Pressure continues to mount on for-profit nursing homes to increase the transparency of their finances amid increased oversight from regulators and government watchdogs in recent months.
Those tasked with overseeing how nursing facilities use public funds are “flying blind,” according to David Grabowski, PhD, a healthcare policy professor at Harvard University, in an interview on CBS Evening News with Norah O’Donnell.
A Wednesday night report highlighted the case of Berkley East Healthcare Center — a southern California nursing home purchased by for-profit provider Aspen Skilled Healthcare in 2019.
Since the change in ownership, the formerly family-run facility has dropped from a four-star rating with the Centers for Medicare & Medicaid Services to a one-star rating, CBS News reported. Residents and staff told CBS News about consistent understaffing issues.
The problems with care at Berkley East are representative of a broader trend with for-profit nursing homes and how they use their funding, Grabowski said in comments to McKnight’s Long-Term Care News elaborating on his prime-time interview.
On CBS, Graboswki highlighted financial transparency concerns, such as some nursing homes’ use of related party transactions to overstate costs and hide revenues by funneling them through entities that share ownership with those facilities.
This process — sometimes called “tunneling” — is not illegal and is helpful for providers looking to streamline and centralize their expenses, according to sector leaders. Some policy experts, however, claim that it can make it difficult for state and federal oversight to track how much funding nursing homes need and how much is going directly toward resident care.
“Unfortunately, most cost reports do not allow policymakers to track these related party transactions,” Grabowski told McKnight’s Thursday. “Going forward, we need increased transparency on who owns our nursing homes and how they are spending public dollars. The good actors should welcome this transparency.”
Graboswki noted that many providers say their finances are strained, especially with the introduction of the new federal nursing home staffing mandate from CMS.
“With more complete cost reports, we would know whether this is true,” he said. “I would assert that greater financial transparency should be a major emphasis for nursing home policy moving forward.”
CBS News planned to air a second segment on the government’s efforts to “crack down on for-profit nursing homes” Thursday night, a spokeswoman told McKnight’s.
A March 2024 study showed that nearly two-thirds of nursing homes used tunneling in Illinois — a state the authors noted had notably strong financial transparency requirements. One researcher told McKnight’s that tunneling may be even more common in other regions of the country.
Berkley East claimed to operate at a loss as recently as 2022, according to financial documents examined by CBS News. Aspen reported $27 million in profits that year.
Aspen did not respond to McKnight’s requests for comment by publication deadline Thursday.
