A new report by the Empire Center (an independent, non-partisan, non-profit think tank based in Albany, New York) finds that nearly three-quarters of New York’s for-profit nursing facilities (72%) “structure themselves as networks of interlocking companies” that “disguise the true profitability of their businesses.” In 2020, companies related to the state’s for-profit nursing homes (“related-party” companies) reported $306 million in profits from $1.6 billion in revenue – a margin of 19.5%. The nursing facilities themselves showed profits of 2.3% in the same year. The Empire Center calculates that “the owners made twice as much money from related businesses as they did from the nursing homes themselves.” In other words, related-party transactions reflected two-thirds of owners’ profits for the year. Most significantly, facilities with related-party transactions spent less money on staffing and had poorer federal quality ratings than not-for-profit or government-owned facilities.
The Empire Center report provides details about one 17-facility chain, one of whose facilities, Van Duyn Center for Rehabilitation and Nursing, is currently being investigated by state Attorney General Letitia James for allegations of abuse and neglect. In 2020, the two joint owners of the 17 facilities in upstate New York, with a total of 3,100 beds, reported $292 million in operating revenue. The aggregate profit reported for the 17 facilities in 2020 was $1.7 million, less than one percent of the revenue. However, the Empire Center reports that the owners made significant profits in other way. The nursing facilities did business with a dozen related companies, including 11 in which one or both men held ownership stakes. Profits for the related-party companies were just over $10 million; the share for one owner was $7.2 million and for the other, $2.8 million. In addition, the Van Duyn facility paid $5.4 million in rent to a limited liability company that appears to be owned by one of the chain’s two owners. Finally, both owners received salaries from multiple nursing facilities in their chain – $1.1 million to one owner for working a combined 140 hours per week at 11 facilities, just under $1 million to the other, for working a combined 60 hours at 10 facilities. The Empire Center calculates that the two owners “netted at least $13.8 million in profits and salaries from their combined nursing home businesses,” more than eight times the $1.7 million officially reported as profits.
President Biden’s nursing home reform agenda, announced February 28, 2022, among its proposals, calls for increased transparency of ownership and finances, creation of a new owner/operator database, and increased accountability for chain owners of substandard facilities.
For further information, see:
- Bill Hammond, Empire Center, “Following the Money: An analysis of ‘related company’ transactions in New York’s nursing home industry” (Jul. 5, 2022), https://www.empirecenter.org/publications/following-the-money-2/l
- Empire Center, “Report documents growing use of ‘related companies’ by New York’s nursing home operators” (Press Release, Jul. 5, 2022), https://www.empirecenter.org/publications/report-documents-growing-use-of-related-companies-by-new-yorks-nursing-home-operators/
- White House, “Protecting Seniors and People with Disabilities by Improving Safety and Quality of Care in the Nation’s Nursing Homes” (Feb. 28, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-protecting-seniors-and-people-with-disabilities-by-improving-safety-and-quality-of-care-in-the-nations-nursing-homes/
July 14, 2022 – T. Edelman