Although many nursing home residents in New York rely on government programs such as Medicare and Medicaid to pay for at least a portion of their care, the facilities are typically for-profit organizations. As such, owners reap the benefits when costs are kept low. In other industries, unscrupulous business owners have found ways to profit by setting up subsidiary companies to provide goods and services. Sadly, companies owning nursing homes have employed these tactics as well, to the detriment of the residents.
This practice, called related party transactions, is defended by those in the industry as a smart business technique that allows them to provide services at a lower cost and saves money on taxes. However, in one lawsuit against a nursing home facility, the family of a resident who lost her leg to infection claimed that the related party transactions contributed to a deficit on the books and a resultant lack of proper care.
In that case, the money that was used for resident care went to sister companies that provided management, medication and physical therapy, as well as other products and services. The owners reported millions in personal income on their tax returns while allegedly funneling the money away from those who were paying for care. Almost 75 percent of the facilities in the country also employ related party transactions.
Anyone who believes that a loved one in a nursing home is suffering from neglect or abuse, regardless of the reason for the poor treatment, should take the concerns to the ombudsman and law enforcement. Some people also choose to file lawsuits, both to recover damages, and to hold facilities publicly accountable for the harm they caused.
Source: The New York Times, “Care Suffers as More Nursing Homes Feed Money Into Corporate Webs,” Jordan Rau, Jan. 2, 2018