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Nursing home industry financial practice called out

Lockport Union-Sun & Journal - 5/27/2022

May 27—One thing learned during the Covid pandemic is that nursing homes are fragile ecosystems. They house a vulnerable population and the children and grandchildren of any facility's residents depend on the care that their loved ones receive.

As COVID-19 ripped through the world, many of the practices of the nursing home industry were laid bare. Cases of not being prepared in terms of staffing, equipment and protective gear were paramount in the news and, as the pandemic peaked, the body bags containing senior citizens were being placed in front of media cameras.

While the reasons for the virus spreading so quickly through the senior population are many, and with plenty of blame to go around the political spectrum, the pandemic exposed a practice that leaders of 1199SEIU United Healthcare Workers East believe is still being utilized post-crisis.

"Related party transaction" refers to a financial practice that is seen most often in for-profit nursing home chains. According to 1199SEIU representatives, one of those chains is Elderwood, which has locations in Vermont, Connecticut and New York state. Of Elderwood's use of related party transactions, union leaders specifically called out its locations in Williamsville and Lockport.

The practice involves common ownership of the nursing home and the services that it relies upon — including the land where the nursing home sits — and moving money from the facility, staff and residents to companies owned by the same individuals that own the nursing home, for the purpose of charging rent or fees for services.

Essentially, the owner of both these service companies and the nursing home can charge any amount without affecting the bottom line, and at the same time claim the nursing home is strapped for funds which results in non-competitive wages and staff shortages.

"We see it often in large for-profit chains with multiple facilities," said Dennis Short, senior policy analyst for 1199SEIU. "They create related parties, other companies, to siphon funds not otherwise committed to provide to the facilities."

Short gave many examples of what is seen in the industry, describing bills for such programs and services as therapy, nutrition and housekeeping. Each of these transactions came with a profit margin for the owners that are paying literally into their own pockets, according to Short.

Demian Fernandez, a 1199SEIU researcher, was able to pull from state-required cost reports of Elderwood facilities in Williamsville and Lockport. The numbers are hard to find there, he said; the reports have lots of unnecessary information and are difficult to read. But Fernandez found that in 2020, Elderwood at Lockport paid in excess of $474,000 for rent, $678,000 for administrative services, $23,000 for pharmaceutical drugs, $138,000 for construction and maintenance, $322,000 for insurance and $59,000 for temporary staffing services, all in related party transactions with common ownership.

"This is the biggest impairment, to know the financial viability of nursing homes," Short said, noting that the full worth of a chain like Elderwood is difficult to gauge even with the state mandated reports showing income going "in and out."

Two new state laws mandate minimum spending and staffing requirements, and that may curtail the practice of related party transactions — as well as lead to better care for residents — but the laws are being challenged in court by nursing home industry advocates including LeadingAge New York.

Grace Bogdanove, 1199SEIU vice-president for WNY Nursing Homes, said that for now, the law is on the side of nursing home residents and workers.

"Seventy percent of revenue must go towards resident care," Bogdanove said. "Forty percent of that must go to resident care at the bedside. The law forces nursing home owners to spend monies on resident care rather than divert taxpayer dollars to related parties."

A representative of Elderwood, Chuck Hayes, said the company would not comment on its financial transactions.

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(c)2022 the Lockport Union-Sun & Journal (Lockport, N.Y.)

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