Florida's largest nursing home owner part of trend

Consulate Health Care, Florida's largest nursing home provider, represents a growing trend nationally: a large corporation made up of a network of related businesses operating nursing homes at a profit for their investors.

Consulate, based out of an Orlando-area business park, operates as the nation's sixth-largest nursing home provider. Taxpayer money flows to Consulate nursing homes and profits earned go to the chain's owner, the Atlanta-based private equity firm Formation Capital.

Related real estate, management, rehabilitation and other companies receive payments from Consulate's nursing homes.

"Everybody knows what's going on. Everybody knows about this shell game," said Brian Lee, former head of Florida's Long-Term Care Ombudsman Program in the Department of Elder Affairs, now heading the nonprofit Families for Better Care.

Consulate and Formation executives did not respond to repeated requests for interviews.

Consulate was founded in 2006 to take over operations of Tandem Health Care's nursing homes, after that company was purchased by an investment group. Headquartered in Maitland, Consulate has grown over the years to manage 210 homes and 22,059 beds in 21 states, according to a 2016 American Health Care Association report.

The privately held company controls one out of every nine nursing homes in Florida, operating in 32 counties and every metro area.

Consulate reported operating revenues of $1.7 billion in 2016, according to the American Health Care Association.

The federal government paid Consulate's 77 Florida homes more than $224.5 million through Medicare, or an average of $2.9 million per home, in 2015, the most recent data available.

Consulate's homes also are paid through Medicaid, receiving an average of $206.62 a day for each eligible patient, state records show.

Despite the big money generated from Medicare and Medicaid programs serving the poor and elderly, Consulate's nursing homes are designed to appear cash-strapped. While individual nursing home LLCs are essentially empty shells, they pay rent, management and rehabilitation service fees to Consulate or Formation Capital-affiliated companies.

For example, Governors Creek Health and Rehabilitation, a Consulate nursing home in Green Cove Springs, is owned and managed by Consulate companies Epsilon Health Care and CMC II, respectively. It paid CMC II, its management company, $467,022 in 2015, according to Medicaid cost reports.

Governors Creek's landlord and rehabilitation services provider are both Formation-related companies. The facility paid $298,554 in rent in 2015, according to cost reports.

In each case, the money flows back to Formation Capital and its wealthy investors.

The convoluted corporate structure is designed to make it difficult for lawyers to recover damages, said Dale Ewart, assistant regional director of the 1199 SEIU health care workers union in Miami.

"It's also baffling, I think, to disguise the real profitability of the nursing home industry," he said.

In court documents last year after a federal whistleblower lawsuit led to a massive $347.8 million judgment against the company, Consulate's leaders laid out the chain's "precarious" financial condition. The company was bleeding cash, they argued. The judgment, overturned by a judge whose ruling is on appeal, could trigger a financial collapse that could lead to the "immediate economic extinction" of all Consulate homes.

Tom Edwards Jr., a Jacksonville lawyer who specializes in nursing home neglect cases, said many nursing home chains are attempting to insulate themselves from liability for providing "lousy care."

"There's a game that's played, that if you don't sue the right entities, your family is out of luck," Edwards said. "You have to then start trying to chase the money."

In 2014, Florida lawmakers put a roadblock in that pursuit when Gov. Rick Scott signed a law that shielded "passive investors" from being named as defendants in nursing home negligence lawsuits.

The Florida Health Care Association praised the measure, saying it "will bring fairness to the Florida court system and preserve investment in Florida's nursing homes."