The former CEO of a Pennsylvania nursing home was sentenced to nine months to five years in state prison for stealing potentially hundreds of thousands of dollars from the facility. The former CEO, 65, who was sentenced on June 15, 2023, was originally charged with 19 felony charges and 17 misdemeanors for his actions while employed at the facility. He was diverting funds from the nursing home to support a community fair, vacations, vehicle purchases, and his family.
Prior to sentencing, the nursing home’s current CEO read from a victim impact statement that outlined the extent of his crimes which began as early as May 2004 and continued until his termination in July 2019. She explained that he misled everyone into believing he was a good person by promoting a food booth at the community fair under the guise of a nursing home fundraiser. He instead used funds from the nursing home to finance the entire operation of the food booth at the fair. He even purchased a new $57,000 truck without board consent to pull his food trailer, for which the nursing home made the loan payments.
The new CEO said that instead of using money which had been allocated to replace old windows in residents’ rooms, the former CEO told employees to roll up towels and put them on the windowsills to keep out the cold air in the winter. He used the funds earmarked for the replacement of the windows to upgrade his office and the office of his personal assistant, who happened to be his wife. Leaks in the roof were dealt with by placing buckets to catch the rain, and obsolete equipment was not replaced. She said he was also continually absent from the facility.
The victim impact statement also said that although the nursing home’s forensic auditor concluded that the facility suffered a financial loss in excess of $900,000, they suspect that the amount misappropriated over many years exceeds it, as the majority of the fair’s revenue was cash, which is difficult to account for. The former CEO’s arrest and the uncovering of his crimes also affected the community’s perception of the company, leading to a lack of confidence which impacted donations and gifts, she noted.
Due to a plea agreement for only one felony charge of theft, the former CEO was required to pay restitution of over $70,694.73 prior to sentencing. The District Attorney provided an audit that determined the restitution numbers but noted that more was alleged to be taken, which may be pursued in a civil case.
Compliance Perspective
Issue
The Centers for Medicare & Medicaid Services (CMS) requires skilled nursing facilities to have a compliance and ethics program that is effective in preventing and detecting criminal, civil, and administrative violations under the Social Security Act, and in promoting quality of care. Every nursing facility should have a double check system in place for all monetary transactions, and all transactions should be reviewed and approved by a second party to prevent misappropriation of funds. Routine audits should be conducted at each facility on monetary transactions and the results of the audits should be reported to the compliance and ethics committee and to the governing body. The audits should have a corrective action plan to address any identified discrepancy, and all discrepancies should be investigated and rectified immediately. Facilities are required to report any allegations of misappropriation or exploitation of a resident’s funds or personal property to local authorities as well as the state agency.
Discussion Points
- Review your policies and procedures for operating an effective compliance and ethics program. Also review the facility’s policies and procedures on accounting and the use of facility and resident funds. Update as necessary.
- Train all staff on your compliance and ethics policies and procedures upon hire and at least annually, including their responsibility to identify and report any concerns of fraud, waste, or abuse of funds in a timely manner. Train appropriate staff on your policies for financial accounting and the protection and approved use of facility and resident funds. Document that these trainings occurred and file the signed document in each employee’s education file.
- Periodically audit to ensure that all monetary transactions have been double-checked and approved by a second party, and that all transactions have been previously approved. Ensure that an independent audit is conducted at least annually. Also audit staff understanding to ensure that they are aware of the steps that should be taken if they suspect theft, and their reporting options, including the use of the anonymous hotline.
*This news alert has been prepared by Med-Net Concepts, LLC for informational purposes only and is not intended to provide legal advice.*
