Recently, an encouraging trend has emerged regarding federal oversight of nursing homes. Federal prosecutors are beginning to demonstrate a willingness to go after substandard nursing homes for violation of something called the False Claims Act. In the latest example, the government announced last week that it had reached an agreement with Extendicare, the seventh-largest nursing home operator in the country, which requires Extendicare to  pay a $38 million fine and be subject to five years’ monitoring of its operations, due to substandard care and false billing submitted to Medicare and Medicaid. Justice Department investigators found that, at 33 different Extendicare facilities, bills were being submitted for care that was of no benefit to the patients, while at the same time patients were neglected to such an extent that the incidence of dehydration, malnutrition, serious falls, head injuries, and bed sores was unacceptably high.

This can all be traced back to a business model that we at MWK are all too familiar with: boost profits by cutting staff and billing for unnecessary care. Here is how theNew York Times describes one such example:

“Medicare’s rates are based on the amount of rehabilitation therapy that a patient needs. In one email made public as part of the whistle-blower lawsuit, an Extendicare manager described one patient’s inability to participate in therapy — because of a seizure condition — as a ‘missed opportunity.’”

“Financial loss of 2300 bucks!!!!” the manager wrote in the email. “We have to step up and make sure that this doesn’t happen again!!!!”

As we’ve said time and again, these huge conglomerates operating nursing homes are not going to become more responsible until we make it unprofitable for them to continue their current behavior. That is why this renewed interest by the Justice Department in going after nursing homes is such welcome news. Perhaps even more important than the fine paid in this case, Extendicare is now subject to the authority of an independent monitor for the next five years. That monitor exists to insure that Extendicare’s facilities maintain adequate staffing levels, training, and other safeguards of patient health and care. This will likely do more to protect the patients than the $38 million fine, to be candid.

When a company pays that sort of penalty, it sounds like more of a loss than it really is. Consider that Extendicare, a Canadian company with facilities in both the US and Canada, operates 251 “senior care centers” in North America, with a total capacity of 27,600 residents. If you spread that fine over 27,600 residents, it works out to $1,376.81 per resident. Currently, the national average cost for nursing home care is $239 per day. Which means Extendicare will earn that $38 million fine back in six days. So no one should shed a tear for Extendicare. We’ll save those for all of the seniors they neglected and abused before the feds caught up to them.