Recommended read: In the New York Times, Jordan Rau of Kaiser Health News offers a harrowing look at nursing homes, where corporate profits may take priority over quality of care.

Nearly three quarters of nursing homes in the United States, Rau reports, have “related party transactions” — in which nursing homes contract out goods and services to other companies in which the nursing home owner controls or has a financial interest:


Contracts with related companies accounted for $11 billion of nursing home spending in 2015 — a tenth of their costs — according to financial disclosures the homes submitted to Medicare.

These arrangements offer an additional advantage: Owners can arrange highly favorable contracts in which their nursing homes pay more than they might in a competitive market. Owners then siphon off higher profits, which are not recorded on the nursing home’s accounts.

The arrangement might be a sweet one for nursing home owners but it can come at a cost for patients:

A Kaiser Health News analysis of inspection and quality records reveals that nursing homes that outsource to related organizations tend to have significant shortcomings: They have fewer nurses and aides per patient, they have higher rates of patient injuries and unsafe practices, and they are the subject of complaints almost twice as often as independent homes.

“Almost every single one of these chains is doing the same thing,” said Charlene Harrington, a professor emeritus of the School of Nursing at the University of California, San Francisco. “They’re just pulling money away from staffing.”

Another key point:


Such corporate webs bring owners a legal benefit, too: When a nursing home is sued, injured residents and their families have a much harder time collecting money from the related companies — the ones with the full coffers. Courts set a high bar for plaintiffs to bring these ancillary companies into their cases.

The nursing home lobby, of course, will be spending big this year in Arkansas to try to ram through a constitutional amendment to limit the damages plaintiffs can seek in court.

In the past, legal actions in Arkansas have exposed the unspeakable mistreatment of elderly people in nursing homes. In 2013, a unanimous jury verdict set damages for pain, suffering and mental anguish at $5.2 million for the negligent treatment of Martha Bull, a 76-year-old woman who died in agony at a Greenbrier nursing home owned by Michael Morton. The presiding judge, Mike Maggio, a major recipient of campaign cash from Morton, reduced the damages to $1 million; Maggio later admitted to bribery in the case.


Rau’s story details the mistreatment of a woman in her early 80s, suffering from the early stages of dementia, in a Memphis nursing home. The nursing home was badly underfunded, even as it funneled hidden profits to its owners via related-party transactions. The woman’s family filed a lawsuit and testified that her washing and eating needs went unmet and they frequently found her bed soaked with urine. The facility was chronically understaffed, they testified, and failed to provide proper attention after a stroke. The most horrifying detail: a son peeled a sock off his mother’s foot in a nursing home in Memphis and discovered rotting flesh; the sock had been left on for a month. Her son insisted on taking her to the hospital, where most of her leg had to be amputated, above the knee. The family won a $30 million verdict; the nursing home owners are appealing. 

Read the whole thing.

Also from Rau, important report last week in Kaiser Health News: The Trump administration has scaled back efforts by President Obama to use fines under the Medicare program to address mistreatment in nursing homes. Since 2013, 40 percent of nursing homes — more than 6,000 nursing homes — have been cited for a serious violation, and Medicare fined two thirds of those. The Trump administration has bowed to the nursing home lobby and reversed the stricter guidelines issued by Obama.

Rau reports:


The new guidelines discourage regulators from levying fines in some situations, even when they have resulted in a resident’s death. The guidelines will also probably result in lower fines for many facilities. …

But advocates for nursing-home residents say the revised penalties are weakening a valuable patient-safety tool.

“They’ve pretty much emasculated enforcement, which was already weak,” said Toby Edelman, a senior attorney at the Center for Medicare Advocacy.