Published on:

Analysis: Corporate Ownership of Nursing Home Affects Care Quality

The number of for-profit corporate nursing homes (as opposed to non-profit facilities) has risen sharply over the last several decades, complicating efforts to hold facilities accountable for substandard care. Worse yet, these centers have a higher rate of poor care because they tend to value profits over the vulnerable people in their charge. Beyond that, owners of these corporate nursing homes often have a stake in other companies contracted to provide goods and services to the patients – everything from physical therapy to drugs to management to staffers. nursing home abuse

A recent analysis by Kaiser Health News and The New York Times explored how these “corporate webs” not only lessen the quality of care, but also make it more difficult for those seeking compensation for nursing home abuse and nursing home neglect.

Almost three-quarters of nursing homes in the U.S. have this kind of business arrangement, referred to as related party transactions. In some instances, facilities will contract out very basic functions, such as management of the facility or rent from their property. Those who run these organizations say it’s a means of simplifying operations and reducing corporate taxes. But of course, there is more to it. The owners of these facilities can score contracts they might not otherwise be able to land in a market that is more competitive, and from there, they can reap more profits that aren’t recorded in the nursing home’s financial records. While a typical non-profit nursing home might take home a profit somewhere in the neighborhood of 3 to 4 percent, owners of facilities with these related party transaction arrangements take home a profit margin of around 28 percent. 

The analysis by KHN revealed that nursing homes who worked with sister companies on average hired 8 percent fewer aides and nurses. On the whole, these centers were also 9 percent more likely to have residents who were injured or placed at immediate risk of harm, racking up 34 validated complaints of wrongdoing for every 1,000 beds, compared to 32 per 1,000 that state and federal inspectors identified at independent nursing home facilities. Finally, nursing homes that had these related party transaction business arrangements were 22 percent more likely to be cited for serious violations of care, and their penalties on average were about 7 percent higher.

For-profit facilities were much more likely to have this kind of arrangement, though it should be noted a 2003 articles published in the Journal of Health Law specifically recommended nursing homes undergo corporate restructuring to limit their liability for negligence claims – something both non-profit and for-profit facilities have been doing increasingly ever since. KHN reported at a 2012 conference for corporate nursing home executives, a presentation was given outlining the benefits of a complex corporate structure in the nursing home industry, noting it’s often too costly – both in time and money – to pursue corporate structure discovery, meaning those facilities are better protected.

When our nursing home abuse lawyers file a negligence lawsuit or a medical malpractice claim against companies with this type of arrangement, we must also convince judges that all these related companies were acting as a single entity, which often requires extensive and meticulous research to track down emails and other internal documents. To hold an owner personally liable – something called “piercing the corporate veil” – can be even more challenging.

Hiring a legal firm with a clear understanding of these corporate structures and how to research and identify all possible defendants is essential to a successful case.

Call Freeman Injury Law — 1-800-561-7777 for a free appointment to discuss your rights. Now serving Orlando, West Palm Beach, Port St. Lucie and Fort Lauderdale.

Additional Resources:

Care Suffers As More Nursing Homes Feed Money Into Corporate Webs, Dec. 31, 2017, By Jordan Rau, KHN

More Blog Entries:

Fatal Nursing Home Neglect of WWII Vet Spurs Criminal Charges, March 19, 2018, Boca Raton Nursing Home Abuse Attorney Blog

Contact Information