Today, we will examine a big factor in why nursing home regulation fails. It is doomed in part by the organizational structures of chains that mask a deadly lack of corporate ethics. Government regulators not only do not stop it, but are currently helpless to do so for the simplest of reasons. They know nothing about those structures and the internal fees and rents that drain funds from the operating companies and from patient care.

The problem starts with a federal law.

The HUD/FHA Section 232 program is an FHA loan product that provides mortgage insurance for residential care facilities. It is a 66-year-old carve-out for the nursing home industry in the National Housing Act.  Section 232 offers FHA guarantees for non-recourse, below-market fixed-rate, long-term loans at up to 80% loan-to-appraised-value ratios. Lender’s fees are generally 3.5%. The cost for new construction can include land purchase.

The loans may be used to finance the purchase, refinance, new construction, or substantial rehabilitation of a project. A combination of these uses is acceptable – e.g. refinance of a nursing home coupled with new construction of an assisted living facility.

Every nursing home that is purchased or renovated using a loan backed by a Section 232 guarantee has its own operating company and realty company that serves as the landlord for the operating company. That is a 232 program requirement designed to protect the real estate collateral of the loan from failure of the operating company. The loans are made to the realty company.

Operating and realty companies are separate LLCs, but the members of each are usually the same people, at least initially.

That is where many chains get creative, both to protect the assets even further and to generate internal fees with enterprise structures borrowed from the real estate industry.

The layers – Unit LLCs, Holdco LLCs, and Master Holdco LLCs

Next steps often include:

• An operating holding company (holdco) is created for every six to eight operating units.
• A property holdco is created to oversee a similar number of property units.
• A consulting company owned by the principals of the operating and property companies will provide services to individual units and to the holdcos.
• Some larger chains will establish “Master” holdcos that manage the individual holdcos.

More sophisticated companies establish tenant companies that manage tenants at the properties with a management chain that includes tenant holdcos and master tenant holdcos.

Management Fees

It is reasonable to expect that each of those companies gets paid fees. And those are only the LLCs. There are also individuals disclosed to CMS who are in the management loops.

The example of Mountain Laurel Rehabilitation and Nursing

The Eastern Healthcare Group controls 17 Virginia nursing homes, including Mountain Laurel Rehabilitation and Nursing in Rural Retreat. It is off I-81 in Wythe County.

Mountain Laurel staffing data reported to CMS show it is significantly short of both RNs and CNAs, and rates in the bottom 20% of the nursing homes in the nation for staffing. Yet while 90 of Virginia’s 292 facilities paid CNA trainees in Q1 of 2025, the last available quarterly data, Mountain Laurel was not one of them. RN turnover has been 67%. Two administrators have left in three years.

Mountain Laurel’s 1-Star Medicare Compare staffing rating is standard for Eastern. The average nurse staffing rating for the entire chain is 1.4 stars. Only one of Eastern’s 17 facilities paid NA trainees in that quarter.

Mountain Laurel’s place in the Eastern Healthcare Group organizational structure

Operating structure

The legal business name of Mountain Laurel is Wythe Va OPCO LLC, the operating company.

Wythe is 100% directly owned by the holdco VA SNF Operations Holdings LLC, which in turn is controlled and is indirectly owned by two trusts at 50% each.  They are:

• Lyam Family Trust (currently listed for two Eastern facilities); and
• YDI Irrevocable Trust (ownership roles in 16 of the 17 Eastern Healthcare facilities).

Operational/Managerial Control of Mountain Laurel is shared among:

• Capital Funding Group
• Va Snf Master Consulting Llc
• Va Snf Operations Holdings 3 Llc
• Ydi Eastern Holdco Llc
• Gittleson, Yehuda
• Hajimomenian, Amir
• Hartman, Aaron
• Shapiro, Akiva
• Sommer, Nechama

The Eastern Healthcare Group Corporate Officer assigned to oversee this property is Akiva Shapiro, the Eastern Healthcare Group CEO. He may or may not get paid by Mountain Laurel for operational/managerial control and for corporate oversight in addition to his corporate earnings. I regularly see corporate officers, but not Mr. Shapiro, receiving W-2s from individual properties.

The CMS data submitted by Eastern Healthcare Group shows that Capital Funding Group holds a mortgage. Capital may get paid for the mortgage and for sharing in operational managerial control as listed above. We don’t know, and neither does the government.

Realty Structure

Wythe Va Opco LLC pays rent to Mountain Laurel Va Propco LLC, which owns the real estate and buildings. If the enterprise architecture is extended further, Mountain Laurel Va Propco Llc may pay fees to a realty or property holdco, which in turn may pay fees to a Master Realty or Master Propco LLC. I have not done the research yet to see if they exist in this case, as they do in others.

The same people tend to own every LLC in the enterprise structure unless they sell some of them to others. For example, health care and nursing home Real Estate Investment Trusts (REITS) are created by buying property companies.

Bottom Line

The regulators do not understand this structure because they have no information on the realty companies, their debt loads, or their lenders. I have to use city and county property searches to get that information. Very tedious work.

The rents are not available to me. Government regulators also don’t know who among those listed as “owners” in the CMS data gets paid fees by Mountain Laurel’s operating and property companies, or if so, how much.

All of those fees and rents, as well as owner profit draws, are paid from the cash flow that is mostly Medicare and Medicaid money.

Staff at places like Mountain Laurel are left to try to deliver the care for which the government has already paid their operating companies. They do not have enough trained professionals to do it right. So many quit – see Mountain Laurel’s 67% RN turnover rate – making the problem worse. No company can deliver healing and life-affirming services over time with those kinds of repetitive losses in key personnel.

CMS and the states regulate nursing home operating companies, but neither attempts to regulate the property companies. They don’t have the required information to do so if they tried. The “black box” that is the corporate structures and internal fee payments of chains has proven the undoing of the government nursing home regulatory structure. They could at least use the data they do have on the performance of chain operating companies to give the worst of them a new Special Focus Chain (SFC) designation analogous to the Special Focus Facility program. That at least may give them pause and can be used to serve as a predicate for banning the owners from a state or from federal programs.

Most human tragedies that result in nursing homes every day are traceable to unethical chains that operate bad nursing homes for the huge profit margins they can wring out of them.

The worst ones get away with murder – figuratively speaking, of course.