By Jordan Rau, Kaiser Health News
MEMPHIS, Tenn. — When one of Martha Jane Pierce’s sons peeled back
the white sock that had been covering his 82-year-old mother’s right
foot for a month, he discovered rotting flesh.
“It looked like a
piece of black charcoal” and smelled “like death,” her daughter Cindy
Hatfield later testified. After Pierce, a patient at a Memphis nursing
home, was transferred to a hospital, a surgeon had to amputate much of
her leg.
One explanation for Pierce’s lackluster care, according
to financial records and testimony in a lawsuit brought by the Pierce
family, is that her nursing home, Allenbrooke Nursing and Rehabilitation
Center, appeared to be severely underfunded at the time, with a $2
million deficit on its books in 2009 and a scarcity of nurses and aides.
“Sometimes we’d be short of diapers, sheets, linens,” one nurse
testified.
That same year, $2.8 million of the facility’s $12
million in operating expenses went to a constellation of corporations
controlled by two Long Island accountants who, court records show, owned
Allenbrooke and 32 other nursing homes. The homes paid the men’s other
companies to provide physical therapy, management, drugs and other
services, from which the owners reaped profits, according to court
records.
In
what has become an increasingly common business arrangement, owners of
nursing homes outsource a wide variety of goods and services to
companies in which they have a financial interest or that they control.
Nearly three-quarters of nursing homes in the United States — more than
11,000 — have such business dealings, known as related party
transactions, according to an analysis of nursing home financial records
by Kaiser Health News. Some homes even contract out basic functions
like management or rent their own building from a sister corporation,
saying it is simply an efficient way of running their businesses and can
help minimize taxes.
But these arrangements offer
another advantage: Owners can establish 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.
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Source: The Washington Post
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