Nursing Home Chain Settles Negligence Dispute for $38 Million

Nursing home negligence can come with a steep price. In 2014, a Justice Department investigation into a nursing home chain called Extendicare led to a $38 million settlement. At the time, Extendicare was a Delaware-based nursing home chain that operated 146 skilled nursing facilities in 11 states. After the settlement, the Extendicare nursing homes ended up in the hands of a private equity firm. Unfortunately, research suggests that this change of hands may not have done much to improve the quality of life for the nursing home residents, and concerned relatives should continue to keep an eye out for signs of negligence.

Billing Medicare for Substandard Care

Joyce Branda, the acting head of the Justice Department’s Civil Division, told the Wall Street Journal that from 2007 to 2013 Extendicare “was driven more by profit and less by quality of care.” In a release, the Justice Department stated that the “substandard nursing services were so deficient that they were effectively worthless.” The Department alleged that the nursing homes failed to follow protocols designed to prevent ulcers and did not hire enough skilled nurses. The Department also found that Extendicare billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services.

From the $38 million settlement, the federal government took $32.3 million, while the eight state Medicaid programs that Extendicare billed for substandard care received the remaining $5.7 million. Two private citizens served as whistleblowers in the case against Extendicare; one received $1.8 million for an upcoding case, while another received $250,000 following a worthless services case in Ohio.

The president of Extendicare did not admit to any wrongdoing and issued the following statement: “We have already invested substantial resources to enhance our existing compliance program over the past several years.”

Private Equity Takeover: Will Nursing Home Negligence Continue?

Extendicare is based in Canada. Since the settlement, Extendicare sold the U.S. side of its business to a private equity company called Formation Capital.

Private equity takeovers do not bode well for nursing homes. Senator Elizabeth Warren sent a letter to Formation Capital, stating, “We are particularly concerned about your firm’s investment in large for-profit nursing home chains, which research has shown often provide worse care than not-for-profit facilities.” One paper from the Journal of Health Care Finance found that private equity nursing homes had fewer registered nurses on staff and greater numbers of deficiencies.

In the letter, Senator Warren spells out the problem with private equity funds running nursing homes: “Private equity funds often operate under a model where they purchase controlling interests in companies for a short time, load them up with debt, strip them of their assets, extract exorbitant fees, and sell them at a profit – implementing drastic cost-cutting measures at the expense of consumers, workers, communities, and taxpayers.”

Recent Claims of Substandard Care in Private Equity Nursing Homes

Formation Capital also owns Consulate HealthCare, another chain of nursing homes with locations in Florida. Five of the locations in Florida have endured COVID-19 outbreaks, and all five have received a one-star rating from CMS.

The relationship between Formation Capital and Consulate HealthCare may make it more difficult for claimants to recover damages. According to a report in the Naples Daily News, the money made from Medicaid payments to Consulate Healthcare ends up at Formation Capital, through a convoluted route involving other Formation Capital-controlled entities. Brian Lee, the executive director of nonprofit Families for Better Care, told Naples Daily News, “Everybody knows it’s a shell game.”

What Can I Do If My Relative Suffered from Nursing Home Negligence?

Do you have concerns about the standard of care provided by your loved one’s nursing home? Contact the attorneys of Fitapelli Kurta for a free case evaluation. Email or call (877) 238-4175.