“Corporate Webs” Can Mean Inadequate Nursing Home Care

Elderly Man Folding Hands

It is sometimes difficult to locate a nursing home for your loved one that checks all the boxes on your list of requirements. But the situation turns worse when you discover that the nursing home you thought would provide excellent care is actually understaffed and neglectful of its residents. It can be your worst nightmare.

That’s what happened to Martha Jane Pierce, a resident of Allenbrooke Nursing and Rehabilitation Center of Memphis, Tennessee. When one of her sons came to visit in 2009, he discovered that his mother’s foot was literally rotting from an untreated wound. A surgeon had to amputate 60 percent of Pierce’s leg to save her, commenting that “he had never seen anything like it.”

The Numbers Behind the Story

Financial records and court testimony in the suit brought by the Pierce family revealed that the nursing home had been badly underfunded and seriously understaffed. A nurse testified in the resulting case that often there were no linens, sheets, or diapers in the nursing home. Allenbrooke showed a $2 million shortfall in funding on its books.

However, during that same year, of the $12 million it took to fund Allenbrooke’s expenses, $2.8 million was paid to a group of corporations run by two accountants who owned 33 nursing homes, one of which was Allenbrooke. The nursing home paid these other corporations for drugs, physical therapy, and management services. The two accountants received the profits: in 2014 alone, Donald Denz earned $13 million and Norbert Bennett received $12 million, largely from their nursing homes, as reported on their personal income tax filings.

Related Party Transactions

These days, nursing home owners frequently outsource goods and services to companies under their control; these business connections are called related party transactions. Such business arrangements are legal and are used by nearly 11,000 facilities, or about 75 percent of all nursing homes, in the U.S. Business contracts with related party companies were paid $11 billion by Medicare in 2015. A report published in the New York Times has called these arrangements “corporate webs.”

Often, the owners write contracts in which the nursing homes pay more than they normally would for goods and services on the open market. Higher prices mean higher profits, which the owners then drain from the business. These profits do not show up on the nursing home’s accounts. That means when injured residents and their families sue, it’s much more problematical for them to collect from the related corporations, where the money is. Unfortunately, the legal bar has been set high for including related companies in suits.

Other industries, notably restaurants and retailers, use corporate networks widely. So do some nonprofit nursing homes. Corporate webs can often allocate resources more efficiently and can make a lot of sense. They are not necessarily a prescription for fraud or bad actions.

However, an analysis of financial, inspection, and quality assurance records performed by Kaiser Health News discovered that nursing homes using related party companies often fell short in a number of areas. Such non-independent nursing homes, on average:

  • Employed 8 percent fewer health care aides and nurses.
  • Were 9 percent likelier to have injured residents, or to place the residents in jeopardy.
  • Had 53 authenticated complaints per 1,000 beds. For independent nursing homes, the rate was much lower: 32 authenticated complaints per 1,000 beds.
  • Were fined 22 percent more frequently than independent homes for significant health violations, with penalties that were approximately $24,441 higher.

What Happened to the Pierce Family?

Because tracing the ownership of the nursing homes and related corporations was complex, it took six years for the Pierce case to come to trial. But the long and involved bouts of needed research bore fruit. A jury delivered a $30 million verdict due to negligence, of which $20 million became the personal liability of Bennett and Denz to pay.

A couple of factors made a difference. One was the owners’ testimony that they delegated responsibilities to the home’s administrators yet claimed on their tax returns that they “actively” took part in the home’s management. The other was testimony from aides and nurses that Allenbrooke added workers in order to satisfy state inspections, but not at other times. Nurses and aides also claimed they were encouraged to fill in medical records with no regard to accuracy. One example? Mrs. Pierce supposedly ate a meal the day following her death.

Listening Hard and Working Harder for Seniors

When someone you love has been hurt, it can feel like nothing will ever be right or fair again. When this happens, the South Carolina nursing home injury lawyers at the Louthian Law Firm can review your legal options and work with you to determine the most appropriate next step.

Many South Carolina assisted living facilities are part of a larger chain, complete with its own legal department. The nursing home’s lawyers may try to dispute abuse and neglect claims, but we have represented victims of neglect or abuse in retirement homes and we understand how to deal with negligent facilities and the nursing home attorneys who represent them. While a lawsuit cannot heal bedsores or restore someone’s health, a South Carolina nursing home abuse claim can help recover the large sums spent on a neglectful or abusive nursing home, as well as medical bills created by that abuse or neglect. You may also be able to hold the abusers accountable for the pain and suffering they caused.

For a free consultation, call our Columbia nursing home injury attorneys today toll free at 1-803-454-1200, or use our online contact form.