In Illinois, some nursing homes are owned by investors who also own other related businesses to which the homes pay money for contracted services, and these corporate webs are causing a decline in the quality of care that is provided to the nursing home patients. Nursing home owners may establish a number of different related businesses and then have the home’s contract with them for services for prices above the going rate so that they can siphon away higher profits. Nursing homes that operate under these kinds of arrangements often provide a much lower quality of care and have staffing shortages that may lead to neglect and abuse. When corporate webs are established, it can be difficult for the victims to go after the related businesses when they have suffered neglect or abuse in the nursing homes.
Why Corporate Webs Are Established
Corporate webs of related businesses are not illegal. Nursing home owners use these businesses to conduct related party transactions because they can substantially increase their profits from the nursing homes. Establishing a corporate web also provides the owners with an added layer of protection from liability. It can be difficult for plaintiffs to reach the related companies when they file lawsuits for abuse or neglect in the nursing homes.
Care Issues in Nursing Home Corporate Webs
Kaiser Health News analyzed inspection and nursing home quality records of nursing homes that outsourced services to related businesses. It found that nursing homes that contract out services to related businesses have fewer staff members per patient, have a greater incidence of injuries to patients and receive twice the number of complaints as nursing homes that are not a part of corporate webs. The nursing homes that are operated in this manner take money away from staffing to pay to the related party businesses in order to drive up profits. In one case in New York, a woman with dementia had not had a sock changed in a month. Her family found that the flesh on her foot was rotting away, and she had to have a large portion of her leg amputated. Nursing staff from the home testified about chronic staffing shortages. When people are injured because of neglect, piercing the corporate veil to hold the owners liable may be difficult.