New Rules May End Nursing Homes Hide and Seek

NEW RULES ON CORPORATE DISCLOSURE MAY SPELL THE END OF HIDE AND SEEK BY NURSING HOMES

In recent years thousands of nursing homes across the nation have been purchased by large Wall Street private equity companies.  Unfortunately, the pattern has been that, once purchased, the private investors cut expenses and staff often below the legal minimum requirements.

Further, those companies have set up Byzantine structures to attempt to insulate themselves from liability and break up their corporations into innumerable LLC’s so that no one can determine who actually is responsible.  In bringing such lawsuits for elder abuse against nursing homes here in Northern California, we have often had to spend a substantial amount of time simply figuring out who actually owns and controls the skilled nursing facility.

Fortunately, the law is starting to catch up with these outlaws.  In March of 2010, as part of the Patient Protection and Affordable Care Act (42 USC §1320a-3),  nursing homes will soon be required to disclose who is actually responsible for the patients’ care.

Within two years the law will require that each nursing home disclose any person or entity that has an ownership interest of five percent (5%) or more in the facility, including: direct or indirect interests such as intermediate entities; the name of any person or entity owning a mortgage, deed of trust or obligation on the facility; the members of the governing bodies of the facility; and the officers, directors, members, partnerships and managing employees of the facility.  Further, the law will require the identity of any “additional disclosable party” who (i) exercises operational, financial or managerial control over the facility, (ii) provides policies or procedures for any of the operations of the facility, (iii) provides financial or cash management services to the facility, (iv) leases or subleases real property to the facility or provides management or administrative services to the facility.

While that information will not be available to the public until March 2013, the facilities will have to make that material available to the Department of Health Services and to any state long term care ombudsman now.  Not surprisingly, the private equity firms are up in arms over having to inform the public who’s actually responsible for treatment.  They insist that, if they have actually have to say who’s responsible, that entity is more likely to be sued.  They’ve also expressed concern that federal prosecutors, who have largely been absent from any enforcement efforts, will “follow the money” and commence investigation on those with repeated staffing deficiencies.    Not that they want to fix their problems, simply that they want to hide who created them.  As my partner Mike Crowley stated when I mentioned I was writing this article, “Of course the cockroaches don’t like the kitchen lights turned on.”

Somehow, one is hard pressed to have much sympathy.  Having made a pattern and practice of playing “hide and go seek” with responsibility, it’s finally time that those who profit from delivering substandard care be held accountable.

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