New York Officials Call for Greater Scrutiny in Non-Profit Nursing Home Sales

Smaller non-profit nursing home operators have found themselves even less able to weather the industry storms than their for-profit counterparts, with many exploring sales to larger, regional chains — a trend that has attracted the scrutiny of government officials in the state of New York.

The state’s Charities Bureau this month released new guidance governing the sale of non-profit nursing homes to for-profit entities, citing concerns that the deals often fail to benefit vulnerable nursing home residents.

“The charitable programs of many non-profit nursing homes do not continue after their sale. Most non-profit nursing home corporations are single purpose entities whose mission, as defined in their charter and demonstrated by their history, is to provide nursing home care,” the agency wrote in its report, first flagged by NYN Media. “Ensuring that the proceeds of the sale are used to further the mission of the sold nursing home is challenging.”

Officials on the bureau say they’ve seen an uptick in non-profits selling to for-profits in the state since 2014, with about 5% of all non-profit homes undergoing such transactions each year. Under New York law, buyers and sellers must prove that the non-profit received a fair and reasonable price for the property, and that the deal will serve the ends of the charity.

That that second part becomes tricky if the non-profit simply exists to operate a single nursing home; if the organization’s goal was to care for skilled and long-term care residents, and it no longer operates a nursing home, its mission won’t continue unless the new owners continue to provide nursing care.

“We have also had the unfortunate experience of approving petitions for sales of nursing homes that are shortly thereafter closed by the purchasers, and sold or converted by the purchasers to condominiums or commercial developments,” the officials wrote.

Furthermore, these operators are at particular risk of exiting the industry in the coming year, with multiple leaders and investors predicting that the advent of the new Patient-Driven Payment Model (PDPM) will likely drive out smaller operators that don’t have the resources to deal with the significant reimbursement changes — presenting opportunities for for-profit buyers.

Moving forward, the Board of Charities recommends that non-profit boards considering a sale draft an in-depth document with information about how they will use the proceeds of the sale, whether or not they considered alternative to selling, and whether or not the buyers could commit to continuing nursing home operations over the coming five-year period.

“The Charities Bureau recognizes that the decision by a board and management to sell a nonprofit nursing home to a for-profit entity is not taken lightly,” the officials wrote. “This guidance is provided to assist both board and management in the exercise of their fiduciary responsibilities to charitable beneficiaries, and to allow well-considered actions to proceed through the approval process.”

Written by Alex Spanko

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Alex Spanko
Alex covers the long-term health care industry for Aging Media Network, with a specific interest in the intersection of finance and policy. Outside of work, he reads nonfiction, experiments in the kitchen, yells at Mets games, and enjoys pretty much any type of whiskey or scotch — often all at the same time.

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