Updated on 7-16-2019
Non-profit nursing homes generally perform better than for-profit facilities. However, the real question should be, is my facility truly a non-profit nursing home? Or is the ‘not for profit nursing home’ a for-profit facility in disguise?
Generally Speaking, Non Profit Facilities are Better
Ownership matters. Culture emanates from the top. Almost every study on the subject confirms that not for profit nursing homes have less deficiencies, less bedsores, fewer falls, and less nursing home abuse lawsuits when compared to their for-profit equivalents.
The acquisition of nursing homes by private investment firms has raised questions about the potential effects on the quality of care. . . PI [private investment] acquired homes had more total deficiencies and lower total nurse staffing ratios than nonprofit homes, both before and after acquisition. – U.S. Government Accountability Office, 2011 Study.
Traditionally, non profit nursing homes cost more when compared to their for profit counterparts. However, this issue is moot to most Americans who have Medicare or Medicaid picking up the tab on a nursing home residency.
So when choosing between a true not-for-profit or a corporation, you are usually better off with the non-profit. However it can be tricky to determine a real non-profit facility.
Not-for-Profit vs. Concealing-the-Profits
“My Mom’s nursing home is not for profit. All the proceeds get recycled back into the care the residents receive,” … You like the sound of that, right?
Savvy corporate nursing home owners are aware of this and may try to capitalize on the public’s distrust of for-profit facilities.
It is for this reason that you need to investigate whether your nursing home is actually non-profit, or just a clever sales pitch.
How a Non-Profit Nursing Home Siphons Off Profits While Still Maintaining a Not for Profit Title
Since the 1990’s, there has been a trend of nursing home operators, also referred to as licensees, to hire outside agencies to do peripheral care, management or maintenance for facility residents. If the owner of the nursing home also has ownership interests in those other peripheral companies, these are called ‘related entities’.
This is a clever way that nursing home operators can maintain a not-for-profit nursing home title while still making millions of dollars per year.
An Example of How a Non-Profit Nursing Home Diverts Money to For Profit Companies
For example, let’s assume Bob Smith owns Happy Acres Nursing Home. The facility is a non-profit. Bob Smith likes parading around his non-profit nursing home banner, as it results in higher occupancy rates on his nursing home census.
Here’s what his residents and their families do not know. Happy Acres outsources its management to Healthcare Consulting LLC. Happy Acres does not own the building, instead paying rent to Healthcare Land Acquisitions LLC. Happy Acres pays Healthcare Supplies LLC for its diapers, linens, etc. The list of related entities goes on to include 30 more companies.
Bob Smith is the majority owner of all of these related entities. In other words, Bob Smith gets to hold out to the public that Happy Acres is a not for profit nursing home, while diverting millions of dollars to his related companies, which are all very much for profit.
Approximately 75% of American nursing homes siphon money from the facility using a complicated corporate web of related entities. This includes non-profit nursing homes as well.
Getting to the Truth on Non-Profit Nursing Homes
A recent Boston Globe article analyzed the nursing home industry and came to this conclusion; they are good at hiding money. “These homes are making money on every single angle, they are hiding their profits, padding all their administrative costs, upping executive salaries,” says Charlene Harrington, a professor at the University of California.
Taking Non-Profit Nursing Homes to Task
Do your homework on the alleged not for profit facility. We recommend you use ProPublica to investigate deeper your specific facility. Once you find your specific nursing home licensee, use the Non-Profit Explorer to delve deeper into the facility financials. You can also visit CMS’s Nursing Home Compare site, look up your specific facility and then click on the ownership section.
Red Flags of Deceit
If you notice your “non-profit” nursing home is siphoning off all of its revenues to companies that are owned by the same individuals, this is suspect.
Example: A non-profit nursing home operates at a break even threshold, but pays more than $4 million to a pharmacy, a linens company, and a management company, all coincidentally owned by the same 3 people.
If you notice your not-for-profit nursing home is paying hefty executive bonuses and salaries, it is possible that the facility’s non-profit status may be more marketing and less reality.
Example: A nonprofit facility pays its executive board of 2 people more than $4 million in bonus compensation.
Do Your Research!
At the end of the day, you have to feel comfortable with the facility you choose. If it is for-profit, make it a good one. If you choose a nonprofit, do some digging and make sure the non-profit status is legitimate.
Digging Deeper: An Example of Pinning Down True Nursing Home Ownership
Step 1: Go to Medicare.gov’s Nursing Home Compare Search. Search for Boca Raton Rehabilitation Center.
This is where you will find whether your facility is a not for profit.
Step 2: Click ‘Get More Ownership Information’ to See Who Really Owns the Facility
Step 3: Dig Deeper Into Individual Owners
Every nonprofit is required to file a 990 form with the IRS. However, nothing comes up on searches for the 990 form for this facility. Additionally, searching more about the listed officer, Howard Jaffe, reveals the following news article:
Hanover Terrace’s nonprofit owner also seems to exist in a legal gray area. According to its 2012 tax return, Chestnut Health is a nonprofit organization based in an office suite in Bala Cynwyd, Pa., that also includes the real estate law offices of Howard Jaffe, the nonprofit’s president. At the end of 2012, Chestnut Health had a balance sheet deficit of $31,000, according to the return. Guidestar.org, a nonprofit organization that says it “gather(s) and disseminate(s) information about every single IRS-registered nonprofit organization,” lists the physical address of Chestnut Health as Suite 900 at 1675 Palm Beach Lakes Boulevard in West Palm Beach, Fla.
But neither Chestnut Health nor Hanover Terrace, whose sign alongside Lyme Road proclaims it is “a not for profit facility,” is on the list of charities of the New Hampshire Attorney General’s Charitable Trust Unit, which oversees all nonprofits operating in the state. The state requires each charity or nonprofit to file an annual report.
The Internal Revenue Service also requires nonprofits to file a tax return, called a Form 990, and make copies available upon request to the public.
Last week, Sherry Perry, an office manager at the reception desk in Hanover Terrace, said she was not familiar with the Form 990 and could not provide one. She said she would refer a reporter’s inquiry to Lincoln, but he did not respond. – VAnews.com
Is this proof that the facility is not really a non-profit? No. But it should prompt further digging to ascertain 1) who really owns the facility and 2) where facility revenues are really going.
Suspect Neglect Inside a Non Profit Nursing Home?
If you believe your loved one was wrongfully injured or suffered wrongful death inside a not-for-profit nursing home, let our law firm help. At Senior Justice Law Firm, our firm’s mission is to zealously advocate on behalf of victims of elder abuse and neglect. We retain forensic accountants and tax law professionals to perform a deep dive on the non-profit’s financials, all in an effort to elucidate the truth.
We are unique in that this is our law firm’s focus. Call us today to see why we are different and how we can help you after a family tragedy: 1-844-253-8919« Previous PostNext Post »