After the nursing home where Leann Sample worked was bought by private investors, it started falling apart. Literally.<\/p>\n

Part of a ceiling collapsed on a nurse, the air conditioning conked out regularly, and a toilet once burst on Sample while she was helping a resident in the bathroom, she recalled in a court deposition.<\/p>\n

\u201cIt\u2019s a disgusting place,\u201d Sample, a nurse aide, testified in 2021.<\/p>\n

The decrepit conditions Sample described weren\u2019t due to a lack of money. Over seven years, The Villages of Orleans Health & Rehabilitation Center, located in western New York near Lake Ontario, paid nearly $16 million in rent to its landlord \u2014 a company that was owned by the same investors who owned the nursing home, court records show. From those coffers, the owners paid themselves and family members nearly $10 million, while residents injured themselves falling, developed bedsores, missed medications, and stewed in their urine and feces because of a shortage of aides, New York authorities allege.<\/p>\n

At the height of the pandemic, lavish payments flowed into real estate, management, and staffing companies financially linked to nursing home owners throughout New York, which requires facilities to file the nation\u2019s most detailed financial reports. Nearly half the state\u2019s 600-plus nursing homes hired companies run or controlled by their owners, frequently paying them well above the cost of services, a KHN analysis found, while the federal government was giving the facilities hundreds of millions in fiscal relief.<\/p>\n

In 2020, these affiliated corporations collectively amassed profits of $269 million, yielding average margins of 27%, while the nursing homes that hired them were strained by staff shortages, harrowing injuries, and mounting covid deaths, state records reveal.<\/p>\n

\u201cEven during the worst year of New York\u2019s pandemic, when homes were desperately short of staffing and their residents were dying by the thousands, some owners managed to come out millions of dollars ahead,\u201d said Bill Hammond<\/a>, a senior fellow at the Empire Center for Public Policy, a think tank in Albany, New York.<\/p>\n

Some nursing home owners moved money from their facilities through corporate arrangements that are widespread, and legal, in every state. Nationally, nearly 9,000 for-profit nursing homes \u2014 the majority \u2014 outsource crucial services such as nursing staff, management, and medical supplies to affiliated corporations, known as \u201crelated parties,\u201d that their owners own, invest in, or control, federal records show. Many homes don\u2019t even own their buildings but rent them from a related company. Homes pay related parties more than $12 billion a year, but federal regulators do not make them reveal how much they charge above the cost of services, and how much money ends up in owners\u2019 bank accounts.<\/p>\n

In some instances, draining nursing home coffers through related parties may amount to fraud: Along with The Villages\u2019 investors, a handful of other New York owners are facing lawsuits from Attorney General Letitia James that claim they pocketed millions from their enterprises that the authorities say should have been used for patient care.<\/p>\n

Deciphering these financial practices is timely because the Centers for Medicare & Medicaid Services is weighing what kind of stringent staffing levels it may mandate<\/a>, potentially the biggest change to the industry in decades. A proposal due this spring is sure to spark debate about what homes can additionally afford to spend versus what changes would require greater government support. Federal Medicaid experts warned<\/a> in January that related-party transactions \u201cmay artificially inflate\u201d the true cost of nursing home care in reports that facilities file to the government. And the U.S. Department of Health and Human Services\u2019 inspector general is investigating<\/a> whether homes properly report related-party costs.<\/p>\n

\u2018A Dog Would Get Better Care\u2019<\/strong><\/p>\n

Beth Martino, a spokesperson for the American Health Care Association, said there is no evidence that related companies charge more than independent contractors do for the same services. \u201cThe real story is that nursing homes are struggling right now \u2014 to recruit and retain caregivers and to keep their doors open,\u201d Martino said.<\/p>\n

Lawyers for The Villages and its investors have asked the judge in the case for a delay until April to respond to the allegations of fraud and resident neglect in the lawsuit<\/a> that the attorney general filed last November. One of the lawyers, Cornelius Murray, said in court papers<\/a> that many allegations of short-staffing occurred during the pandemic when workers were out sick and the facility was required to accept any patient with covid-19. Lawyers declined to discuss the case with KHN.<\/p>\n

In a deposition for that case, Ephram \u201cMordy\u201d Lahasky, one of Fulton\u2019s owners, disputed that he and fellow investors improperly depleted The Villages\u2019 resources to the detriment of residents.<\/p>\n

\u201cI can assure you there was a lot of money left in the facility to make sure that it was not running on a shoestring budget,\u201d he testified. The Villages, Lahasky said, was a \u201cbeautiful facility\u201d with \u201cbeautiful gardens\u201d where \u201cresidents look great\u201d and employee morale was strong.<\/p>\n

That wasn\u2019t the opinion of Margarette Volkmar. She said in an affidavit filed with the state lawsuit that her husband was left in his bed with only a diaper on, was bruised by a fall,\u00a0choked by another resident, given the wrong medication doses, dressed in other residents\u2019 clothes, and covered in unexplainable bruises. After she moved him to another home, he gained back the 60 pounds he had lost and never fell at the new facility, she testified.<\/p>\n

\u201cI wouldn\u2019t put a dog in Villages,\u201d she said. \u201cA dog would get better care than he did.\u201d<\/p>\n

Owners Invested in Hundreds of Homes<\/strong><\/p>\n

Both The Villages and its related real estate corporation, Telegraph Realty, were controlled by the same trio of investors, although they arranged for the nursing home to be listed in regulatory filings as solely owned by a silent partner and did not disclose their co-ownership of The Villages, court records show. One co-owner, David Gast, disclosed his net worth was $22 million and revealed that he had shares in more than 100 nursing homes, according to a loan application included in court records. Lahasky, whose disclosed net worth was nearly $73 million, said in a deposition he was the biggest nursing home proprietor in Pennsylvania and owned one of New York\u2019s largest ambulance companies.<\/p>\n