California Gov. Jerry Brown signed legislation this month requiring nursing home owners to provide more information about “insider” companies that may siphon scarce resources away from nursing residents through nursing homes’ inflated payments for supplies, rents, and services.

The legislation authored by Assemblyman Wood (D-Healdsburg) stemmed from a state audit of nursing homes earlier this year that focused on Brius Healthcare, California’s largest nursing home company.

Wood and Sen. Mike McGuire (D-Healdsburg) requested the audit following concerns raised by the National Union of Healthcare Workers (NUHW), which published a report showing that during 2015 Brius nursing homes purchased $67 million in goods and services from 65 “insider” companies owned by Brius CEO Shlomo Rechnitz and his relatives.

In 2015, Rechnitz’s “insider” companies – including paper landlords – stood to gain as much as $12 million by charging inflated rents to Brius nursing homes, according to NUHW’s report. This money, says NUHW, should have been spent on care and services for nursing home residents who often lack adequate staffing, support and care.

The state audit, published in May 2018, found that the California Department of Public Health failed to perform necessary inspections or issue timely citations for substandard care. In addition, California State Auditor Elaine Howle found the reporting rules for nursing homes failed to show whether operators are profiting from business deals with “insider” companies owned by nursing home executives.

To improve transparency of these related-party transactions, Wood’s bill (Assembly Bill 1953) requires nursing home owners to disclose whether they have “an ownership or control interest of 5% or more in a related party … that provides any service to the skilled nursing facility.”

Under those circumstances, the nursing home must disclose all of the services provided by the related-party company, the number of people who provide the service, and any other information requested by state officials.

If the nursing home receives goods, fees, and services worth $10,000 or more per year from a related-party company, then this “insider” company must give state officials a copy of its profit and loss statement as well as data on caregiver staffing levels inside the nursing home.

The bill “will now ensure transparency and reporting that will allow us to make sure that these companies are not being used to generate excessive profits for the owners of these facilities on the backs of the residents,” Wood told Skilled Nursing News.

Sen. McGuire, who voted for the bill, praised the new law.

“AB 1953 ensures that accurate data is collected regarding skilled nursing facility third-party transactions, such as what services are provided, for how much money, and how those costs potentially affect facility staffing rates,” he told the Eureka Times-Standard.

The law will take effect January 1, 2020.