According Kaiser Health News, an analysis of nursing home financial records revealed that nearly three-quarters of all nursing homes in the U.S. are owned by people who also have vested interest in companies that in turn sell services and goods to these same nursing homes.
These business dealings are known as “related party transactions.” These transactions enable a nursing home owner to arrange contracts with their related businesses above a more competitive price, allowing them to turn around and siphon off the extra profit.
As an additional benefit, creating these corporate “webs” provides a layer of legal protection to nursing home owners. When a nursing home is sued, it is often very difficult for victims and their families to collect from the other related companies an owner holds stake in, thereby allowing them to “shore” away money.
Unfortunately, nursing homes which deal in “related party transactions” tend to have significant shortcomings which specifically affect their patients. The Kaiser Health News analysis showed that nursing homes which outsource to related organizations “have fewer nurses and aides per patient, have higher rates of patient injuries and unsafe practices, and are the subject of complaints almost twice as often as independent [nursing] homes.”
In order for related companies to be brought into a nursing home lawsuit, the client’s attorney needs to convince the judge that all the companies acted together as “one entity,” meaning that the nursing home was unable to make standalone decisions. This is a complicated and often time and money intensive decision, as it often requires obtaining evidence like company documents and emails to prove the connections.