Van Duyn owners’ side businesses reaped $10 million in profits from nursing home chain, report says

Syracuse, N.Y. — The owners of Van Duyn Nursing Home reaped a $10 million profit in 2020, providing management and other services to Van Duyn and the 16 other New York nursing homes they own, according to a report out today.

An analysis by the Empire Center for Public Policy, an Albany research group, shows that Ephraim Steiff and Uri Koenig made this profit from a network of companies they own that rent buildings and provide services to their nursing homes.

Collectively, they took home at least $13.8 million in profits and wages in the first year of the pandemic, the Empire Center report showed. Empire’s report is based on nursing home financial statements collected by the state. This data is available on the Empire Center website.

Steif and Koenig’s 17 nursing homes generated $292 million in revenue in 2020, nearly half of that from the government’s taxpayer-funded Medicaid and Medicare health insurance programs, according to the report.

Although Van Duyn and seven of the homes lost money in 2020, the chain posted a total profit of $1.7 million.

But Steiff, a nursing home administrator, and Koenig, an accountant, both of Rockland County, made nearly six times as much money as their companies that do business with their nursing homes.

Those 11 companies that received payments from the nursing homes for management and other services had more than $10 million left over after spending in 2020, Empire’s analysis of public records shows.

At the same time, there is no evidence in the financial filings that Steiff and Koenig’s side businesses plowed any of those profits back into the nursing homes.

The couple also collected about $1 million each from their salaries from their nursing homes.

The practice of nursing homes contracting with companies that have financial ties to the home owners is legal. It’s a growing trend that the nursing home industry is championing and critics say is problematic.

Stephen Hance, a state nursing home lobbyist, said nursing homes must use “economies of scale company strategies” because of Medicaid’s underfunding. Medicaid is a government health insurance program that pays for most nursing home care.

He said the Steif and Koenig nursing home chain “…effectively and efficiently uses these important cost-saving strategies.”

Empire’s report says the practice is spreading among New York’s for-profit nursing homes “carries risk of loss and misuse.”

Bill Hammond, who authored the Empire Center report, said he could not make a firm judgment about whether the profits that Steif and Koenig’s side businesses were making from their other Van Duyn nursing homes were excessive.

“But when you look at the real bottom line, it changes your whole perception of the profitability of the nursing home industry,” he said.

The Empire report comes after a recent investigation by syracuse.com | The Post-Standard, which revealed that four companies controlled by Van Duyn’s owners billed the troubled Syracuse nursing home about $60 million for food, rent, management and other services from 2016 to 2020. Review of federal data shows about $25 of every $100 the nursing home spent on operating expenses over the five-year period went to companies controlled by Van Duyn’s owners.

The New York attorney general’s office accused Van Duyn in court documents of using the practice to siphon off money – some of them from taxpayers – from the nursing home for the benefit of its owners, leaving less money for residential care.

The AG’s office is investigating more than two dozen complaints of abuse and neglect — including seven deaths — at Van Duyn.

Van Duyn has denied any wrongdoing. It defended its practice of buying goods and services from side companies of its owners, saying it was common practice in the nursing home industry, which consolidates services and saves money.

Last week, a spokesman for Van Duyn said Steif was out of the country and did not respond to questions about the report.

The Empire report found that payments by New York nursing homes to companies controlled by their owners totaled more than $1 billion, or 16 percent of the homes’ operating costs. The overall profit margin for these side businesses is 19.5%. By comparison, the aggregate profit margin for nursing homes using these side businesses is 2.3%.

Owners of for-profit nursing homes often form limited liability companies, or LLCs, to own their facilities. This is a legal practice.

And it’s common for for-profit businesses to create multiple LLCs and affiliates for many reasons, from tax planning to fending off costly lawsuits.

But when nursing homes do, it deserves special attention, Hammond and other nursing home experts say. That’s because much of nursing home revenue comes from Medicaid and Medicare, which are funded by taxpayers.

Hammond said Albany lawmakers need to take a closer look at cash flows.

“The state legislature has a debate every year about whether they are adequately reimbursing nursing homes,” Hammond said. “But I don’t know if they’re really looking closely at those numbers to understand how their money is being spent.”

His report found that for-profit nursing homes that do business with affiliated companies spend less on staff, on average, than nonprofit nursing homes. Homes for profit too received lower federal quality ratings than nonprofit homes.

Van Duyn, for example, paid $5.4 million in 2020 to lease its 513-bed facility on Onondaga Hill from 5075 W. Seneca Turnpike, a limited liability company controlled by Steif.

Although Van Duyn reported the rent as a payment to a related party, he did not disclose expenses at 5075 W. Seneca, making it unclear how much profit the real estate side business made made on top of the $5.4 million rent payment, Hammond said.

He said the Van Duyn owners’ other side businesses that received service payments in 2020 reported profits of about $96,000. That year, Van Duyn reported a loss of $1.02 million.

Steiff and Koenig also own Central Park Rehabilitation and Nursing Center in Syracuse. Their side companies made a profit of $1.81 million doing business with this nursing home in 2020. Central Park recorded a profit of $84,142 in that year.

The Empire report recommended the state make its extensive data on nursing home finances more accessible and easy to use.

He also says the state needs to scrutinize that data more closely.

“Given the stakes for tens of thousands of vulnerable New Yorkers — and for the taxpayers who fund the vast majority of care — the state must reconsider its oversight of related-party transactions in the nursing home industry,” the report said.

James T. Mulder covers health care and higher education. Got a news tip? Contact him at (315) 470-2245 or [email protected]

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