By Steve Wishnia

New York State Attorney General Letitia James is suing the owners of four nursing homes, charging that they siphoned off more than $83 million in Medicare and Medicaid payments through a “related-party transaction” scheme where they channeled money intended for resident care to businesses they, their associates, or family members own.

The civil suit, filed June 28 against Centers Health Care in State Supreme Court in Manhattan, accuses the two main owners, Kenneth Rozenberg and Daryl Hagler, and 12 others of starving staffing and cutting care to the point where residents “were forced to sit for hours in their own urine and feces; suffered from severe dehydration, malnutrition, and increased risk of death; developed infections and sepsis from untreated bedsores and inconsistent wound care; sustained life-changing injuries from falls; and died.”

The four nursing homes named are Beth Abraham Center for Rehabilitation and Nursing, a 448-bed facility in the Bronx; Buffalo Center for Rehabilitation and Nursing, with 200 beds; the 314-bed Holliswood Center for Rehabilitation and Healthcare in Queens, and Martine Center for Rehabilitation and Nursing in Westchester County, which has 200 beds. Centers Health Care operates 49 skilled nursing facilities in New York, New Jersey, and Rhode Island, according to 1199SEIU, the main union representing nursing-home workers in New York.

Centers Health Care is co-owned by Rozenberg and Hagler, but the ownership and operation of the four facilities is a tangled, nepotistic web of interlocking limited-liability corporations. According to the suit, Rozenberg ran the four LLCs that operated the nursing homes, while Hagler had the largest share in the four LLCs that owned their sites — and charged exorbitant rents.

They concealed that scheme, the suit alleges, by submitting much lower proposed rents to the state Department of Health when applying to take over the nursing homes, and raising rents after they got their licenses. For example, it says, Buffalo Center told the department in September 2015 that the rent would be $600,000 a year — but after the purchase deal was closed a few months later, Rozenberg and Hagler signed a new lease for $2 million, more than three times as much. At Holliswood, they raised the rent by two-thirds when they took over in 2012.

Other scams, the suit says, included $4.8 million in no-interest loans from Buffalo Center to Centers Health Care facilities in Kansas and Rhode Island. Only a quarter of that debt has been repaid. From 2019 to 2021, the four nursing homes paid more than $3.3 million to BIS Funding, which is owned by Hagler and his son Jonathan. There were no contracts detailing the services it provided, the Attorney General’s office says, and what it purportedly provided appeared to duplicate work by other contractors.

From 2017 to 2021, Centers Health Care-affiliated nursing homes paid more than $34 million to Skilled Staffing, supposedly for staffing and consulting services. There were no contracts for that work either, the suit says. Holliswood Center paid more than $170,000 in 2020 and 2021 even though it never hired any staff through Skilled Staffing. Skilled Staffing is on paper owned by Rozenberg’s daughter and daughter-in-law, but they are not targets of the suit. The company paid $5 million to Rozenberg’s wife, Beth Rozenberg, between 2019 and 2021.

In May 2020, during the devastating first wave of the COVID pandemic, the suit alleges, Holliswood Center refused the city Department of Health and Mental Hygiene’s offer to provide free weekly testing for residents. Instead, it hired Centers Lab, owned by Kenneth Rozenberg.

Rozenberg refused to speak to investigators, saying he could not testify under oath without knowing whether there was a criminal investigation underway. Daryl Hagler testified for part of a day, but refused to return, on the same grounds.

Centers Health Care “denies the New York attorney general’s allegations wholeheartedly,” spokesperson Jeff Jacomowitz said in a statement June 28. The company “attempted to resolve this matter out of court,” he added, and “will fight these spurious claims with the facts on our side.”

THE MISSING COLOSTOMY BAG

What was the effect on patients? According to the suit, in July 2022, a woman visiting her mother at Martine Center saw that she was in pain. When she pulled her mother’s hand out from under her blanket, “it was covered in feces.” Her mother was wrapped in a towel filled with feces, and her colostomy bag was gone. The daughter unwrapped the towel, and “saw exposed intestines and the surrounding area covered in feces.”

One out of every seven residents at Holliswood Center died in 2020, according to death certificates tallied by the Attorney General’s office. That year, the suit says, Centers Health Care hired a new employee “to strategically help facilities reduce the cost of appropriate staffing.” In May 2021, state health inspectors at Buffalo Center found only two workers covering the overnight shift on a dementia unit with 53 residents.

The money diverted into related-party companies, the suit alleges, made the facilities look like they were “unprofitable or only minimally profitable.” That enabled the owners to claim that they needed higher Medicaid reimbursements and couldn’t afford to give the staff pay raises.

“1199SEIU members who work in these homes across the state continue to deliver care to their residents under very difficult conditions, including severe understaffing and often with limited supplies,” Yvonne Armstrong, the union’s senior executive vice president for long-term care, said in a statement. “It is our hope this lawsuit will result in investment in frontline care, which is desperately needed for our most vulnerable and aging New Yorkers.”

Attorney General James is asking for a preliminary injunction requiring the four nursing homes to hire a financial monitor and a health-care monitor to oversee their operations. She is also seeking a court order that would prohibit them from admitting any new residents until they have adequate staffing, as well as directing them to return the more than $83 million they “wrongfully received” to Medicaid, and to reimburse the state for the cost of the investigation.

MALIGN NEGLECT

In my work as a labor reporter, I have talked to dozens of nursing-home workers. When facilities are understaffed, they say, the first thing they lose is the extra moments they have for personal contact with residents — the conversations about their grandchildren or whatever that makes patients feel a human bond, that someone cares about them, that they’re not just waiting around to waste away, alone and forsaken.

In understaffed nursing homes, workers complain that they’re constantly scrambling to keep up with feeding patients, giving them medication, taking them to the toilet, and watching out for emergencies. (That’s a common complaint in all understaffed medical facilities.)

The level of neglect alleged in this lawsuit and similar cases is an order of magnitude worse. It is a business model of deliberately decreasing care and condemning patients to degrading deterioration.

It has become a common business model in the nursing-home industry, which is supposed to take care of the most infirm and fragile elderly people. And the owners accused here are not hurting for money. According to the suit, Rozenberg spent $107 million in 2020 for a controlling interest in the Israeli airline El Al, while Hagler spent $132 million buying real estate in Brooklyn and Queens last year.