When families entrust a nursing home with the care of a loved one, they expect safety, compassion, and accountability. But a recent MLive article pulls back the curtain on a disturbing and widespread financial practice that siphons money away from resident care — all while operators reap massive profits.
The investigation centers around South Jersey Extended Care, a nursing home deemed one of the worst in New Jersey. According to the state comptroller’s scathing report, millions of Medicaid dollars meant for patient care were funneled into “related” businesses owned by the same individuals operating the home. The result? Dismal care conditions, chronic understaffing, and a facility in financial free fall.
Sadly, this case is not an outlier.
Across the U.S., nursing homes increasingly use complex business structures to divert funds. By setting up sister companies — entities that charge for services like management, real estate, therapy, or food — operators can legally pay themselves inflated fees while reporting paper losses to regulators. In 2023 alone, these arrangements led to $2.76 billion in payments to related parties above what federal rules allow.
“These financial maneuvers are devastating for residents,” said Donna MacKenzie, a Michigan-based attorney who represents victims of nursing home abuse and neglect. “Every dollar funneled into a side company is a dollar not spent on bedside care, adequate staffing, or even nutritious food. It’s legal on paper, but morally bankrupt in practice.”
MacKenzie, a partner at Olsman MacKenzie Peacock, has litigated against many such facilities and sees firsthand how corporate greed undermines patient safety. “We’ve represented families whose loved ones suffered and died in facilities that claimed to be broke — even while their owners were quietly profiting through these self-dealing contracts.”
The MLive article highlights the ripple effects: lower staffing levels, unqualified temp workers, and dangerous lapses in care — including one tragic case where a man choked to death while pleading for help on video. His nursing home was simultaneously funneling money to a parent company in the form of undisclosed management fees.
And it’s not just about a few bad actors. More than 70% of U.S. nursing homes use related-party transactions, many with private equity investors or chains hiding behind webs of limited liability companies. Experts liken it to a “Russian doll” system — layers upon layers, impossible to untangle without massive legal and regulatory effort.
Calls for reform are growing louder. Advocates want the federal government to audit related-party payments, enforce minimum staffing standards, and demand greater financial transparency. But real change will require public pressure, political will, and a refusal to accept the status quo.
As MacKenzie put it: “The public deserves to know who is profiting from taxpayer dollars — and at what cost to our most vulnerable citizens.”
Until that happens, this multibillion-dollar shell game will continue — and residents will pay the price.