Judge with gavel on table

Editor’s note: This article has been updated from its original form to include additional commentary.

Nursing homes can be attractive targets for prosecutors looking for COVID fraud, but aggressive enforcement policies may make it difficult for “good actors” to conduct business, legal observers cautioned Thursday. 

The latest tangled web involves a shuttered nursing home in Sioux City, IA, where the owner — Indian Hills Health Care — controversially alleges that the company it hired to manage the facility made off with $500,000 in government reimbursements, according to a report in the Iowa Capital Dispatch. The company also diverted $1.8 million in federal COVID relief funding awarded to the home, the owner said. 

The management company, Health Dimensions Consulting, vehemently denies the accusations. In fact, it said Indian Hills still owes it $129,000 in unpaid fees, according to reports in the Iowa Capital Dispatch. 

“The claims by Indian Hills Health Care, the owner of Touchstone Health Care Community, are baseless and untrue. Health Dimensions Consulting Inc. was sought out by Touchstone Healthcare Community’s bank to assist the community when the prior management company went into sudden bankruptcy,” explained Health Dimensions CEO Erin Shvetzoff Hennessey. “Unfortunately, Indian Hills Health Care failed to pay for the services provided. Health Dimensions Consulting, Inc. is a highly regarded organization that has been serving senior care communities for more than 20 years with a focus on resident-focused care.”

Part of Healthcare Dimension’s mission is overseeing challenged senior communities and serving residents without access to the quality care they deserve, Hennessey added.

“All Touchstone Healthcare Community funds remained in the community’s financial accounts, were used solely for resident care and vendor support services, and approved for disbursements by the community’s trustee,” she said. “We are confident that this lawsuit will reveal that Health Dimensions Consulting Inc. operated with the highest integrity.”

Cory Flashner, a member at the Mintz law firm and a former assistant US Attorney for the District of Massachusetts, said investigating COVID relief fraud is a critical mission at the Department of Justice. But while not every fraud will rise to prosecutorial prominence, the vulnerability of nursing home residents will lead to heightened scrutiny. 

“DOJ can’t prosecute every case of COVID fraud — they don’t have the resources to prosecute all of it,” Flashner told McKnight’s Long Term Care News on Thursday. “But allegations involving $1.8 million in stimulus funds plus a vulnerable victim class — that is going to attract additional scrutiny.”

Prosecutors also pay attention to their local news, Flashner noted. Accordingly, coverage of Touchstone Healthcare Community closing shortly after a judge appointed a receiver in July 2022 because of “immediate danger to the residents” would have raised questions from a legal perspective. 

Touchstone spent four years on the Center for Medicare & Medicaid Services’ Special Focus Facilities list due to care issues before closing.

As lawyers for vendors swarmed over the debris of Indian Hills Health Care alleging they were owed $500,000, another group entered the fray. Health Services Group’s lawsuit against Indian Health alleges that the company claimed it sold Touchstone to a New York company called Queens Sweet Jane, and it was this company that was responsible for paying bills. Health Services Group claims Indian Hills “deliberately defrauded [it] and other vendors,” according to local media reports. 

The complex ownership schemes for some skilled nursing facilities and chains can put them under an “enforcement microscope,” said Mysty Blagg, an attorney with Shipman & Wright LLP. She added that private equity and skilled nursing facility ownership is an odd, and potentially concerning, relationship.

“It’s kind of at odds with what the focus of a healthcare facility should be, which is the patients,” Blagg told McKnight’s. “The more complex the ownership relationship, the harder it is to figure out who to hold accountable when things go wrong.”

However, she said that basing policy on preventing bad actions frequently winds up chasing good actors out of the sector. Before becoming an attorney, Blagg was a healthcare compliance investigator. She said it can be nearly impossible for even top-rated facilities to perform well in audits anymore. 

“The people who are doing it the right way and taking care of their residents are feeling this burden that’s making it tremendously difficult for them to operate and keep their doors open,” she said.