by James C. Sherlock

Virginia is awash with out-of-state nursing home and behavior-analysis chains operating as LLCs. Our state regulators know little to nothing about them and have no control over their presence in Virginia because they are not licensed by those regulators.

The problems we are experiencing in both industries are centered on rogue chains.

• Individual nursing homes are licensed, inspected, and regulated, but not their chains.
• In the booming applied-behavioral analysis business, behavioral-health companies are not regulated at all, just individual providers. Physical behavioral-health centers are not even inspected. Telehealth services in general are a problem that DMAS is trying to address with individual providers. But chains employ a lot of them.

After a dozen years of investigating major scandals in those industries, this author has concluded that Virginia must change course.

The ongoing scandals in both industries indicate they must be brought under tighter regulation. A standard LLC

• Can be owned by anyone;
• Files a registration with the State Corporation Commission (SCC) Clerk’s office to do business in the state; and
• Shields owners from the company’s general business debts and liabilities.

Registration with the SCC provides little information about LLCs and none about their members.

We will examine how the state might proceed to establish regulatory control of chains organized as LLCs in problematic medical services industries.

Two alternatives that don’t seem to work

PLLCs

Some states require behavioral medicine practices to be professional LLCs (PLLCs). A PLLC

• Must be owned by state-licensed professionals
• Usually requires approval from a state licensing board
• Shields owners from general debts and each other’s malpractice, but not from personal practice.

The author has investigated and found that a state PLLC requirement does not effectively protect the state from rogue LLCs. New York has required clinician ownership for ABA companies since it began licensing behavior analysts in 2014. Drilling down into a PLLC registered in New York, he found that it served as a state-compliant front for a multi-state LLC chain headquartered in New Jersey.

Corporate Practice of Medicine Doctrine

Virginia is one of 14 states without a corporate practice of medicine (COPM) doctrine. But Minnesota has a COPM doctrine, and it did not shield it from widespread Medicaid fraud in behavioral health.

What is Virginia to do?

New law needed

The author suggests a Virginia law requiring:

• Chains of skilled nursing facilities, home health agencies, hospice agencies, and behavioral health companies LLCs operating here to obtain licenses for their members, their businesses, and their Virginia subsidiaries, as well as for their management, from the appropriate state regulators.
• Nursing home registrations to include information on both the owners of the licensed facilities and the owners of the real estate and buildings where they operate.
• Senior chain LLC members and management to undergo background checks before licenses are granted.
• The Secretary of Health and Human Resources to ban chains from operating in Virginia that file false information, fail to update it in a timely manner, raise serious issues in background checks, or regularly fail to comply with Virginia laws and regulations.

At that point, regulators would be able to keep known bad actors’ chains out of Virginia and know immediately who is actually responsible for incidents like the Colonial Heights nursing home scandal.

The opposition from the usual suspects will be fierce, and their campaign donations will surge. But do it anyway.

Healthcare Fraud Prevention Partnership

In the meantime, Virginia regulators and the Attorney General’s Medicaid Fraud Control Unit should consider joining the federal government-sponsored Healthcare Fraud Prevention Partnership. It seems to work, and it is something of an astonishment that Virginia government agencies are not already members.