Finding out what company is responsible for a nursing home should be simple. It should be the name on the sign or on the door. When a nursing home resident is injured through neglect or abuse, the owner should take responsibility. However, some nursing home companies play a dangerous shell game – they hide behind different corporate structures and shell companies in order to avoid responsibility for what happens to its residents.
In a bankruptcy case currently proceeding in Tampa, several nursing home companies are accused of transferring ownership back and forth between multiple shell companies and declaring bankruptcy in order to avoid paying out court judgments. The nursing homes involved were facing more than 150 lawsuits for neglect and abuse by residents or their families.
A Dangerous Shell Game:
Unfortunately, situations like the one playing out in the Tampa bankruptcy case are all too common. Nursing home companies set up different shell companies that own and operate different aspects of the nursing home, but primarily serve the purpose of funneling money up a chain of intermediaries to the owners.
Although Florida law technically requires a single “licensee” to have full responsibility for the operation of the home, many owners have figured out how to game the system by using many different companies to operate the nursing home. One company hires and supervises the people who work at the nursing home, another buys supplies, another runs the pharmacy, another owns the property and leases the building, and yet another serves as the “licensee” of the nursing home. All profits are funneled up to the owner, but when the owner is sued they are quick to assert that they have no “day to day” involvement with the nursing home, despite reaping the profits.
The Canavan Case:
The most important recent case in Florida regarding nursing home ownership and liability is Estate of Canavan v. National Healthcare Corp. In this case, the family of a deceased nursing home resident sued the company that operated the home, as well as Roger Friedbauer, the individual who actually owned the company. Friedbauer tried to get dismissed from the lawsuit by arguing that he had no “hands-on” involvement with the home. The appellate court held that because Friedbauer was in charge of approving the budget for the home, and the resident’s problems (bed sores, infections, poor hygiene, malnutrition) could have been caused by Friedbauer cutting the budget to maximize profit, the family could still name him in the suit.
This case is important because the court recognized that many owners cost-cut and penny-pinch, which can result in harm to residents when the home staff is overworked. When an owner begins taking active steps, such as setting a budget, telling the staff what to do in certain occasions, or making decisions on hiring and firing the staff or suppliers, they can become liable for what happens in the home.
One Solution – Financial Responsibility:
Doctors who want to practice law in Florida have to meet certain financial responsibility requirements – basically a requirement that they either carry enough insurance or have enough money set aside to pay a judgment if a patient sues them and wins.
Nursing homes do not have this requirement. If they did, many injured residents would be able to pay for their medical care following an injury. Also, many nursing home residents are either receiving Medicare or Medicaid – which means that if they are injured through nursing home negligence, the taxpayers ultimately end up paying for what the nursing home caused. Requiring financial responsibility for nursing homes would let the taxpayers get at lease some of their money back when nursing home injuries happen.
When nursing home companies try to play a shell game to avoid responsibility, the residents are the ones who ultimately suffer. While Florida law sometimes lets families hold owners responsible, the owners are trying more inventive and devious ways of avoiding responsibility. Requiring nursing homes to be financially responsible is one possible solution to this problem.