Judge questions legality of nursing home management companies, but dismisses complaint against one

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Nursing home management agreements may run afoul of federal law, but it's hard to argue that having a third-party manager hurts resident care. That was the message from Judge Jon S. Tigar, who recently dismissed a complaint brought by nonprofit resident rights group California Advocates for Nursing Home Care.

In 2012, CANHC filed suit against Country Villa Service Corp (CVSC) and related entities owned by Steven Reissman. As a management company, CVSC contracted with 40 skilled nursing facilities in California, taking over practically all aspects of operations, the suit stated.

This type of business arrangement violates the federal Nursing Home Reform Act, CANHC argued. The reform act says that every Medicare- or Medicaid-certified nursing facility must be directly overseen by a governing body that appoints an administrator, and the administrator must be “directed by and answerable to” the governing body alone.

Management agreements essentially create a middleman between the administrator and the governing body, and this causes resident care to decline, CANHC claimed.

It's possible that CANHC's claims about management company agreements are justified, Judge Tigar wrote. However, CANHC is not in a position to bring these charges, if nursing home residents — not CANHC members — are the ones injured by the breach of law.

Furthermore, the plaintiffs did not make a convincing case that the management agreements lead to resident harm due to substandard care, the judge stated.

“The execution of a management contract does not directly cause nursing home services to become substandard, just as the choice not to execute a management contract does not insure that a nursing home's care will be adequate,” Tigar wrote. “The two are simply untethered.”

The judge dismissed the plaintiffs' complaint on June 3, and gave them 30 days to file an amended version.