Federal, state governments cracking down on nursing home payments to affiliated companies

A string of recent lawsuits uncover a trend of nursing home owners moving money into their own pockets through corporate arrangements that are widespread — and legal — in every state, NPR reported Jan. 31.

Nearly 9,000 for-profit nursing homes nationwide outsource their nursing staff, medical supplies and even the buildings out of which they operate to affiliated corporations, known as related parties, that their owners also own and operate, according to the report.

Facilities pay related parties more than $12 billion a year, but federal regulators do not make them reveal how much they charge above the cost of service or how much money ends up in owners' pockets, according to NPR.

"Even during the worst year of New York's pandemic, when homes were desperately short of staffing and their residents were dying by the thousands, some owners managed to come out millions of dollars ahead," Bill Hammond, a senior fellow at the Empire Center for Public Policy, a think tank in Albany, N.Y., said in the report.

In January, Medicaid experts warned that related parties "may artificially inflate" the true cost of nursing home care in reports that facilities file to the government. The U.S. Department of Health and Human Services inspector general announced in August that it will look into whether nursing homes are following federal regulations while using related parties.

The federal and state governments have filed multiple lawsuits in the last year, alleging Medicaid fraud schemes. Some of the more recent ones include:

  • Nursing home owner Bob Dean, who recently settled a class-action lawsuit for $12.5 million, is being sued by the U.S. government for allegedly misallocating $4 million in Federal Housing Administration funds.

  • New York Attorney General Letitia James sued Cold Spring Hills Center for Nursing Rehabilitation in Woodbury for allegedly diverting over $22.6 million in Medicaid and Medicare funds to the owners' pockets.

  • New York Attorney General Letitia James filed a lawsuit against Comprehensive at Orleans for neglect and using the state's Medicaid program for personal profit.

The three owners of Comprehensive Orleans are estimated to have stakes or official roles in 275 other facilities across 28 states, according to the NPR report. The attorney general alleges that, over seven years, the owners gave themselves and other investors more than $18 million through one of their nursing homes in New York. 

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