Jun 22, 2018

The Shell Game

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Naples News had a great article on a growing and disturbing trend in nursing home ownership–a large corporation made up of a network of related businesses operating nursing homes at a profit for their investors.  This type of ownership structure allows the parent corporation to profit from the lack of funding that causes injuries and avoid accountability.  It is a scam meant to siphon as much of taxpayer resources as legally allowed.  It is morally repugnant.  See the investigative report Naples News did on Consultate Health Care.  At the crux of the story: how Consulate — and most other large nursing home operators — allegedly use a network of related businesses to shift assets and make a profit for their owners and investors.

The article discusses Consulate Health Care which operates as the nation’s sixth-largest nursing home provider. Consulate reported operating revenues of $1.7 billion in 2016, according to the American Health Care Association.  Taxpayer money flows to Consulate nursing homes and profits earned go to the chain’s owner, the Atlanta-based private equity firm Formation Capital.  Related (meaning common ownership and/or common control) real estate, management, rehabilitation and other companies receive payments from Consulate’s nursing homes.

“Everybody knows what’s going on. Everybody knows about this shell game,” said Brian Lee, former head of Florida’s Long-Term Care Ombudsman Program in the Department of Elder Affairs, now heading the nonprofit Families for Better Care.

Despite the big money generated from Medicare and Medicaid programs, Consulate’s nursing homes are intentionally designed to appear cash-strapped. While individual nursing home LLCs are essentially empty shells, they pay rent, management and rehabilitation service fees to Consulate or Formation Capital-affiliated companies.

The convoluted corporate structure is designed to make it difficult for lawyers to recover damages, said Dale Ewart, assistant regional director of the 1199 SEIU health care workers union in Miami.

“It’s also baffling, I think, to disguise the real profitability of the nursing home industry,” he said.

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