For-profit nursing homes are cutting corners on safety and draining resources
The care at Landmark of Louisville Rehabilitation and Nursing was abysmal when state inspectors filed their survey report of the Kentucky facility on July 3, 2021.
Residents wandered the halls in a facility that can house up to 250 people, yelling at each other and stealing blankets. One resident beat a roommate with a stick, causing bruising and skin tears. Another was found in bed with a broken finger and a bloody forehead gash. That person was allowed to roam and enter the beds of other residents. In another case, there was sexual touching in the dayroom between residents, according to the report.
Meals were served from filthy meal carts on plastic foam trays, and residents struggled to cut their food with dull plastic cutlery. Broken tiles lined showers, and a mysterious black gunk marred the floors. The director of housekeeping reported that the dining room was unsanitary. Overall, there was a critical lack of training, staff and supervision.
The inspectors tagged Landmark as deficient in 29 areas, including six that put residents in immediate jeopardy of serious harm and three where actual harm was found. The issues were so severe that the government slapped Landmark with a fine of over US$319,000 — more than 29 times the average for a nursing home in 2021 — and suspended payments to the home from federal Medicaid and Medicare funds.
But problems persisted. Five months later, inspectors levied six additional deficiencies of immediate jeopardy — the highest level.
Landmark is just one of the 58 facilities run by parent company Infinity Healthcare Management across five states. The government issued penalties to the company almost 4½ times the national average, according to bimonthly data that the Centers for Medicare & Medicaid Services first started to make available in late 2022. All told, Infinity paid nearly $10 million in fines since 2021, the highest among nursing home chains with fewer than 100 facilities.
Infinity Healthcare Management and its executives did not respond to multiple requests for comment.
Race to the bottom
Such sanctions are nothing new for Infinity or other for-profit nursing home chains that have dominated an industry long known for cutting corners in pursuit of profits for private owners. But this race to the bottom to extract profits is accelerating, despite demands by government officials, health care experts and advocacy groups to protect the nation’s most vulnerable citizens.
To uncover the reasons why, The Conversation delved into the nursing home industry, where for-profit facilities make up more than 72% of the nation’s nearly 14,900 facilities. The probe, which paired an academic expert with an investigative reporter, used the most recent government data on ownership, facility information and penalties, combined with CMS data on affiliated entities for nursing homes.
The investigation revealed an industry that places a premium on cost cutting and big profits, with low staffing and poor quality, often to the detriment of patient well-being. Operating under weak and poorly enforced regulations with financially insignificant penalties, the for-profit sector fosters an environment where corners are frequently cut, compromising the quality of care and endangering patient health.
Meanwhile, owners make the facilities look less profitable by siphoning money from the homes through byzantine networks of interconnected corporations. Federal regulators have neglected the problem as each year likely billions of dollars are funneled out of nursing homes through related parties and into owners’ pockets.
More trouble at midsize
Analyzing newly released government data, our investigation found that these problems are most pronounced in nursing homes like Infinity — midsize chains that operate between 11 and 100 facilities. This subsection of the industry has higher average fines per home, lower overall quality ratings, and are more likely to be tagged with resident abuse compared with both the larger and smaller networks. Indeed, while such chains account for about 39% of all facilities, they operate 11 of the 15 most-fined facilities.
With few impediments, private investors who own the midsize chains have swooped in to purchase underperforming homes, expanding their holdings even as larger chains divest and close facilities.
“They are really bad, but the names — we don’t know these names,” said Toby Edelman, senior policy attorney with the Center for Medicare Advocacy, a nonprofit law organization.
Trouble in South Carolina
South Carolina is no stranger to the issues plaguing the nation. According to CMS data, nursing homes in the state have accumulated over $5 million in fines over the past three years. Pruitt Health and Fundamental Healthcare are the two highest fined chains with nearly $650,000 and $608,000 in total penalties respectively.
While fines can be a good indication of care quality, they are often a function of the capacity of state offices, and the figures for South Carolina are likely underrepresented. The state ranks 12th lowest in nursing home fines per capita, but it has the fewest number of inspectors per home in the nation, according to the Congressional report, Uninspected and Neglected. The report found that at the close of 2022 there was only one state CMS inspector for every 11.8 nursing homes — an inspection load nearly three times higher than the national average — and that 58% of the agency’s state positions were vacant.
In response to The Conversation’s findings on nursing homes and request for an interview, a CMS spokesperson emailed a statement that said the CMS is “unwavering in its commitment to improve safety and quality of care for the more than 1.2 million residents receiving care in Medicare- and Medicaid-certified nursing homes.”
“We support transparency and accountability,” the American Health Care Association/National Center for Assisted Living, a trade organization representing the nursing home industry, wrote in response to The Conversation‘s request for comment. “But neither ownership nor line items on a budget sheet prove whether a nursing home is committed to its residents.”
Ripe for abuse
It often takes years to improve a poor nursing home — or run one into the ground. The analysis of midsize chains shows that most owners have been associated with their current facilities for less than eight years, making it difficult to separate operators who have taken long-term investments in resident care from those who are looking to quickly extract money and resources before closing them down or moving on. These chains control roughly 41% of nursing home beds in the U.S., according to CMS’s provider data, making the lack of transparency especially ripe for abuse.
The churn of nursing home purchases by midsize chains underscores investors’ perception of the sector’s profitability, particularly when staffing expenses are minimized and penalties for subpar care can be offset by money extracted through related transactions and payments from residents, their families and taxpayers. Lawsuits can drag out over years, and in the worst case, if a facility is forced to close, its land and other assets can be sold to minimize the financial loss.
A churn of nursing home purchases even during the pandemic shows that investors view the sector as highly profitable, especially when staffing costs are kept low and fines for poor care can easily be covered by the money extracted from residents, their families and taxpayers.
Exposing the identities of who should be held responsible poses a formidable task. Private investors in nursing home chains often employ a convoluted system of limited liability corporations, related companies and family relationships to obscure who controls the nursing homes.
These adjustments are crafted to minimize liability, capitalize on favorable tax policies, diminish regulatory scrutiny and disguise nursing home profitability. In this investigation, entities at every level of involvement with a nursing home denied ownership, even though the same people controlled each organization.
A rule put in place in 2023 by the Centers for Medicare & Medicaid Services requires the identification of all private-equity and real estate investment trust investors in a facility and the release of all related party names. But this hasn’t been enough to surface every player and relationship. More than half of ownership data provided to CMS is incomplete across all facilities, according to a March 2024 analysis of the newly released data.
Shadowy ownership structures
The Villages of Orleans Health and Rehabilitation Center in Albion, New York, was, by any reasonable measure, broken. Court records show that on some days there was no nurse and no medication for the more than 100 elderly residents. Underpaid staff spent their own cash for soap to keep residents clean. At times, the home didn’t feed its frail occupants.
Meanwhile, according to a 2022 lawsuit filed by the New York attorney general, riches were siphoned out of the nursing home and into the pockets of the official owner, Bernard Fuchs, as well as assorted friends, business associates and family. The lawsuit says $18.7 million flowed from the facility to entities owned by a group of men who controlled the Village’s operations.
Although these men own various nursing homes, Medicare records show few connections between them, despite them all being investors in Comprehensive Healthcare Management, which provided administrative services to the Villages. Either they or their families were also owners of Telegraph Realty, which leased what was once the Villages’ own property back to the facility at rates the New York attorney general deemed exorbitant, predatory and a sham.
So it goes in the world of nursing home ownership, where overlapping entities and investors obscure the interrelationships between them to such a degree that Medicare itself is never quite sure who owns what.
Glenn Jones, a lawyer representing Comprehensive Healthcare Management, declined to comment on the pending litigation, but he forwarded a court document his law firm filed that labels the allegations brought by the New York attorney general “unfounded” and reliant on “a mere fraction” of its residents.
The shadowy structure of ownership and related party transactions plays an enormous role in how investors enrich themselves, even as the nursing homes they control struggle financially. Compounding the issue, the figures reported by nursing homes regarding payments to related parties frequently diverge from the disclosures made by the related parties themselves.
As an illustration of the problems, consider Pruitt Health, a midsize chain with 87 nursing homes spread across Georgia, South Carolina, North Carolina and Florida that had low overall federal quality ratings and about $2 million in penalties. A report by The National Consumer Voice For Quality Long-Term Care, a consumer advocacy group, shows that Pruitt disclosed general related party costs nearing $482 million from 2018 to 2020. Yet in that same time frame, Pruitt reported payments to specific related parties amounting to about $570 million, indicating a $90 million excess. Its federal disclosures offer no explanation for the discrepancy. Meanwhile, the company reported $77 million in overall losses on its homes.
In South Carolina, two of Pruitt’s facilities are among the 10 most fined in the state. PruittHealth Aiken has received over $217,000 in fines over the past three years, including nearly $150,000 in fines when inspectors found lax infection control procedures for COVID-19 and antibiotic resistant bacteria MRSA and C. Diff. And PruittHealth Columbia has received over $180,000 in fines–eighth highest in the state.
Pruitt Health did not respond to repeated requests for comment.
Inflated costs
Meanwhile, a March 2024 study from Lehigh University and the University of California, Los Angeles shows that costs were inflated when nursing home owners switched to contractors they controlled directly or indirectly. Overall, spending on real estate increased 20.4% and spending on management increased 24.6% when the businesses were affiliated, the research showed.
Overall, 77% of US nursing homes reported $11 billion in related-party transactions in 2019 — nearly 10% of total net revenues — but the data is unaudited and unverified. The facilities are not required to provide any details of what specific services were provided by the related parties, or what were the specific profits and administrative costs, creating a lack of transparency regarding expenses that are ambiguously categorized under generic labels such as “maintenance.” Significantly, there is no mandate to disclose whether any of these costs exceed fair market value.
What that means is that nursing home owners can profit handsomely through related parties even if their facilities are being hit with repeated fines for providing substandard care.
“This is the model of their care: They come in, they understaff and they make their money,” said Sam Brooks, director of public policy at the Consumer Voice, a national resident advocacy organization. “Then they multiply it over a series of different facilities.”
This is a condensed version of an article from The Conversation’s investigative unit. To find out more about the rise of for-profit nursing homes, financial trickery and what could make the nation’s most vulnerable citizens safer, read the complete version.
Complete Version link here.
Sean Kevin Campbell is an investigative journalist based in New York City and contributing reporter with The Garrison Project. His recent stories his focused on the criminal legal system, social justice and health. His investigation into the Black Lives Matter Global Network Foundation was one of the most widely read stories in 2022, and with New York magazine’s “Ten Years Since Trayvon” issue, was honored with a 2023 National Magazine Award. Sean has won the Les Payne Award for Coverage on Communities of Color from the Society of Professional Journalists’ Deadline Club and a Sidney Award from the Hillman Foundation, among other recognitions. His feature work has been published by outlets including New York Magazine, Rolling Stone, ProPublica, and FiveThirtyEight. Sean holds a BS in aerospace engineering from the University of Florida, an MFA in creative writing from Sarah Lawrence College, and a master of science degree from the Columbia University School of Journalism with a specialization in data journalism.
Charlene Harrington, PhD, RN, (Co-Principal Investigator) has been a professor of sociology and nursing at the University of California, San Francisco since 1980, specializing in long-term services and supports (LTSS) policy and research. She was elected to the Institute of Medicine in 1996. In 2002, she and a team of researchers designed a model California LTSS consumer information website, funded by the California HealthCare Foundation, which she continues to maintain and expand. Since 1994, she has been collecting and analyzing trend data on Medicaid home and community-based services programs and policies, funded by the Kaiser Family Foundation. In 2003, Dr. Harrington became Principal Investigator of the UCSF Center for Personal Assistance Services, a position held until 2012.
