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Back Office Dealings of Nursing Home Owners Put Lives in Danger

Every nursing home website, every brochure, every administrator, and every admissions representative says it: “Caring for our residents is our top priority.” As we’ve experienced firsthand through nearly 3 decades of working with our clients, that’s not always the case. According to a January New York Times article entitled Care Suffers as More Nursing Homes Feed Money Into Corporate Webs, nearly 75% of all U.S. nursing homes are benefitting financially from relationships called “related party transactions.” The often unknown truth of the nursing home industry is that ownership can be lucrative and greed has been known to overpower good judgment.

Benefits: Increased Profits, Reduced Liability & Reduced Staff
Related party transactions refer to a complex network of businesses that conduct transactions behind the scenes in nursing homes for goods and services. The owner or owners have a vested interest in related corporations and in essence set up contracts with themselves to provide things such as linens, food, physical therapy, and other goods and services to nursing homes. In fact, this business method is not only legal, but encouraged and taught by attorneys who defend nursing homes. Owners reap large profits by giving contracts to companies they either own, co-own, or have a financial interest in, and pay more for these goods and services than they would if they had sought bids from several competitors.

While increasing profits for an owner’s side business is one benefit, another major upside to these networks is reduced legal accountability if a facility is sued by a resident’s loved ones for nursing home abuse or neglect. It is extremely difficult to go after assets and funds that have been moved from the nursing home’s bank account, even if it was moved to a company also owned by or of some financial interest to the nursing home’s owner. Called corporate structure discovery, the legal process is expensive and takes a significant amount of time. Savvy nursing home owners are quick to shuffle nursing home profits by happily overpaying their other companies to buy things the nursing home would need to purchase anyway. Ultimately, moving the money makes the nursing home look less profitable, leaving less for the victim’s families to potentially be awarded in a lawsuit.

The idea of owning or having interest in contracted vendor companies is legal, common in other industries and makes good business sense. In essence, why pay other people for things you can provide yourself? The problem with the nursing home industry is that statistics and data have consistently shown that nursing homes who engage in these related party transactions have a track record of poor care, abuse, and negligence. Kaiser Health News reviewed federal nursing home records and discovered that nursing homes who engage in these transactions almost always maintain low staff to resident ratios, widely considered to be the primary predictor of nursing home injuries and wrongful death from abuse and neglect.

Kaiser Health News found that nursing homes who conduct business using related party transactions are usually for-profit facilities, are 22% more likely to be fined for health violations, and are more likely to injure their residents, with 53 substantiated complaints for every 1,000 beds versus 32 substantiated complaints per 1,000 beds at nursing homes who do not follow the related party transaction business model.

After 6 Years of Fighting, Victim and Her Children Receive Justice
The New York Times article covered the story of two owners of a Long-Island based Aurora Cares, LLC, a chain consisting of 38 nursing homes. Donald Denz and Norbert Bennett routinely contracted with their own companies to provide good and services to their nursing homes. They enjoyed a 28% profit margin, or $40 million of the chain’s reported $145 million revenue over an 8 year period. According to a nursing home consultant, the average nursing home’s profit margin is 3-4%.

Allenbrooke, an Aurora Cares-owned nursing home located in Memphis, was chosen by Martha Jane Pierce’s children as the facility to care for her in her golden years. Their mother, suffering from dementia, eventually suffered a stroke while at the nursing home. Her children report rarely seeing their mom repositioned to prevent bedsores, and even more surprisingly, said they rarely bumped into any staff while visiting on weekends. One day her son decided to roll down a sock on his mother’s foot and discovered a pressure sore that scared him so badly he immediately had her transferred to the hospital. A surgeon had to amputate 60% of Mrs. Pierce’s leg as a result of the nursing home’s inability to prevent and later care for her bed sore. After 6 years of corporate structure discovery, attorneys for Mrs. Pierce were able to uncover the web of jointly owned businesses by Aurora Cares. As a result of their research, attorneys were able to go after all of Donald Denz and Norbert Bennett’s shared funds and received a $30 million jury verdict on behalf of Mrs. Pierce and her family. During both depositions and the trial it was revealed that the nursing home “staffed up” for inspections (a well-known ‘secret’ in the nursing home industry) and that they falsely charted, including writing that Mrs. Pierce ate a meal the day after she died.  When asked about repositioning Mrs. Pierce during depositions, a nurse from Allenbrooke told attorneys “Not having enough staffing, we can’t — we weren’t actually able to go and do that.”

It’s unfortunate, but it’s reality. Some nursing homes are in business for reasons unrelated to a commitment for taking compassionate care of those we love. While it’s certainly not wrong to operate a corporation with an intent to earn a profit, when it involves jeopardizing the health, safety, and happiness of our families, it becomes behavior that deserves to be punished. If you have a loved one that has been injured as a result of any form of abuse or neglect at a nursing home, long term care facility, or rehabilitation center, please call the nursing home abuse and neglect attorneys of Chicago-based Levin & Perconti to discuss your legal options. We are among the first attorneys in the country to stand up and fight for the rights of elders and are well-known throughout the state of Illinois and the country to secure justice and bring peace to victims and families that have needlessly suffered.

Consultations with our lawyers are free and can be requested online or by calling us now at 312.332.2872.