Elder Voice Advocates (EVA) strongly supports the MN Department of Human Services bill, HF 4480/SF 4580, which mandates disclosure of related-party transactions.
We are alarmed by a concerning trend: nursing homes masking their true profitability by diverting funds to related businesses, all while the quality of care deteriorates. It's imperative to expose this deception and demand transparency and accountability in finances, operations, and ownership.
Currently, many Minnesota nursing home businesses claim that existing funding and reimbursements fall short of covering their actual costs. They assert a need for additional government funding to hire more direct care staff, pay competitive wages, and maintain profitability. However, the Department of Human Services has no idea how the money is being spent. What we do know is that the quality of care consistently falls below acceptable standards.
National research demonstrates a link between ownership structures and poor care quality. In Minnesota, despite receiving $1.2 billion in 2022, the nursing home industry continue their decades long understaffing and delivering substandard care. Key finding from the March 4, 2024, research report titled “Tunneling and Hidden Profits in Health Care” include:
Real estate and management expenses account for 77% of related-party spending, leading to a notable increase in overall costs when facilities engage with related parties. Once a facility adopts a related party for one of these services, total spending increases by 20.4% for real estate and by 24.6% for management.
If hidden profits were redirected towards hiring registered nurses, staffing ratios could increase substantially, improving care quality.
Limited consumer ability to assess quality before admission reduces firms' incentives to compete on quality.
The prevalence of opaque ownership structures allows nursing homes to prioritize profits over care, despite heavy reliance on public funds.
Nearly three-quarters of US nursing homes engage in related-party transactions, diverting $11 billion from essential resources. These facilities, intertwined with related businesses, consistently demonstrate deficiencies in care, staff shortages, and regulatory violations.