Related Party Transactions

WVTR reported that one for-profit nursing home facility in Colonial Heights, Virginia, is in hot water for doing something most nursing homes get away with every day. Last April, Colonial Heights Rehabilitation and Nursing Center received news coverage for their scathing 1-star quality rating from the federal government and their staggering profit margins.

The facility is reported neglecting vulnerable adults under their care including residents not being fed, not getting treatments, and needs being ignored. Residents often develop pressure injuries and infected wounds that make them worse off than when they started at the facility.

For example, after enduring a spinal injury, Michael Kabel, spent over a week at this facility without being fed, turned, or receiving much care at all.

Five days into his stay, he told his wife, “You need to get me out of here. I hate it here.”

A few days later, Michael developed an intense pressure wound that required an emergency transfer to the hospital via ambulance. Photographs of the injury are too graphic to be published. His family was not even notified of the wound’s existence until a nurse came into his room to dress it, and his wife asked what she was doing.

For anyone who’s familiar with this nursing home, this may seem unsurprising. Colonial Heights is frequently at the center of abuse, neglect, and wrongful death lawsuits. Even more appalling is that last December, 18 employees were arrested in an elder abuse investigation upon finding that the facility completely failed to provide care for pressure injuries. Considering how limited the facility’s staff was in the first place, it’s a wonder how they had any employees left after the arrests were made.

Meanwhile, between 2020 and 2023, the company reported $8 million in profits. That’s $8 million they received for providing services that do more harm than good to seniors and people with disabilities. Yet, only a year later, the facility reported to have suddenly experienced an $89,000 loss. These new numbers aren’t fooling anyone, as experts look to “related party transactions” to explain the deceptive reports.

“Related party transactions” refers to business transactions that facilities do with other companies that are actually all under the same ownership. Companies then refer to these transactions as “operating expenses” on cost reports, when the parent company is really just paying itself more money.

For example, Colonial Heights’ financial reports suggest that the facility, named “Colonial Heights Operator LLC” was paying rent to “831 East Ellerslie Avenue LLC.” Both LLCs are owned by Virginia Care HoldCo LLC. It does not take an expert to recognize that Virginia Care HoldCo LLC is covertly paying itself millions of dollars while creating fake companies to deceive the public. As Julian Rich, an expert witness in long-term care cases, explained, “They’re paying rent, basically, and it goes right into their pocket.”

In the meantime, while Michael undergoes surgical debridement to heal the wound that’s progressed to an unstageable level, the facility’s owner decided it needed to increase rent on itself 134%, giving itself $3.5 million more dollars that can evade taxes.

Then, as if this renting scam was not enough wealth for the directors of the health facility, their dangerously low staffing allowed them to pocket an extra $2.7 million. Residents assigned to Colonial Heights receive an average of 18 minutes with a registered nurse per day. Ernest Tosh, a nursing home abuse and neglect attorney and financial analyst, explained that “There are articles written and published all the time about staffing in nursing homes, how higher staffing equates to better outcomes, etc. If you are in this market space, there is no way you don’t understand that.” However, the drastic increase in the quality of care residents would receive with a sufficient number of registered nurses was apparently not worth the extra expense.

Staffing at Colonial Heights is actually so low that employees admitted to a common saying the staff shared while working: “keep them alive, off the floor, clean and dry.” Yet even this bare minimum is unmet, as the local long-term care ombudsman reported that the facility has “received multiple concerns” regarding “wound care not being done.” Michael also went without being fed, turned, or receiving much attention at all.

Less than a year ago, when officials began the investigation into elder abuse, staffing seemed to magically improve. Although temporary and performative, one employee stated that her “mind was blown” by the difference in care that was able to be provided with an improved staffing ratio.

Michael’s wife has begun advocating for laws that reasonably supervise the financial reporting and ownership of healthcare facilities. “I’m not saying that [facility owners] shouldn’t make a profit, but how much should that profit really be,” she asks. “Because there’s really no reason that you couldn’t give great care and still take home a decent paycheck.”

Ultimately, while some may deceptively argue that nursing homes are highly regulated, Colonial Heights reminds us of the reality that loopholes, lack of enforcement, and little to no financial regulation allow countless long-term care facilities to drastically abuse our most vulnerable populations.