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  • Writer's pictureLeitner Varughese Warywoda

How do nursing home owners reap millions in income when claiming no profit?


In New York, there has been a long-standing intermingling of nursing homes, ownership, and real estate. Many nursing homes are owned by for-profit corporations, which often purchase or lease the real estate where the nursing home is located. This can create complex financial arrangements and potential conflicts of interest.


One issue that has arisen is the practice of "related party transactions," where the nursing home is owned by a company that also owns the real estate used by the nursing home. This can create a situation where the nursing home pays higher-than-market rates for the use of the real estate, which can put a strain on the nursing home's finances and ultimately affect the quality of care provided to residents.


Another issue is the potential for nursing homes to be sold or transferred to new owners, which can disrupt care and create uncertainty for residents and their families. In some cases, the new owners may have different priorities or may be less invested in ensuring high-quality care. Additionally, the new owners may have different financial arrangements with regard to the real estate, which could impact the nursing home's ability to provide care.

Overall, the intermingling of nursing homes, ownership, and real estate in New York has raised concerns about transparency, accountability, and the quality of care provided to vulnerable residents. Efforts are underway to address these issues and ensure that nursing homes are providing safe, high-quality care to all residents.


It is true that in New York, some nursing homes may appear to make little profit, while the owners are making millions. This often happens because of the complex financial arrangements that are common in the nursing home industry, particularly when the nursing home and the real estate used by the nursing home are owned by the same company or individual.


In some cases, the nursing home may be required to pay high rents or lease payments to the owner of the real estate, which can eat into the nursing home's profits. Additionally, the nursing home may be required to purchase supplies or services from related entities, which can inflate costs and reduce profits.


Despite these financial arrangements, it is important to note that some nursing home owners may be making significant profits, even if their nursing home appears to be struggling financially. This can happen because the nursing home industry is largely funded by government programs such as Medicare and Medicaid, which pay for the majority of nursing home care in the United States. These programs set rates for reimbursement, which may be lower than the actual cost of providing care. Therefore, nursing home owners may be able to make up for lower rates by cutting corners or reducing the quality of care provided.


It is important to note that not all nursing homes are operated in this manner, and there are many dedicated professionals in the nursing home industry who work hard to provide quality care to residents. However, the intermingling of ownership and real estate in the nursing home industry can create challenges for both residents and their families and for those trying to ensure quality care.


How do New York nursing home owners skirt the ownership linitation regulations?


In New York, the Department of Health has rules in place that limit the ownership of nursing homes by a single company or individual. Specifically, the rules prohibit any single company or individual from owning or operating more than 25% of the nursing homes in a given region or market area.


However, some nursing home owners have found ways to get around this rule by creating multiple companies or entities that each own a portion of the nursing homes. For example, an owner may set up one company to own the real estate of a nursing home and another company to operate the nursing home itself. In this way, the owner can effectively own multiple nursing homes without technically violating the ownership limits.


Another way that nursing home owners get around the ownership limits is through management agreements. In this type of arrangement, one company or individual is hired to manage multiple nursing homes, even though they do not technically own the facilities. This allows them to exert significant control over the operations of the nursing homes without violating the ownership limits.

While these ownership structures may technically comply with the rules, they can create challenges for oversight and accountability. For example, it can be difficult to determine who is ultimately responsible for the quality of care provided to residents. Additionally, it can create conflicts of interest, such as when the owner of the real estate charges high rents to the nursing home operator, which can undermine the financial stability of the nursing home and impact the quality of care provided. Overall, the complex ownership structures in the nursing home industry can pose challenges for regulators, residents, and their families alike.

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