RICHMOND, Va. — Three federal lawmakers sent a formal request to the Centers for Medicare and Medicaid Services (CMS) Wednesday calling for stronger nursing home oversight following CBS 6's investigation into the finances of the embattled Colonial Heights Rehabilitation and Nursing Center.
The letter, signed by Republican Congressman Rob Wittman and Democratic Senators Tim Kaine and Mark Warner, urges CMS to "conduct enhanced oversight of nursing homes and implement stronger safeguards to protect seniors in the wake of alarming reports of alleged abuse, neglect, and falsified records coming out of Colonial Heights Rehabilitation and Nursing Center."
The nursing home is a for-profit facility operated by Medical Facilities of America, according to the state health department, and has historically low quality ratings and low staffing levels, according to CMS data.
As multiple staff members are being prosecuted for alleged abuse and neglect connected to a resident's alleged inadequate care and subsequent death, CBS 6 took a deeper dive into the facility's financial reports to find out how it's been spending Medicare and Medicaid dollars.
In reviewing the facility's state and federal cost reports, financial analysts identified "extremely unusual and large" related-party transactions, which are essentially payments for services from the nursing home to another company under the same ownership. While related-party transactions are common in the industry, recent research has suggested that some expenses among interrelated parties could be inflated to mask profits.
WATCH: Records show low-rated Virginia nursing home was 'highly profitable'
In 2024, records revealed that Colonial Heights paid $6.1 million in rent to a real estate company that owned the property of the facility and was under common ownership— a significant increase from 2022 when the facility paid itself $2.6 million in rent. While the rent transaction appeared as an operating expense on the state cost report, experts believed it generated profit for the parent company, despite the facility claiming an overall $89,000 loss in 2024.
“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 in 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.
"One of the most disturbing things out of everything I looked at, is that they are paying exorbitant amounts of rent," said Julian Rich, an expert witness in long-term care cases and former administrator of a Massachusetts nursing home. "They're paying rent, basically, and it goes right into their pocket."
When asked about the rent payments identified on the Medicaid cost reports, a spokesperson 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 nursing home disclosed the rent transaction on Medicaid cost reports, there was no disclosure on the Medicare cost reports. The facility did not answer specific questions about why related-party transactions were not disclosed on the Medicare reports.
"That's the kind of bookkeeping chicanery that CMS is supposed to figure out," Senator Kaine previously said in response to CBS 6's report.
"Medicare needs to hold these facilities accountable," Rep. Wittman previously told CBS 6. “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.”
In their letter, Wittman, Kaine, and Waner brought attention to the inspection reports by the Virginia Department of Health. Those inspections resulted in citations for poor staffing and failures to provide adequate care and services such as wound care treatments and prevention efforts. They also pointed to allegations from Colonial Heights law enforcement agencies that staff members engaged in “abuse and neglect of vulnerable adults" and falsified records.
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"We share the same goal of quality care for all seniors, and it is critical that we conduct rigorous review of the reports at Colonial Heights Rehabilitation and Nursing Center. Additionally, CMS must adequately oversee – in partnership with the states – the Skilled Nursing Facilities (SNFs), of which about 1.2 million Americans as of Fiscal Year (FY) 2023 reside and ensure proper accounting of SNFs’ cost reports," the letter stated.
Additionally, the letter highlighted a December 2024 report from the Health and Human Services Inspector General which found half of sampled nursing homes “failed to properly adjust related-party costs in their Medicare reporting—resulting in over $1.7 million in overstated costs.”
The lawmakers said they agreed with a recommendation from the inspector general that CMS should review the reporting and disclosure of related-party transactions as part of its desk review and audit processes, which is not currently a part of the agency's standard practice.
"We look forward to working with CMS to improve Medicare for all Americans to ensure accountability and transparency in all Medicare expenditures and welcome your feedback to these concerns," the letter stated.
The letter was addressed to Ing-Jye Cheng, the Acting Deputy Administrator and Director of the Center for Medicare, and Dr. Mehmet Oz, the newly sworn-in CMS Administrator.
A CMS spokesperson said the agency was reviewing the letter and "will respond directly to appropriate members of Congress."
In a previous statement, an agency spokesperson said, "Skilled nursing facilities are required to submit annual cost reports to a Medicare administrative contractor. Adequate cost data, based on financial and statistical records, must be verifiable by qualified auditors. 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."
When asked, CMS has not confirmed whether any such audit has happened or is in the process of happening.
Before the letter was sent Wednesday, Congressman Wittman said in a previous interview that he would consider giving direction to the executive branch on the matter and explore possible legislative solutions.
"Do we need legislation? Is it a matter of writing to this to the folks at CMS... 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.
Senator Kaine previously said he believes more routine auditing of cost reports could encourage nursing facilities to comply with Medicare reporting requirements.
"If you do a sufficient number of audits regularly, everybody gets worried about, 'Okay, well, I'm going to get caught if I'm doing something wrong,' and their behavior tends to get better. So there needs to be a systematic audit practice," Kaine said.
Share your nursing home stories with the CBS 6 Investigative Team: Email Melissa Hipolit and Tyler Layne
