RICHMOND, Va. — Federal lawmakers are calling for action following a CBS 6 investigation examining the financial records of Colonial Heights Rehabilitation and Nursing Center, a facility that's been at the center of ongoing criminal prosecutions pertaining to allegations of inadequate care and abuse and neglect.
The for-profit nursing home, operated by Medical Facilities of America according to the health department, has a 1-star quality rating from the federal government.
"It is heartbreaking to see the stories about what's happening there at the Colonial Heights facility," Republican Congressman Rob Wittman said.
Family members, like Cindy Wilison, have been voicing concerns to CBS 6 about the quality of care provided to their loved ones.
“He was crying, he was upset. He wanted to get out of there so bad, and I wanted the same for him because of the lack of care," Wilson said about the veteran she cares for who stayed at the facility in the summer of 2024.
A recent inspection report showed the Virginia Department of Health cited the facility for poor staffing levels that were inadequate to meet the needs of residents and a failure to treat and prevent pressure ulcers.
That's a problem Deba Kabel claimed her husband experienced. Nursing home records showed he was admitted to the facility with a stage-two bedsore, but it had progressed to an "unstageable" level with "overall decline" by the time he was discharged ten days later.
"Where is all the money going then? Because these facilities are not exactly cheap, and yes, I understand that most people are there for Medicare, Medicaid and whatnot, but that doesn't mean you shouldn't be taking care of them," Kabel said.
Nursing facilities have to submit annual cost reports to state and federal regulators, since a majority of their income comes from Medicaid and Medicare. The filings are supposed to reveal how nursing homes spend money and essentially justify the Medicaid and Medicare reimbursements they receive.
According to Colonial Heights' state cost report, the facility reported $8 million in profits from 2020-2023, but in 2024, it claimed an $89,000 loss. However, experts who reviewed the records didn't take the reported loss at face value.
They pointed to what they called "extremely unusual and large" related-party transactions. That's when the nursing home pays another company for services that is still under the same ownership as the facility.
In this case, Colonial Heights paid $6.1 million in rent to a related-party landlord in 2024. That's a 134% increase from 2022 when rent was $2.6 million.
Though that transaction appeared as an operating expense on the Medicaid cost report, experts believed it still generated profit for the parent company.
“This facility was highly profitable, but they don't show the profits at the nursing home. They moved all their profits to a real estate company that owns the land and the building, and they overpaid their rent by a couple of million or more dollars per year," said Ernest Tosh, a Texas-based nursing home abuse and neglect attorney and financial analyst.
When asked about the rent payments, a spokesperson for Colonial Heights said, “The rents are believed to be fair market value, and all governmental filings were submitted by qualified professionals who are not identified in any irregularities.”
While the rent transaction was disclosed on a Medicaid cost report submitted to the state, it was not disclosed in a Medicare cost report submitted to the federal regulator, the Centers for Medicare and Medicaid Services (CMS).
The facility's federal cost report claimed an even higher expense for capital costs: $7.7 million. But there's no disclosure of any interrelated companies.
CBS 6 asked lawmakers to weigh in.
“Your guys’ reporting was fantastic," said Senator Tim Kaine (D-Virginia). "That's the kind of bookkeeping chicanery that CMS is supposed to figure out.”
“Great work by the way of really digging in and saying, 'Hey, when we get to the second and third order effects, there's a lot here that doesn't meet the eye.' Medicare needs to hold these facilities accountable," Wittman said.
Wittman and Kaine called on CMS to conduct an audit of the facility's financial reports.
In a statement, CMS said, “Medicare administrative contractors reserve authority to complete an audit on a skilled nursing facility cost report if professional judgment dictates. Reasoning for any audit must be documented.”
However, the agency did not confirm whether any such audit has or is taking place, when asked.
“These individuals have paid, through their lifetime, into the Medicare system. The expectation is that they are going to get quality care for the dollars that are being paid. That's the accountability. The transparency is being able to show exactly how are those dollars being utilized, and if they're not utilized for patient care, then I think there's a problem," Wittman said.
The concerns come after a December 2024 inspector general report found some nursing facilities were not complying with Medicare requirements for reporting related-party costs.
Out of 14 facilities reviewed for the report, it found seven of them did not properly adjust related-party costs, resulting in $1.7 million in overstated costs that included profits paid to related parties.
Three facilities did not even disclose some of their related parties at all including a real estate company, according to the report.
However, these errors were not caught or corrected by CMS, because the Medicare contractors do not review related-party transactions or check for the proper disclosure of related parties as part of their desk reviews. The inspector general's office recommended that CMS change that practice to enhance its oversight responsibilities.
Kaine said he believed more frequent and random audits of cost reports, such as selecting one out of every five reports for an audit, would help put facilities "on notice" and encourage compliance with regulatory reporting requirements.
But with the Trump administration recently laying off about 300 CMS staff members, he worries how the agency's oversight activities may be impacted.
“These reports should be analyzed, and yes, somebody who is hiding information on a report should be penalized, but you only get that if you have a team of people who can do inspections, and laying inspectors off will enable more people to do things just like this, which we shouldn't allow," Kaine said.
CBS 6 asked CMS whether any auditors have been affected by workforce reductions, and we're still waiting to hear back.
Wittman said he would be working with his colleagues to make a formal request to CMS for further action on this issue.
"Do we need legislation? Is it a matter of writing to the folks at CMS from the chairman of the Energy and Commerce Committee, and say, 'By the way, what are you doing to make sure that these Medicare dollars are being used properly and to make sure these facilities are being held accountable?' So we're going to look at multiple ways to make sure we're jumping in to help," Wittman said.
The inspector general report stated that analyzing financial reports is "crucial to understanding the incentives that contribute to nursing home performance and how nursing homes deliver care to residents."
Medicare gives facilities payments based off fixed, predetermined rates for Medicare residents that are not directly affected by the actual costs incurred by the nursing homes. However, the inspector general found cost reports provide "critical information" that CMS uses to determine reimbursement rates.
CBS 6 is committed to sharing community voices on this important topic. Email your thoughts to the CBS 6 Newsroom.
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