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I-Team: Following the money in nursing home ownership

'Related party transactions' scrutinized
Nursing home
Posted at 6:00 AM, Mar 18, 2021
and last updated 2021-03-18 12:19:39-04

BUFFALO, N.Y. (WKBW) — New York Gov. Andrew M. Cuomo is engulfed in scandals relating to sexual harassment and his administration’s handling of the Covid-19 pandemic in nursing homes.

But while a critical state report found Cuomo’s administration “undercounted” thousands of nursing home deaths, State Attorney General Letitia James also found blame with nursing home owners.

“Empty beds cost the facility money,” said Steve Bailey, a nurse at a Buffalo nursing home. “My experience is a facility will do almost anything to avoid empty beds.”

Bailey and dozens of other nurses were protesting earlier this month for a proposed “safe staffing” bill that would mandate minimum staffing levels in nursing homes and other health care facilities in New York State.

Bailey said nursing home owners can’t negotiate the price of their electric bill and other fixed costs, but they can cut staffing, which studies have found lowers patient care.

“But one thing where you can cut if you do it smartly enough or sneakily enough,” Bailey said, “maybe people won’t notice or they won’t notice until you’ve had some significant savings.”

Nurses aren’t alone in pointing out that the nursing home business has been a good business for the owners of some facilities, despite thousands of deaths from Covid-19 and a scandal that has nearly taken down the governor.

In her report on nursing homes, James also laid blame at nursing home owners, writing, “Through a variety of related party transactions and relationships, owners and investors of for-profit nursing homes can exert control over the facility’s operations in a manner that extracts significant profit for them, while leaving the facility with insufficient staffing and resources to provide the care that residents deserve.”

Michael Scinta, an attorney with the Brown Chiari law firm, has seen firsthand the complicated financial web that allows some for-profit nursing home owners to receive public money through Medicaid and Medicare and essentially pay themselves with those and other profits.

“Many of the owners make third-party related transfers of their revenues, so you can’t get a true picture of the revenue from the nursing home,” Scinta said.

The AG in her report described the practice as “self-dealing.”

“For example, they will also own or be related to the party that owns the pharmacy, or a transport company, or the laundry service, even a staffing agency, or a linen service,” Scinta said.

The AG used the example of nursing home owner Joseph Zupnik, who pleaded guilty in 2018 to endangering residents of his Cooperstown nursing home. The AG's criminal case stated that Zupnik slashed staffing to dangerous levels, while accepting public Medicaid and Medicare funds.

Over the course of a three-year period, the AG's recent report states that Zupnik and his partner paid more than $14 million to themselves or “related entities” like management or realty companies affiliated with themselves or their relatives.

New reform measures in the state legislature also take aim at the issue of transparency in ownership.

Currently, the state Health Department only publishes the corporate names of nursing home owners on its website. Those names are often just LLCs that obscure the actual names of people who invest in the facility.

“What we see is a constant shell game that goes on among various parties, various entities, LLCs, corporations,” Scinta said. “And it becomes a huge shell game where you cannot really identify in many cases who the true owner is.”