For-Profit Nursing Homes: The Hidden Costs of Commodifying Elder Care

Choosing a nursing home for a loved one is never an easy decision. Families want to ensure their relatives will be treated with kindness, dignity and respect in a safe, supportive environment. While this doesn’t sound like too much to ask of a facility tasked with caring for vulnerable members of our communities, the unfortunate reality is that far too many facilities fall short of their responsibilities, often with devastating consequences.

Recent estimates suggest that more than 10,000 nursing homes in the U.S. are operated by for-profit organizations, many of which manage upwards of 100 facilities at a time. As these for-profit structures continue to become more commonplace within the elder care industry, concerns about resident safety, quality of care, and financial mismanagement continue to grow. Let’s take a closer look at some of the risks associated with for-profit nursing homes and cover the various legal options that may be available to those affected by neglect or abuse within these facilities.

What are for-profit nursing homes?

Like most industries, the elder care sector operates under two primary financial models when developing and managing facilities: for-profit businesses and nonprofit organizations. There are some key differences between these two business structures that have very real implications for the quality of care provided within corresponding facilities.

 

Here is a brief overview of some of the variations in how for-profit and nonprofit nursing homes operate:

 

For-Profit	Nonprofit
●      Owned by private investors	●      Owned by religious, charitable, or community-based organizations
●      Profit-driven	●      Service-driven
●      Funded by individuals, corporations, or trusts	●      Funded by donations, grants, sponsorships, or government subsidies
●      Subject to cost-cutting measures to increase profits	●      Less concerned about profits and, therefore, more flexible to meet residents’ needs

 

In recent years, many research studies have shown that for-profit nursing homes are subject to a number of unique challenges that may directly compromise the quality of care provided to residents, as well as the quality of the work environment available to the staff responsible for daily operations.

The trouble with for-profit nursing homes

As briefly outlined above, the primary difference between for-profit and nonprofit nursing homes is that for-profit nursing homes operate with the intention of maximizing their profits. There are several different strategies that these facilities may employ to keep profits up, many of which involve cutting costs and making significant compromises around resident care.

Some of the issues commonly witnessed in for-profit nursing home facilities include:

• Understaffing: In an effort to keep costs low, many for-profit facilities aim to keep their staff size limited. Understaffing in these facilities can lead to increased risk of resident neglect, as well as high levels of staff burnout and turnover. All of these variables result in residents receiving less reliable hands-on care, which can have dire consequences.
• Poor living conditions: Some corporations may choose to cut corners with expenses like meals, sanitation and personal care products. The impact of these kinds of cost-cutting measures is often that residents are forced to live in sub-par conditions, which can increase the risk of serious health problems in the long term.
• Inadequate training: Due to the relatively high turnover rate for nursing home staff in these for-profit facilities, it is not uncommon for staff members to be inexperienced and undertrained while attempting to care for vulnerable residents. This lack of vetting and training can further contribute to resident neglect and, in extreme cases, even elder abuse.

These pitfalls can all contribute to increased rates of injury, abuse, neglect, and severe illness within for-profit nursing home facilities. In fact, multiple reports have found that for-profit nursing homes are more frequently cited by regulatory agencies for deficiencies in their structure, process and resident outcomes than their nonprofit counterparts.

What about mid-sized nursing home chains?

It may be tempting to assume that nursing homes run by mid-sized rather than large-scale corporations could offer a more acceptable quality of care to their community members. However, mid-sized nursing home chains often find themselves facing higher levels of strain than facilities run by larger corporations with more substantial resources.

Mid-sized chains may also face less public scrutiny than larger elder care corporations do, which can contribute to a lack of oversight and accountability. All of these factors together may result in mid-sized nursing home chains:

• Incurring higher fines per facility than large or independent facilities.
• Receiving lower overall quality ratings.
• Being more frequently cited for resident abuse and other violations.
• Diverting valuable resources from existing facilities to newly acquired homes.

Mid-sized nursing home chains benefit from flying “under the radar” while appearing to serve as humble, mom-and-pop care providers. This can be a particularly volatile combination that may subject residents and their families to extremely harmful consequences.

The financial gymnastics of for-profit facilities

The abuses of for-profit nursing home facilities aren’t just limited to harmful cost-cutting measures and poor quality of care. Many for-profit nursing homes take things a step further by using what are known as “related-party transactions” to disguise their profits from the public. Some common tactics involved in these transactions may include the following:

• Inflated lease agreements: If the individual or business entity operating a nursing home owns the physical location of the facility, the property owner may lease the facility back to their own nursing home for exorbitantly high rates. This increases the owner’s profits while diverting funds away from resident care.
• Excessive management fees: Similarly, some nursing home owners will form management companies to oversee the operations at their facilities and then charge their own nursing home for these management services.
• Triple-net leases: These lease agreements essentially allow property owners to pass along the financial burden of things like property taxes, insurance, and maintenance costs to nursing home facilities. These leases increase operating costs for nursing home facilities while reducing monthly expenses for landlords.

The role of Real Estate Investment Trusts

Another major player in the for-profit nursing home industry is something called a Real Estate Investment Trust (REIT). We are seeing a growing number of REITs investing in nursing home facilities because of their high earning potential. Not only do REITs benefit from owning equity in nursing home properties themselves, but they can also charge exceptionally high rental rates to these facilities on an ongoing basis to maximize their profits.

Unfortunately, when nursing homes are subject to high operational costs like those associated with inflated lease agreements, resources must be diverted away from resident/patient care simply to make ends meet. Because REITs are purely in the elder business for the potentially high profits, these business entities are less likely to make decisions based upon what would be in the best interest of their residents and more likely to make decisions that serve their bottom line.

How do you choose the right nursing home?

Because of the complexities of the elder care industry and the widely-regarded lack of transparency within many for-profit facilities, it can be very difficult for families to know whether they are making the right choice for their loved ones. Many families rely on the CMS Five-Star Quality Rating System to provide them with an easy-to-understand overview of a facility’s strengths and reputation. While the basic idea of this system is a positive one, the underlying mechanism of the system can be easily manipulated due to for-profit nursing homes making dishonest self-reports.

Subsequently, many families rely on word of mouth to narrow down their lists of possible facilities. Family members must also do their due diligence in terms of researching the facilities in their area and digging into the financial structure and potential business ties of the different nursing homes available to them. Whenever possible, families should strive to look for nonprofit facilities that dedicate themselves to ensuring the highest possible standards of care for their residents without the conflicts of interest associated with for-profit homes.

What to do if you suspect elder abuse or mistreatment

Even as advocacy groups and regulatory agencies continue to lobby for comprehensive reform within the elder care industry, many families may still find themselves impacted by the unscrupulous business practices of for-profit nursing home facilities. If you suspect that a loved one has suffered abuse, neglect, or other forms of mistreatment while under the care of a for-profit elder care facility, there are dedicated professionals available to help you pursue all your available legal options.

The experienced attorneys at Garcia and Artigliere specialize in helping families fight back against the abuses that run rampant within the elder care industry while advocating for the health, safety and dignity of some of the most valued members of our communities. With over 30 years of experience in elder abuse litigation, Stephen Garcia and his team are paving the way for a brighter future for elders and their families.

If your family is concerned about abuse or neglect perpetrated by an elder care facility, the team at Garcia and Artigliere is standing by to help you navigate the legal system with confidence. With offices located across the U.S., you can rest assured that you are receiving the best possible legal guidance available to you and your family during this difficult time. Reach out today to schedule a consultation with a member of our team, and let’s explore how we can help you arrive at the best possible resolution for your family.