Virginia's lowest-rated nursing home made 'exceptionally huge' payments to related-party company

HENRICO COUNTY, Va. — Virginia's lowest-rated nursing home made "exceptionally huge" payments to another company under common ownership as it claimed an overall financial loss, according to an expert who reviewed filings submitted to government agencies.

While some family members of residents and a legislator are calling for accountability of how the facility prioritizes financial resources, the nursing home maintains it made investments that "have positively impacted our facility and, most importantly, the well-being of our residents."

'Poor quality of care'

As CBS 6 previously reported, Henrico Health and Rehabilitation Center in the county's east end has been identified as one of the country's worst-performing nursing facilities due to its designation as a "special focus facility." According to the federal government, such facilities "rarely address underlying systemic problems that give rise to repeated cycles of serious deficiencies, which pose risks to residents' health and safety."

The facility is now enrolled in a national program that "focuses on nursing homes that have a persistent record of noncompliance, leading to poor quality of care," according to State Health Commissioner Dr. Karen Shelton. As part of the program, the facility is subject to more frequent inspections, escalating penalties, and potential termination of its Medicare and Medicaid provider agreement.

"The place is crazy. It's like a madhouse over there," said Cynthia Jefferson, whose aunt is a current resident.

The care and conditions at the facility remain a major concern to some family members of those living at the facility.

Past inspection records have detailed issues, including slow responses to call bells, residents sitting in their waste for long periods of time, and medication errors.

"If you're not taking care of them to get them healthy, how are they safe? And when you're giving wrong medicine, you're not cleaning them, they're getting bed sores," said Sandy Patron, whose mother was a resident in 2023. “It stressed me completely out.”

Between 2023 and 2025, inspectors with the Virginia Department of Health (VDH) have cited the facility for violations including neglecting incontinence care, inadequate staffing levels, allowing a known perpetrator of abuse and neglect to work at the facility, and at least four instances of sexual abuse against residents by staff.

In the same time period, CMS imposed multiple fines on the facility totaling more than $200,000 and just issued a notice in July of another incoming fine of up to $258,000.

“You take their money. You hit them where it hurts, in the pockets," Jefferson said.

In response to recent inspection findings, Henrico Health and Rehab spokesperson Mindie Barnett said the facility is “currently operating with appropriate staffing” and “working tirelessly to enhance training and education, aiming to prevent any future issues and to ensure the highest standards of care are always met.” The state's most recent follow-up inspection in July found all previous citations had been corrected.

WATCH: Henrico nursing home identified as one of the worst care facilities in the country: 'It's like a madhouse'

How the money is being spent

As most nursing homes' income comes from taxpayer-funded sources such as Medicare and Medicaid, CBS 6 requested financial reports that show how the for-profit facility spent its money.

“The first problem would be Medicaid. [If] Medicaid stopped paying them, I bet you they'd get their act together, because most of their patients are Medicaid," Jefferson said.

During the reporting period, Medicare records indicated the nursing home was operated by Medical Facilities of America (MFA), a chain that ran more than 30 other facilities across Virginia. According to VDH, MFA facilities were acquired in 2021 by the company Innovative Healthcare Management, whose address is listed in New Jersey. Medicare records showed Innovative also ran facilities, including Colonial Heights, Westport, and Glenburnie rehab and nursing centers, which have all faced recent enforcement actions and have low-quality ratings from Medicare.

Updated Medicare records now list Lifeworks Rehab as the operational chain of Henrico Health and Rehab and the MFA portfolio. However, Barnett disputes that information.

"The Facility is independently owned and operated. The licensed nursing home administrator manages the Facility along with multiple department heads and staff. Lifeworks Rehab, MFA and dozens of other entities provide rehabilitation, administrative, and other services. These entities are vendors not owners and/or operators," she said.

Cost reports submitted to federal and state agencies overseeing the Medicare and Medicaid programs are meant to show the facility's revenues versus expenses. Government agencies rely on the filings to set rates for Medicare and Medicaid reimbursements.

Forensic accountant Valerie Gray, who specializes in analyses of healthcare facilities, reviewed Henrico's reports for CBS 6.

“What I noticed, the big takeaway, was the increase in rent that they're paying themselves for the building," Gray said.

Gray pointed to the rent money that Henrico Health and Rehab paid to another company under common ownership. This is called a related-party transaction, which means "they control what they charge themselves for rent," according to Gray.

The cost of that rent went up significantly from $1.6 million in 2022 to $3.1 million in 2024.

“It’s an exceptionally huge increase," Gray said. "In the last year of the current ownership, the rent comprised 20.5% of their total operating expense, so $1 of every $5 spent to run the facility was leaving the facility to go pay rent to the owners through another LLC.”

For comparison, Virginia's Medicaid agency, which relies on a fair rental value system for rate-setting, set a capital rate that would max Henrico's 2024 rent expense at $917,000.

Gray said higher rent payments lead to "fewer dollars [that] are going to go to take care of the people that they have accepted into their care.”

However, Barnett said the capital expenses were justified as the facility spent over $500,000 to upgrade the care center following the 2021 change in ownership. She said that went toward new beds and mattresses, comfortable new chairs, refreshed hallways with fresh paint, and new oxygen concentrators.

“These investments and current market conditions resulted in a rent increase (which includes interest, insurance, property taxes and certain maintenance expenses) to the owner of the building," Barnett said.

When asked whether the real estate costs limited resources for direct care, Barnett did not provide a direct answer.

WATCH: Former Henrico nursing home administrator disciplined for retaliation, failing to protect residents from abuse

Lawmaker promises a solution

“When I see that and realize what has happened and the complaints and the sexual violations, it’s egregious," said Democratic State Delegate Delores McQuinn, who represents the district where the nursing home is located. "Just appalled that those kind of funds are going toward the LLC or maybe a building, but not providing the care for the individuals who are in that building.”

McQuinn said she's been meeting with local, state, and federal officials in the wake of CBS 6's reporting about concerns at the facility.

But she's worried there's a disconnect between the agency that inspects for care — VDH — and the agency that allots Medicaid dollars — the Department of Medical Assistance Services (DMAS).

“It could have been much more attention and focus on the nursing home if there was a better understanding of what people were doing, what they were responsible for, and how they were executed," McQuinn said. "You've got to communicate. You've got to talk. Because the bottom line is wherever those dollars are going, they're not just going to a building, they're going to provide care to an individual."

She added, “If the quality of care is not provided, someone should not be getting paid.”

While the facility claimed an overall $141,000 loss in 2024, Gray said that doesn't account for any potential profit the owners made from related-party transactions.

“Generally, what they're doing is transferring the profit to another entity, so it makes it look like the nursing home isn't making any money," Gray said.

If this sounds familiar, CBS 6 previously reported that Colonial Heights Rehabilitation and Nursing Center, which was under the same ownership as Henrico and was the subject of criminal elder abuse investigations, raised its rent payments to a related-party landlord from $2.6 million in 2022 to $6.1 million in 2024.

While Barnett, also the spokesperson at Colonial Heights, previously said the rents were "believed to be fair market value," lawmakers in that district said they were alarmed.

"They claim it's being spent in rent, but that's a lot of money that is not going to hiring more doctors, more nurses, paying the folks better so they can get quality care providers to work at this facility," said Republican State Senator Glen Sturtevant.

Recent research has shown similar trends across the industry. A 2024 federal inspector general report suggested some owners and private investors do not properly disclose or adjust related-party costs, resulting in overstated expenses and underreported profits, which typically appear in real estate transactions.

In an effort to improve care through financial accountability, a handful of states, including New Jersey have passed laws requiring a certain percentage of revenues be spent on direct patient care.

“Is that something you think Virginia should consider?” reporter Tyler Layne asked McQuinn.

“Absolutely. Absolutely," she responded. "We’re going to be demanding that. We're going to be demanding that there be a restructuring of this situation.”

“Should we expect that you will be introducing legislation?” Layne asked.

“I promise you I will be introducing legislation. I promise you," she responded.

Del. McQuinn said she wants DMAS, the agency that reviews and audits cost reports, to investigate Henrico's spending. CBS 6 asked DMAS for a response to McQuinn's request, but the agency has not responded.

DMAS has generally said that "inconsistencies, unusual transactions, significant cost fluctuations, or other indicators that suggest potential overstatement of expenses" would trigger an audit or investigation of a facility's cost reports. Regulations require related-party transactions to be comparable to arm's-length transactions.

The agency has previously stated it does not have authority to broadly oversee how nursing facilities pay related parties or invest resources. As it relates to setting capital rates, DMAS does not consider a facility's reported expenses. Instead, it relies on a fair rental value accounting principle.

Meanwhile, family members of residents are calling on government agencies to strengthen their oversight efforts.

“They need to say, ‘Hey, let's be accountable to where the money is going,'" Jefferson said.

"We need to have more eyes on these facilities because that's our loved ones that they're supposed to take great care of," Patron said.

CBS 6 is committed to sharing community voices on this important topic. Email your thoughts to the CBS 6 Newsroom.

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