Report finds web of related companies make Consulate-owned nursing homes appear 'cash-strapped'

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A lengthy report by a Florida newspaper Thursday attempted to lift the veil on the inner workings of Consulate Health Care, the state's largest and often-controversial nursing home provider.

At the crux of the story: how Consulate — and most other large nursing home operators — allegedly use a network of related businesses to shift assets and make a profit for their owners and investors.

Owned by Formation Capital, Consulate is the nation's sixth-largest nursing home provider and works with a number of connected real estate, management and rehabilitation companies that are paid by Consulate's nursing homes.

“Everybody knows what's going on. Everybody knows about this shell game,” frequent industry critic Brian Lee told the Naples News. The former head of Florida's Long-Term Care Ombudsman Program is now heading a nonprofit called Families for Better Care.

Consulate and Formation executives did not participate in the newspaper's article.

Jennifer L. Trapp, the company's vice president of corporate communications told McKnight's Thursday that the article, part of a larger series, had a "multitude of inaccuracies and misrepresentations." She declined to cite specific errors.

"The lack of understanding around our ownership and operating structure is not surprising," Trapp said in an email. "Since the change in leadership two years ago, we have made wonderful advancements in quality improvements."

According to Trapp, those include a 28% increase in overall 5-Star CMS ratings in the last 24 months and an overall average of 4 stars in Quality Measures. She said over the past eight months, all of Consulate's skilled nursing centers operating in Florida had received the Gold Seal of accreditation for quality from the Joint Commission.

"These accomplishments are our story; and they speak highly of our forward-thinking, deliberate, and dedicated focus on enriching the lives of our residents through quality improvement, which remains our highest priority,” she said.

Consulate, according to Naples News, had operating revenues of $1.7 billion in 2016, as reported by the American Health Care Association. Its facilities accept private pay, Medicare and Medicaid payers, though in some cases, the company has fought to keep its right to receive federal funding after repeated quality concerns.

The newspaper reported that Consulate's nursing homes “are designed to appear cash-strapped,” with each individual nursing home operating as an “empty shell” of an LLC that pumps cash into those related partners.

As an example, the paper cited Consulate's Governors Creek Health and Rehabilitation, managed CMC II. The nursing home paid CMC II $467,000 in 2015, according to Medicaid cost reports, cited by the newspaper.The facility also paid $298,554 in rent to a related landlord in 2015, the newspaper reported.

Dale Ewart, a local official for a healthcare workers union, said the company's structure is designed to make it difficult for lawyers to get damages their clients are owed.

“It's also baffling, I think, to disguise the real profitability of the nursing home industry,” he said.

Consulate was the target of a huge whistleblower case that led to a $347.8 million judgement that has since been overturned. In court documents, company officials claimed the chain was in a “precarious” financial situation and claimed a financial penalty could lead to the “immediate economic extinction” of all Consulate homes.

In May, whistleblower Angela Ruckh filed paperwork stating her intention to appeal the overturned verdict. Bloomberg News had estimated previously that she could be eligible for up to $50 million if Consulate were found guilty of making false claims.