Nursing Home Related-Party Fraud: An Expense at the Home, Income for Its Owners

Nursing home related party fraud can conceal who receives health care money or inflate the costs a facility reports to Medicare. The home pays rent, management fees or supplier charges to a company under the same control. The money leaves the facility’s books while staying inside the owners’ business. If you work in accounting, property management or nursing home operations, you may see both sides of a payment that the cost report describes only as an expense.

How Money Moves Through Connected Companies

Within a healthcare business, the operating company receives payment for care. A property company receives rent. Management and service companies collect fees. Common ownership can put the same people on both sides of those transactions, even though the invoices carry different company names.

When nursing home owners transfer Medicaid money to a related management company, the management agreement, the work performed and the destination of the payment tell the story. The same inquiry reaches rent, loans, supplier charges and home-office allocations. The useful comparison is between what the facility paid, what the receiving business actually spent and who controlled both businesses.

Home-office allocations can carry substantial costs into a facility’s accounts. In its 2019 AltaCare audit announcement, the Tennessee Comptroller identified $855,679 in nonallowable home-office expenses allocated to Cambridge House and estimated $324,999 in resulting Medicaid overpayments. That finding followed the expense from the home office into the facility and through to reimbursement.

For someone approving invoices or preparing allocations, that is the connection worth discussing with us: how a charge arrived in the facility’s costs and what the company represented it to be.

Related-Party Charges and Actual Costs Are Different Numbers

Medicare’s related-organization cost rules generally recognize the related organization’s own cost of providing services, facilities or supplies, subject to a ceiling based on comparable purchases elsewhere. The amount on the invoice can exceed that allowable cost.

A management company can bill a facility for services while spending less to provide them.

Control can be indirect. Ownership records identify interests in the businesses, while contracts and actual decision-making show who can direct them.

This is where an accounting insider’s knowledge matters. Someone may know the cost behind the charge, the relationship behind the vendor name, or who chose how the transaction would appear in the Medicare cost report.

What Medicare Cost Reports Reveal

Worksheet A-8-1 records related-party relationships and cost adjustments, including names, ownership and facility or home-office identifiers. It lets a reviewer compare the relationship reported with the companies actually involved in the payment.

An HHS-OIG audit published in 2024 identified $1,703,734 in overstated costs across 14 selected skilled nursing facilities. Three had undisclosed related parties and seven had improper cost adjustments.

Those findings put disclosure and cost adjustment side by side. Identifying the connected company answers who received the payment. Adjusting the expense answers how much of it belongs in allowable cost. A report can disclose the relationship and still carry the wrong amount.

Medicare’s prospective payment system does not repay each reported expense dollar for dollar. The cost report, the payment rules and the claims need to be read together to establish the financial effect. We connect those pieces with you.

How Nursing Home Rent and Management Fees Hide Related Party Profit

Nursing home rent and management fees can hide related party profit by moving income outside the operating company’s accounts. The facility records an expense while the connected landlord or manager receives the money. Stopping at the facility’s margin stops before the money trail ends.

A National Bureau of Economic Research working paper on Illinois nursing homes, issued in 2024 and revised in September 2025, estimated that 68% of profits were shifted to related parties. The operator’s accounts can leave much of the enterprise’s profit elsewhere.

For a facility that reports losses while a related landlord receives rent, we examine the operator and the receiving company together. Consolidated accounts, the lease and the recipient’s costs help show where the income landed. The reported loss is the beginning of that inquiry.

Related-Party Fraud Cases Connect the Books to Control and Care

Centers Healthcare Admitted False Cost-Report Statements

Centers Healthcare admitted that Medicare cost reports for 44 skilled nursing facilities contained false statements or material omissions about related-organization transactions. In its July 2025 announcement, the Justice Department said Centers was paying $6,063,500 to resolve the matter.

Centers acknowledged that management reviewed the cost reports and knew or reasonably should have known of the false statements.

The New York Centers Case Followed Money Away From Care

The New York Attorney General alleged that Centers diverted money through related-party rent, loans and fees. Residents went short of staff and required care while connected businesses received the money, according to the state. The November 2024 state agreement addressed those financial and care allegations separately from the federal Medicare cost-report matter.

The agreement required an initial $35 million resident-care fund and imposed health and financial monitoring. Money directed back into care was central to the remedy. For an insider, the connection is between the transfers leaving the home and the staffing and services residents received during the same period.

Van Duyn Put Resident-Care Spending at the Center of the Resolution

At Van Duyn Center for Rehabilitation and Nursing, New York alleged that funds were extracted through related organizations while the home lacked sufficient staffing and necessary care. Its August 2025 agreement required $10 million for resident care and a separate $2 million government payment.

The parallel with Centers is the relationship between money leaving the operating business and care going without.

Saratoga Shows Who Actually Controlled the Spending

If a nursing home landlord controls the staffing budget without an operating license, the lease and the personnel decisions become part of the financial inquiry. Saratoga Center shows why the name on the operating license can leave actual control out of view.

The Justice Department alleged that a landlord/operator dispute led to a transfer of control to unlicensed operators in 2017. Its February 2023 resolution totaled $7,168,000 across agreements concerning allegedly worthless services. The alleged failures included inadequate staffing, medication problems and problems with hot water and linens.

In a separate December 2023 settlement, an unlicensed operator acknowledged controlling finances, choosing which vendors to pay, keeping the books and holding authority over senior hiring and firing. That acknowledgment identifies the kind of control a vendor, administrator or finance employee may recognize immediately: who could release the money and who could make the staffing decision.

What Evidence Is Needed to Prove Fraud?

The evidence needs to connect the related business, the payment, the representation and the person controlling it. In a care-diversion case, staffing and care records add what happened inside the home while the money moved out.

The care evidence supplies the operational side. Staffing records, unpaid vendor accounts and resident-care records can show how spending decisions affected the home. Saratoga’s vendor-payment authority and the care-fund requirements in the New York cases make that connection concrete.

We work with accounting, management and care staff to connect what each person knows. The accountant may see an expense adjustment. The property manager may know who set the rent. The administrator may know who controlled staffing and which vendors went unpaid. Together, those details can explain how the financial decision reached the resident.

What Is the Reward for a Medicare Fraud Whistleblower?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Who Received the Money

If you know why a nursing home’s rent or management charges keep rising while care goes without, speak with our whistleblower experts about where the money went. We build the case with you around the costs, the disclosures and the people controlling the payments. We bring in nursing home fraud whistleblower lawyers who understand related-party accounting and stay beside you through the case.