COLONIAL HEIGHTS, Va — "Where is the money going?" That was the question Debra Kabel posed after her husband spent a little more than a week at Colonial Heights Rehabilitation and Nursing Center, a facility that's been at the center of abuse and neglect prosecutions, a wrongful death lawsuit, and a damning inspection report from health regulators.
The nursing home is a for-profit facility with a 1-star quality rating from the federal government.
As the facility provided low-rated care with low staffing levels, financial records revealed that it paid several million dollars to an interrelated company under the same ownership, causing concern for experts who reviewed the provider's filings.
'Bare minimum care'
Kabel said her husband Michael has been through the wringer.
After a fall in November of last year seriously injured his spine, part of Michael's recovery included about ten days at Colonial Heights Rehabilitation and Nursing Center.
"And about five days in, he said, 'You need to get me out of here. I hate it here,'" Kabel said.
Debra visited Michael at the facility every day, and she said he would often complain about a lack of attention from staff.
Michael couldn't move himself or feed himself due to the injury, she said.
"Things that he would tell me, that they weren't turning him, they weren't feeding him. They were doing just bare minimum care for him," she said.
Her worries hit a breaking point on day nine.
"One of the younger nurses came in to turn him and do his wound care. And I was like, 'What wound are you talking about?' And she said, 'Oh, he has this bedsore back here.' And that was news to me," Kabel recalled.
The following day, Kabel said she had her husband transported by ambulance to a hospital where she said he underwent surgical debridement so that the wound could heal.
"I mean, it's just like an open valley. It's terrible," Kabel said as she showed CBS 6 pictures of the wound which were taken after his discharge.
The photographs are too graphic to publish.
According to nursing home records, Michael was admitted to the facility with a stage 2 bedsore to his sacrum.
By the end of his short stay, records showed the wound had progressed to an "unstageable" level that was "worsening" and had an "overall decline."
A spokesperson for Colonial Heights declined to comment on questions about Michael's care.
But we do know through a state inspection, initiated by the Virginia Department of Health in late December after 18 employees were arrested in an elder abuse investigation, that the facility failed to provide care and services for pressure injuries.
The inspection report, which surveyed a sample of residents not including Michael, stated staff failed to give residents prescribed treatments to prevent wounds and failed to reposition a resident every two hours.
Watch: Criminal charges against Virginia nursing home staffers
In fact, the report said a nurse trained in wound care told investigators she had not done treatments "in a long time" because she was pulled to other tasks "due to staffing issues." A long-term care ombudsman reported to investigators they had "received multiple concerns" about "wound care not being done."
Inspectors faulted the nursing home for failing to maintain adequate staffing, which was "excessively low" on the weekends, and the report noted that employees said they had a saying when they were short-staffed that went, "keep them alive, off the floor, clean and dry."
"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.
Through Freedom of Information Act requests, CBS 6 obtained the facility's financial reports to get the answer.
Expert 'disturbed' by 'exorbitant' payments to related party
Since a majority of nursing facilities' income comes from Medicaid and Medicare, they have to submit cost reports to state and federal regulators. The reports are supposed to show how the money is being spent and essentially justify the reimbursements facilities receive.
According to the health department, Colonial Heights Rehabilitation and Nursing Center is owned by Virginia Care HoldCo LLC and operated by Medical Facilities of America.
It reported about $8 million in profits between 2020 and 2023, but last year, the provider claimed an $89,000 loss.
However, experts who reviewed the cost reports don't take the reported loss at face value.
"This facility was highly profitable, but they don't show the profits at the nursing home," said Ernest Tosh, a Texas-based nursing home abuse and neglect attorney and financial analyst.
Tosh said true profits can appear unclear due to something that's commonplace in the nursing home industry: related party transactions.
That's when a facility does business with other companies, such as a real estate company, that are all under common ownership. Those transactions then appear as operating expenses on cost reports.
But recent research of the industry overall has suggested expenses among interrelated parties could be inflated to mask profits.
A 2023 report from the legislative branch agency that advises Congress on Medicaid said it was "concerned about the potential for related-party transactions to increase costs above what would be expected for an economically operated facility."
"Because you own the real estate company, you could overpay on rent and what that does is it sucks all the money out of the nursing home and makes it look like it's unprofitable," Tosh said.
And that's what Tosh expects may have happened at Colonial Heights.
The nursing home disclosed on its state cost report that a related party owned the property of the facility and then charged itself rent.
The landlord company is listed as 831 East Ellerslie Avenue LLC and the company operating the nursing home is listed as Colonial Heights Operator LLC.
Both companies are owned by Virginia Care HoldCo LLC.
But the rent costs increased significantly from $2.6 million in 2022 to $6.1 million in 2024, a 134% increase in just two years.
"That is a highly unusual, extremely large transaction," Tosh said.
Julian Rich, a former nursing home administrator of a non-profit facility in Massachusetts and expert witness in long-term care cases, also analyzed the cost reports and had a similar reaction.
"One of the most disturbing things out of everything I looked at, is that they are paying exorbitant amounts of rent," Rich said. "They're paying rent, basically, and it goes right into their pocket."
While Tosh's data found that rent on average in Virginia made up about 10% of a facility's total operating expenses in 2024, Colonial Heights' rent last year made up 25% of total operating expenses. That's the highest percentage Rich said he's ever seen.
"The most. Number one by far. By far. I've never seen more than 10% rent in any of the cases I've looked at," Rich said.
The facility also claimed more than $500,000 in related party transactions for administrative costs, but it did not disclose which companies they were on its 2024 cost report.
Virginia's Medicaid agency, the Department of Medical Assistance Services (DMAS) which is responsible for reviewing and settling the cost report, said those costs should be identified but added, "this is not always done accurately by providers."
DMAS spokesperson Brooke Barlow said the agency has now inquired whether Colonial Heights paid management and consulting fees to its related companies Innovative Healthcare Management and Medical Facilities of America. While Barlow said the facility disputes that those companies are under common ownership, she said the facility has not provided sufficient documentation to prove it.
On the facility's 2024 federal cost report, which was submitted to the Centers for Medicare and Medicaid Services (CMS), the facility did not disclose any related party transactions, including the millions of dollars it paid itself in rent.
"That is, for sure, a problem. According to CMS regulation, on the federal cost report, you have to reveal all related party transactions," Tosh said.
Watch: Nurse: 'Mind was blown'
When asked whether the facility believed the $6.1 million in rent payments to interrelated companies were reasonable, spokesperson Mindie Barnett 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."
For comparison, using the fair rental value system set by DMAS, Barlow said the facility would receive an estimated $1.2 million in capital costs reimbursements if all Medicaid claims in 2024 were approved. Medicaid residents made up 68% of the nursing home's admissions in 2024, according to the state cost report.
Barlow said DMAS has 180 days to settle the state cost report from the date it was submitted, which was November 25, 2024, in this case.
On the report, Colonial Heights did acknowledge that about $1.6 million in rent payments would not be allowed for reimbursement under Medicaid regulations. However, Barlow said the facility could still use Medicare reimbursements to cover those costs.
When asked about the state cost report, a spokesperson for the Office of Attorney General Jason Miyares, which has a unit focused on matters involving Medicaid, declined to comment due to "pending litigation."
Barnett did not answer specific questions about the apparent nondisclosure of related parties on the federal cost report.
Tosh says low staffing equated to $2.7M in reduced costs
Experts said it's important to analyze the finances, because they reveal how much money is or isn't going directly toward care.
For most nursing homes, Tosh said labor is the biggest expense.
At Colonial Heights, he said the latest payroll data from 2024 showed the facility staffed registered nurses much below average and significantly below what CMS has proposed as the minimum standard to "significantly reduce the risk of unsafe and low-quality care for residents."
According to CMS data, a resident at Colonial Heights received 18 minutes of registered nurse time per day, when the average in Virginia is 39 minutes.
"The number one most expensive employee in a nursing home is registered nurses, RNs, so you cut that group to the bone, that's going to maximize profits," Tosh said. "There are articles written and published all the time about staffing in nursing homes, how higher staffing equates to better outcomes, etc. If you are in this market space, there is no way you don't understand that."
Tosh estimated it would have cost the nursing home an extra $2.7 million last year to bring nurse staffing levels up to the proposed federal minimums.
The December 2024 inspection report, which cited the facility for poor staffing, stated that after VDH began its investigation, staffing dramatically improved. One employee said her "mind was blown" by the difference in care she could provide when there were more staff members available to care for residents.
Barnett did not directly answer questions about the facility's staffing, but said in a statement, "The information is incorrect and out of context. We understand the intense scrutiny and salacious nature of the news cycle. Eighteen members of our staff were arrested and prevented from caring for residents. We look forward to the conclusions of these matters so we can freely defend the quality caregivers and our community."
She did not provide further comment when asked to explain what information is inaccurate.
Much of the information contained in cost reports and staffing data is reported to government entities by the facility itself.
For Kabel, she recognized that providers need to make money but in a way that's transparent and allows for minimum standards of care to be met.
"I'm not saying that they shouldn't make a profit, but how much should that profit really be? Because there's really no reason that you couldn't give great care and still take home a decent paycheck," Kabel said.
She's now calling for stronger laws at the state level surrounding financial reporting and ownership oversight.
"You need to enforce laws based on nursing homes that are substandard and prosecute those for this lack of care, because this definitely needs to change," Kabel said.
Tosh said while CMS tracks nursing home ownership changes at the federal level, the agency's database is not keeping up with the pace in which acquisitions are occurring.
He said all states should publish their own ownership data to give the public more timely information.
He and Rich agreed that audited consolidated financial reports of all nursing home chains, to include statements from the parent companies and related parties, should be required and reviewed by lawmakers, who are ultimately responsible for setting Medicare and Medicaid reimbursement rates.
"Nursing homes are one of the three most regulated industries or fields in the country," Rich said. "However, the financial aspect is not getting the scrutiny that it deserves."
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