While nursing home advocates continue to plead with federal officials about what they call the lack of feasibility for an expected first-ever federal staffing mandate, a notable consumer group has released a report accusing government overseers of not adequately tracking billions of dollars given to providers.

“Where Do the Billions of Dollars Go? A Look At Nursing Home Related Party Transactions” claims to document how nursing homes “funnel billions of dollars through related party companies — companies they own — with little to no oversight by the Centers for Medicare & Medicaid Services.”

The publication was produced by the National Consumer Voice for Quality Long Term-Care, a watchdog group long known to wary providers. The report appears to have been released with the White House’s looming nursing home staffing mandate in mind. The group is holding a webinar Thursday to discuss the report’s contents. 

The administration is widely expected to release details of its mandate sometime in April, raising anxieties among providers.

National Consumer Voice Executive Director Lori Smetanka told McKnight’s Long-Term Care News the report has generated significant response from unspecified individuals outside the industry.

“Key to President Biden’s promise of a minimum staffing standard is ensuring that the money we give nursing homes to implement the standard is used for care,” report authors wrote. “The solution is not in more money for the nursing home industry, but more accountability for how current dollars are spent.”

Specifically, authors call for the Centers for Medicare & Medicaid Services to: audit operators’ cost reports more closely; demand broader disclosure by nursing home owners of financial operations through consolidated cost reports; require specific minimum staffing levels; and impose profit caps on operators.

The consumer group pointed to new laws in New York, New Jersey and Pennsylvania as good examples of how to make sure a certain amount of every dollar goes towards resident care.

Providers find fault

Nursing home associations firmly rejected the report’s premises and conclusions. Some advocates urged “a careful read” of the report “to avoid reaching unfair and inaccurate conclusions.” 

Others pointed out that Medicare doesn’t pay skilled nursing facilities based on costs. Medicare payment rates are dictated through the Patient Driven Payment Model (PDPM), which hews to the clinical attributes of a given patient.

“Related parties are common across a variety of industries and focusing on them among nursing homes is a red herring,” said the American Health Care Association / National Center for Assisted Living in a statement to McKnight’s Long-Term Care News. “There is no evidence that nationwide, related parties are charging significantly more than other non-related third-party services. It is very well possible that these are the going rates for these services. Moreover, many of these related parties help streamline services and coordinate care for residents, such as therapy, pharmacy, and home health.”

 The nation’s largest nursing home association called for systemic change.

“The reality is that nursing homes are struggling right now — to recruit and retain staff and to keep their doors open. The sad truth is that because long-term care is chronically underfunded, ancillary services sometimes help keep these facilities afloat,” the AHCA/NCAL statement said. “But they alone cannot fix where the government has neglected its duty to our nation’s seniors. Focusing on related party transactions is missing the bigger picture — if we truly want to transform America’s nursing homes and prepare for a growing elderly population, policymakers must invest in long-term care.”   

 LeadingAge President and CEO Katie Smith Sloan cautioned against generalizations.

“The sector is not homogenous,” Sloan told McKnight’s in an email. “Our nonprofit nursing home members are driven by their missions and disclose ownership as required by federal tax law on Form 990s that are open to public inspection. This kind of clarity of motive and transparency of finances help to distinguish ethical operators from bad actors.

“It’s important to know how money flows to ensure what we do have goes to where it is needed,” she added. “Nonprofits funnel money toward quality care, not lining pockets.”

Major allegations

Among the claims the Consumer Voice makes:

  • There appears to be little to no scrutiny by the federal government on how taxpayer funds are spent.
  • Nursing home owners and operators routinely pay their related parties more than the reported costs, in some instances by nearly 1200%.
  • Related parties make nursing homes look less profitable, while a closer look at the parties involved reveals that profits may be hidden in these transactions.
  • Cost reports do not capture enough information on related party transactions to enable CMS to fulfill its regulatory obligation to ensure taxpayer dollars are going towards care and not profits to owners and operators.

The consumer group report features charts allegedly showing dollar volumes spent on related party payments by three large for-profit nursing home chains. 

The leader of one of them cited a “deep-rooted commitment to transparency, regulatory compliance and quality healthcare.” 

“Regretfully, in compiling the recent report on ‘related party transactions,’ the authors never contacted PruittHealth to review or discuss the data they attributed to our organization,” said President and CEO Neil Pruitt. “It is not clear how the authors calculated their figures, but their cost analysis does not align with traditional cost reporting practices. PruittHealth cost reports are audited independently and reflect a ‘reasonable and prudent’ standard for related-party costs.

“PruittHealth leadership would welcome a productive dialogue with the report’s authors and any opportunity to further assist CMS in upholding our shared purpose to ensure high-quality medical care for skilled nursing patients.”