers at Beasley Allen continue to fight for residents and their families who have been harmed by a nursing home’s abuse, negligence or poor care. If you or your loved one has suffered serious injury or death because of nursing home abuse or neglect, or if you have any questions about nursing home abuse and neglect, contact Alyssa Baskam by phone at 800-898-2034. Alyssa handles nursing home litigation for our firm and she will be happy to talk with you. Beasley Allen also has a helpful brochure about identifying signs of nursing home abuse and neglect, and steps you can take to file a claim. You can request a copy of the brochure here.

Source: Kaiser Health News

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