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MFA Nursing Homes Flagged for Inflated Costs, Use Mandatory Arbitration

by Jeffrey J. Downey, Esq

6 News from Richmond recently reported that tens of millions in reported costs from  Medical Facilities of America (MFA) facilities and affiliates could not be justified or verified through regulatory reviews of financial reports. Despite being flagged, those “inflated” costs were not further investigated by Medicaid.

Medical Facilities of America (MFA), headquartered in Roanoke, Virginia, is one of the largest nursing home chains in Virginia, operating some 39 facilities in Virginia and North Carolina.  While MFA functions as the primary operator of these facilities, as with most private nursing home chains the facilities are part of a complex corporate structure.  Innovative Healthcare Management/Innovative Long Term Care Management out of New Jersey has assumed managerial oversight of MFA facilities.  Dominion Care Manage Services, LLC, acts as a managerial consultant with LTC acting as a holding company.  MFA LifeWorks LLC provides in- house physical, occupational and speech therapy for all MFA facilities. Families who believe a loved one suffered harm from inadequate staffing or substandard care at one of these facilities may have grounds for an elder abuse or personal injury claim.

“Nursing homes operated by MFA or its related companies make use of mandatory arbitration agreements in which a patient waives his or her right to sue in Court and have the case heard by a jury.  Often patients, who are signing numerous forms in the admission process, do not even realize they are signing these agreements,” explains Virginia Nursing Home Attorney Jeffrey J. Downey.  “Patients need to read the admission agreement carefully and cross out the arbitration provision.”

The Department of Medical Assistance Services explained that the audits were focused on identifying related-party transactions, which occur when a nursing home conducts business with another company under common ownership or control. Related-party transactions in the nursing home industry are common but have drawn scrutiny from some consumer advocates who argue they may lead to increased costs above market rates. 

CBS 6 reported that it heard reports from many families that their loved ones suffered in nursing homes that were part of the Lifeworks Rehab chain. Based on federal records, the chain has overall performance and staffing ratings below the national average. It also had two of the state’s worst-performing facilities.

Since US Taxpayers pay most nursing homes charges through Medicaid, facilities must submit annual cost reports which are used to set Medicaid reimbursement rates.  CBS 6 obtained audits of 2024 cost reports for all 37 MFA facilities, which DMAS tracks under the name Innovative Healthcare Management. The audits, which were completed by contractors for DMAS, identify tens of millions of dollars in disallowed, unsubstantiated, and what auditors said appeared to be “inflated” expenses.

“What happens is that they’re overreporting expenses and so that makes it look like they’re making less profit. These disallowances are basically profits,” said Dr. Charlene Harrington, professor emeritus at the University of California, San Francisco, who has studied nursing home quality and finances for four decades. A spokesperson for the nursing homes, Mindie Barnett, said the auditing process is simply reconciling real costs faced by providers with expenses that are recognized under regulations.

After auditors’ adjustments, some $65 million in  costs reported by the 37 facilities were disallowed, meaning DMAS would not consider those expenses reimbursable, and they would not be factored into rate-setting processes. The same kinds of disallowed expenses were identified by auditors across nearly every facility — including management fees above the limit paid to suspected related parties, undocumented consulting and corporate payroll costs, lobbying dues, and unsubstantiated related-party employee benefit costs.

Auditors stated that they were also concerned that multiple facilities made questionable equipment purchases on the same date from a New York-based vendor, totaling close to $10 million.

At Colonial Heights Rehabilitation and Nursing Center, auditors removed more than $600,000 in management fees over the regulatory limit paid to nine suspected related-party entities. Those companies included Medical Facilities of America Consulting, Heritage Consulting, LLC, Innovative Health Care Management, Forest Holdings, M&M Capital Holdings, Garden View Holdings, Vita Healthcare Group, MFA Heritage Consulting, and MFA Clinical Consulting, according to DMAS.

Colonial Heights, which underwent an operator change last month, did not disclose any of these entities as related parties on its submitted cost report. In an appeal, the provider disputed the related-party connections.

Republican Senator Glen Sturtevant, from Colonial Heights, was troubled by the findings. “It would appear from the audit that DMAS did that they are creating all of these opportunities of self-dealing, to be able to pay themselves for lots of different things, basically pick whatever price they want, and then expect to get reimbursed by the state for it,” Sturtevant said.

According to the audits, auditors limited hundreds of thousands of dollars in related-party management fees across many other facilities in the Central Virginia region including $896,000 at Glenburnie Rehabilitation and Nursing Center, $407,000 at Parham Healthcare and Rehabilitation Center, and $753,000 at Westport Rehabilitation and Nursing Center.

Last year, CBS 6 investigations found that some facilities paid what experts described as unusually high rent to a landlord under common ownership in the 2024 cost reporting year. The amounts significantly exceeded what Medicaid would pay under as fair rental value

“Complex corporate structures like this are common in for-profit nursing home chains,” explains Virginia attorney Jeffrey Downey.  “They have different entities passing money to holding and other companies, which can insulate them from liability. It also gives them the ability to inflate costs by having related subsidiaries charge higher the market value prices.  If one facility, typically an LLC, has a large judgement or debt against them, they can file for bankruptcy protection, reinvent themselves, and discharge the individual debt after profits have been moved up the corporate chain to a holding company.  Genesis HealthCare, one of the largest nursing home changes in the US. filed bankruptcy in 2025 claiming that their debt was largely due to over a 250 million in personal injury and wrongful death lawsuits.” For more information on the Genesis bankruptcy, click here.

“Anyone considering placement in a nursing home should review the facility’s survey history on Medicare.gov,”  explains nursing home attorney Jeffrey J. Downey. “MFA also has patients sign mandatory arbitration agreements that are typically buried in the fine print of a long admission agreement.  No one should have to waive their civil rights to sue in Court and have their case decided by a jury, in order to get admitted into a nursing home.  The unfortunate reality is most patients don’t read the fine print and are not aware that they are even signing their rights away.  It’s important to understand that these arbitration agreements can be crossed out on the form and the facility will not reject you if you cross that language out,” explains Downey.

Residents and families who suspect neglect, injury, or wrongful death tied to inflated costs and understaffing should speak with an elder abuse or wrongful death attorney promptly, since a mandatory arbitration clause can significantly limit legal options if it is not addressed at admission.

Below is a list of MFA facilities operating in Virginia. 

Central Virginia

  • Albemarle Health & Rehabilitation Center – 1540 Founders Place, Charlottesville, VA 22902
  • Appomattox Health & Rehabilitation Center – 235 Evergreen Avenue, Appomattox, VA 24522
  • Charlottesville Health & Rehabilitation Center – 5050 Heritage Hall Road, Charlottesville, VA 22901
  • Lynchburg Health & Rehabilitation Center – Lynchburg, VA [1, 2, 5]

Richmond & Eastern Virginia

Southern & Western Virginia