Senior Care Policy Brief: Federal Audit Finds Some Nursing Homes Non-Compliant

Despite longstanding industry claims that nursing homes operate on “razor-thin” margins, reports continue to show significant profit-making overall, with increasingly sophisticated operators tunneling money away from care into upfront profits.

• An investigation by the New Jersey Office of the State Comptroller (OSC) found that South Jersey Extended Care (SJEC) misused millions in Medicaid funds to enrich its operators while neglecting residents. The facility, consistently given the lowest, one-star rating by the Centers for Medicare & Medicaid Services (CMS), was run by Michael Konig and Steven Krausman, who funneled Medicaid payments through businesses they controlled, avoiding scrutiny through fraudulent practices.
  • Between 2018 and 2023, SJEC received $35.6 million in Medicaid funds but paid $38.9 million to related-party businesses owned by Konig and Krausman. The Comptroller found that these entities inflated prices and delivered substandard services, leading to chronic understaffing and dire living conditions for residents, including filthy facilities and delayed medical care.
  • New Jersey has suspended SJEC, its related facilities, and the individuals involved from Medicaid.
• The non-partisan Medicare Payment Advisory Commission (MedPAC) recommended a 3% funding cut for nursing homes under fee-for-service Medicare for the third consecutive year. This reflects ongoing concerns over high Medicare profit margins, which reached 21.9% in 2023 and are projected to hit 23% in 2025.
• The senior housing sector is expected to deliver total annual returns of 13% over the next four years, driven by strong rent growth, wage increases, and favorable market dynamics, according to Capital Economics, an economic research firm.

• A new study reveals a direct link between nurse burnout and negative patient and facility outcomes, such as medication errors, lower safety culture, and poor care quality.
  • Burnout among healthcare workers surged during the pandemic, with 68% of nurses reporting burnout.
  • The study also links burnout to higher patient fall rates, delayed care, and increased infections. In nursing homes, burnout was associated with higher rates of urinary catheter and tube feeding use.