Do We Need More Federal Intervention to Stop Profiteering in the Nursing Home Industry?

When Connecticut Attorney General Richard Blumenthal went before Congress a couple weeks ago to discuss the need for greater oversight in the nursing home industry, he was speaking fresh from the wound of one of the worst episodes of corporate siphoning in recent memory, as bad or worse than the ENRON fiasco, but far less well-known.

Blumenthal cited his experience in the ongoing fight with Haven Healthcare, one of the largest administrators of nursing homes in Connecticut. The company, which grew to administer 25 nursing homes in New England, 15 in Connecticut, during the 1990s, filed for Chapter 11 bankruptcy protection in November. The filing came the same day as the conclusion of a three-part expose by the local paper the Hartford Courant, and just two days after CEO Ray Termini reaffirmed his company's" commitment to quality care, adequate staffing and financial management."

However, as a result of the Hartford Courant's reporting and court documents released as a result of the bankruptcy filing, we now know that Termini was committed to only one thing: taking money from the families of the elderly and infirm and putting it in his pocket.

An audit by the Connecticut Department of Social Services revealed that Termini diverted more than $15 million in assets from the nursing home chain into his personal investments and his wife's checking account. The money from his wife's checking account was used to purchase several homes in Connecticut and Florida, rental properties across Connecticut, and a $1.5 million yacht.

The main investment made by Termini was in Category 5 records, a Nashville label headlined by country star Travis Tritt. This company received nearly $ 9 million in loans from Haven Healthcare, in addition to the purchase of its $2.1 million headquarters with more than half a million down in cash.

While this money was being diverted, the company ran its nursing homes with the bare minimum staff required to avoid severe penalties, well below the national average staffing level, and was cited for numerous care violations, with one of its homes being the most fined in the state of Connecticut. In addition, the company received millions in reimbursements from Medicare to pay for medications used in the home, but did not pay its bills, acquiring $20 million in debt to medical suppliers. It did not pay property taxes on its homes, or even its utility bills. In December 2005, the heating oil to one nursing home was shut off for delinquent payments, and in January 2006 Connecticut Light & Power threatened to shut off electric service to six nursing homes run by the company.

Although this is one of the worst examples of corporate profiteering in the nursing home industry, it is by no means an isolated incident. Consider the case of National Health Care Associates, Inc, whose financial misdeeds have yet to be fully exposed. What is known is that it operates its nursing homes in Connecticut and New York, which are underequipped, understaffed, and underfunded, through sham companies designed to deflect negligence from the parent company. When people file lawsuits against the nursing home, the sham company folds, protecting the parent company from liability. The shield company is no more than a dry husk of an entity, barely legal, and its bankruptcy proceedings are like trying to squeeze blood from a turnip.

So, will increased federal oversight protect us from this kind of capitalist piracy? Blumenthal proposes a powerful federal-state partnership that can track down the financial center of nursing home conglomerates, and a strike force to rapidly investigate nursing home corruption. In addition, states would be required to perform regular financial audits to prevent corporate bleeding, self-dealing, and corporate facades.

But such oversight is expensive, and with economic decline putting many states' solvency in jeopardy and executive bleeding of the federal government into the personal wars of our leaders, it seems unlikely that either the state or federal government will have the potency to fulfill its half of the bargain.

Perhaps the only possible solution to this problem is removing profit from the equation. ENRON, MCI WorldCom, and other companies show that whenever there are profits to be made , executives will find ways to filter money to their personal accounts while the company slides into bankruptcy, taking employees and the economy with it. In terms of nursing homes, the failure of corporations also puts residents in jeopardy, not just in terms of their livelihoods, but also their lives. This is too great a risk, and we need a system that makes care for the elderly the goal, not just a means for profit.

Until we can achieve this new system, the only way to protect your loved ones from nursing home neglect is constant vigilance. A personal injury attorney can help you hit these corporate jackals where it hurts: in their profits, but in some cases you have to act fast, to file your suits before your loved one has suffered the full extent of possible injury and before the jackals can scatter from the corpse, leaving only the bones of the managing corporation behind.