INSTALLMENT 2 | THE CORPORATE MAZE: The Shell Companies Behind America’s Nursing Homes—and the Laws That Protect Them
- Brett Leitner
- 26 minutes ago
- 4 min read
When a nursing home resident is catastrophically injured—through preventable falls, untreated infections, or neglect—families assume there will be accountability. They imagine a lawsuit will lead to answers, reforms, and compensation. But in many parts of the country, especially New York, the reality is far more complex.
Behind the front-facing nursing home are networks of limited liability companies (LLCs), management corporations, real estate holding entities, consulting firms, and related-party vendors—a corporate maze built not by accident, but by design. These structures create a labyrinth so dense that even when a facility is found negligent, there is often no financially responsible party left to collect from.
It is a system built to silo liability, obscure who truly controls the operation, and protect the owners’ profits long after the harm is done.
A Web of Companies, One Purpose: Protection
A typical nursing home may look like a single facility with a single owner. In practice, many are split among 10, 15, sometimes 20 or more separate legal entities. Each plays a specific role in shielding the enterprise from risk.
Ownership may be divided this way:
One LLC technically owns the building
Another LLC “operates” the facility
A related management company controls staffing and finances
A consulting company—also related—charges administrative fees
A real estate LLC collects rent
Several shell companies provide services such as therapy, billing, or supplies
In many cases, the same individuals sit behind all these entities. Yet legally, each one is treated as a separate corporation with its own assets, liabilities, and protections.
Corporate governance experts call this the fracturing of ownership. Nursing home attorneys call it something else: judgment-proofing.
Private Equity’s Quiet Takeover—And the Financial Engineering Behind It
Private equity firms have increasingly moved into the nursing home sector, drawn by steady revenue streams and opportunities for aggressive financial structuring. These firms are adept at creating complex corporate webs that maximize profit extraction while minimizing legal exposure.
Here is how the model often works:
Step 1: Acquire the facility.
The private equity fund uses a network of newly formed LLCs to purchase both the real estate and operations.
Step 2: Split the ownership.
The real estate is held by one company; the nursing home operations are held by another. The operating company pays rent—often inflated—to the real estate company owned by the same investors.
Step 3: Layer on management fees.
A management company—another related-party entity—charges administrative or consulting fees for services that may be overstated or redundant.
Step 4: Move money up and out
Funds flow through the structure—rent, management fees, service contracts—leaving the operating company (the one legally responsible for patient care) with little capital and little insurance.
Step 5: When negligence claims arrive…The operating company argues insolvency. The parent companies point to corporate separateness. The real estate entities declare they had “no involvement in patient care.”
The result: victims win lawsuits but encounter a shell with no money.
As one bankruptcy scholar put it: “These structures are engineered so liability flows downward and profits flow upward.”
Why Veil-Piercing Almost Never Works
In theory, courts can “pierce the corporate veil” if companies are mere alter egos of each other. In practice, piercing is exceptionally rare—especially in healthcare, where regulatory filings and formal separations create an appearance of legitimacy.
To pierce the veil, plaintiffs must prove:
Complete domination of one entity by another
That such domination was used to commit a wrong
That the wrong caused the plaintiff’s injury
But nursing home operators meticulously maintain the paperwork to show separateness: separate bank accounts, separate tax returns, separate meeting minutes—even when the functional reality suggests centralized control.
Judges are reluctant to collapse these entities because doing so challenges longstanding principles of corporate law. And operators know it.
A corporate attorney told investigators:“The system is designed so that veil-piercing is technically possible but practically impossible.”
Following the Money—And Losing the Trail
For reporters, regulators, and plaintiffs’ attorneys, tracing financial flows through these structures is an exercise in frustration.
Money may move from:
The operating company →
The management company →
The real estate holding company →
A consulting affiliate →
A private equity fund’s limited partners →
Offshore tax structures
At each step, liability dissipates.
The complexity is not incidental—it’s strategic. It allows operators to extract millions in rent and fees while the operating entity reports razor-thin margins and pleads poverty when sued.
In one case involving a chain of nursing homes under investigation by the New York Attorney General, operators allegedly siphoned more than $80 million through related-party entities while residents suffered from malnutrition, infections, and preventable injuries.
The operating companies claimed they “lacked resources” to provide adequate staffing.On paper, it was true—because the money had already been moved elsewhere.
The Legal Architecture Protecting the Maze
Why is this allowed?
Because corporate law prioritizes separateness. Because bankruptcy courts follow formal ownership, not functional control. And because healthcare regulation focuses almost entirely on operations—not on the financial machinery behind them.
The result is a system where:
The operating company is perpetually undercapitalized
The real estate company is legally shielded
The management company is “just a vendor”
The private equity owners remain untouchable
The insurer is a captive shell with no real assets
Even when state attorneys general win major settlements, the underlying structure remains intact. The maze regenerates.
For Families, a Final Shock
For families who try to understand who owns the nursing home where their loved one was harmed, the journey often ends in disbelief.
“What do you mean the people who run it aren’t the people who own it?”
“Why does the nursing home have 18 companies attached to it?”
“Why is there no one left to sue?”
The shell companies were always meant to answer those questions with silence.