N.Y.’s largest health vendor linked to owner accused of fraud, neglect
New York has contracts worth $27 billion with a company closely linked to a nursing home conglomerate that’s accused of fraud in a state attorney general’s investigation.
By Raga Justin April 7, 2024
The Schenectady Center for Rehabilitation and Nursing is a Capital Region nursing facility owned by the Bronx-based Centers Health Care. The nursing home conglomerate’s owner was named in a state attorney general’s lawsuit last year that alleged several fraud and neglect charges stemming from four other Centers facilities.
Will Waldron/Times Union
ALBANY— State Attorney General Letitia James stood at a podium late last June to announce her office had filed another civil case against allegedly nefarious nursing home operators, this one targeting four facilities and their Bronx-based parent company, Centers Health Care.
James accused two Centers Health Care executives of orchestrating “multiple fraudulent schemes” that siphoned millions from the state’s Medicaid program to enrich themselves, their business associates and also to purchase a flailing Israeli airline. She pointed to disturbing, graphic examples of hundreds of elderly residents forced to endure harmful conditions for years because of the company’s alleged role in woefully understaffing nursing homes.
“They ignored and violated laws meant to protect nursing home residents and they pocketed millions of dollars that should have gone to patient care,” James said of the nursing facilities, which are located in Queens, the Bronx, Westchester County and Buffalo.
The for-profit nursing home conglomerate’s chief executive officer, Kenneth Rozenberg, is the subject of intense ongoing scrutiny from state regulators as the attorney general’s civil lawsuit progresses through the court system.
But six months after the allegations of widespread abuse and Medicaid fraud against him were made public, New York approved a 5-year, multibillion-dollar contract with the state’s largest and highest-paid managed care company — which Rozenberg also owns.
That company, called Centers Plan for Healthy Living, has had $27 billion worth of business with the state Department of Health since at least 2012, according to records maintained by the state comptroller’s office. Two contracts totaling nearly $17 billion have a start date of January 2022, likely around the time the attorney general’s investigation began.
Still, both contracts were approved months after the investigation was made public — and after a state judge determined the attorney general’s office had presented enough evidence of fraud by Rozenberg and one of his close business partners and co-defendants, Daryl Hagler, to merit assigning an independent financial monitor for Centers Health Care’s operations.
And last spring, while under scrutiny from state authorities and as the investigation crept closer to becoming public, Centers Plan for Healthy Living entered into a $10,000-per-month lobbying deal with noted health care lobbying firm Hinman Straub — the company’s first such activity, according to lobbying records, despite doing business within New York since at least 2013.
The situation raises questions about what vetting process the state uses to examine its highest-paid vendors, especially in the complex world of government-funded health insurance plans. In that sector, the relatively new health payment system known as managed care has been criticized for, in some cases, enabling profit-seekers to flourish while providing care to the state’s most vulnerable residents.
State contracts of that magnitude typically are reviewed by multiple entities, beginning with the agency which entered into them and then by the state comptroller’s office, which issues final approval.
Mark Johnson, a spokesman for the comptroller’s office, said the agency’s contract approval scope is narrow. Its vetting process is limited mostly to whether the vendor has violated labor laws by failing to pay workers proper wages.
Melissa Pomeroy, a spokeswoman for the Department of Health, said the agency would not comment on Rozenberg’s case because of pending litigation.
When asked about the department’s policy for dealing with vendors who are facing civil or criminal penalties, Pomeroy said there is a general review process at the time a contract is approved and when it is renewed.
She noted that if a person or entity who is providing Medicaid services has “engaged in an unacceptable practice,” the department’s Office of the Medicaid Inspector General can impose sanctions, including censure or exclusion from state contracts.
A spokesman for Centers Plan for Healthy Living and Centers Health Care declined to comment.
‘A duty to act’
The sole reference to Centers Plan for Healthy Living in the 366 pages of the state’s civil complaint against Rozenberg and Centers Health characterizes the insurance plan as the largest managed care organization in New York. These types of plans essentially function as the payment intermediary between Medicaid enrollees with intensive medical needs and their health care providers.
In the complicated parlance of health insurance, Managed Long Term Care plans help people who are chronically ill, have disabilities or otherwise need long-term care. The health plans help arrange for those medical services, like home health or nursing care, and receive payment from the joint state-federal Medicaid program to do so.
New York has been increasingly reliant on Managed Long Term Care plans over the decades, and companies have flocked to provide such plans — including Rozenberg’s Centers’ conglomerate.
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Since at least 2012, the Department of Health has approved six contracts with the Staten Island-based Centers Plan for Healthy Living. Most recently, the department entered into two 5-year contracts beginning January 2022 and running until December 2026. That contract term is standard for Managed Long Term Care plans.
The first contract, worth $16.1 billion for services simply characterized as Managed Long Term Care, was approved by the state comptroller’s office on Dec. 15. Another agreement for $599 million for a health plan for dually-eligible Medicaid and Medicare enrollees was approved on Nov. 15.
Both contracts would have been entered into by the Health Department around the time the massive investigation had been launched by the state’s Medicaid Fraud Control Unit, a bureau within the attorney general’s office dedicated, in part, to rooting out dishonest health care practitioners.
Contained in that lawsuit are multiple allegations that Rozenberg and Hagler submitted misleading or false information to Department of Health regulators related to funding and ownership structures for some of their nursing homes.
But officials elsewhere had quickly reacted to the severity of the allegations.
Last July, state Supreme Court Justice Melissa Ann Crane found evidence of “repeated and persistent fraud” so credible that she appointed a financial monitor and health monitor to assess and manage Centers Health Care’s operations.
“Although respondents have promised to cease payments to related entities and that principals will take no further draws, the sheer magnitude and variety in the fraud that has allegedly persisted warrants the imposition of an independent financial monitor,” Crane wrote in a decision. “In all likelihood, the massive self-dealing will continue without a monitor.”
New Jersey officials also found the allegations serious enough to issue temporary suspension notices in January, targeting two facilities owned by Rozenberg and Hagler in that state.
In a release, New Jersey State Comptroller Kevin Walsh cited “poor conditions … and evidence of massive Medicaid fraud in New York.”
“When there is evidence of fraud of this magnitude, and when a judge has acted to prevent further siphoning and self-dealing, we have a duty to act,” Walsh said. “To protect New Jersey Medicaid and the residents who rely on it, we must stop the flow of Medicaid funds to these individuals, and we must require them to step aside.”
Several New York lawmakers said they were only vaguely familiar with the company and did not recall being approached by a lobbyist concerning Centers Plan for Healthy Living or Centers Health Care.
But lobbying filings indicate both organizations have retained Hinman Straub, though the specific focuses of that lobbying were not disclosed. While Centers Health Care has been listed in lobbying records since 2019, Centers Plan’s CEO Mark Bloom signed its first agreement with the lobbying firm in March 2023 for unspecified health care lobbying activities, including with the governor’s office.
The agreement, which runs until the end of this year, is for $10,000 a month.
According to his profile on Centers Health Care, Rozenberg credited the shift that states have taken in recent years towards managed care as the reason behind forming Centers Plan for Healthy Living. The health insurance organization services all of New York City, plus Rockland, Niagara and Erie counties and has plans to expand further.
The company did not respond to questions about how much control, if any, Rozenberg currently exercises over Centers Plan for Healthy Living, or over Centers Health operations.
Allegations
The attorney general’s lawsuit alleged that while the COVID-19 pandemic shone a spotlight on illegal conduct from Rozenberg and his associates, he had been engaged in fraudulent activity since well before 2020 — and had continued through the time of the filing.
James claimed that from 2013 to April 2022, Rozenberg, Hagler and multiple other LLCs and business associates in their network extracted tens of millions of dollars in Medicaid reimbursement funds as up-front profit from nursing homes they controlled, cutting staff expenses and paying low wages to do so. The breadth of the allegations include claims that Rozenberg and others filed false documents with the Department of Health to hide the amount of money they were transferring to themselves.
“In so doing, respondents repeatedly prioritized their personal enrichment by minimizing staffing expenses while maximizing revenue from admissions and ignoring and violating many state and federal laws designed to protect nursing home residents,” the lawsuit contends.
The allegations in the state’s lawsuit encompass a disturbing array of patient care violations, including several instances where elderly residents were left covered in feces and other waste while they waited hours for nurses to come to their aid. Many developed gaping bed sores from not being turned regularly; when residents repeatedly rung call bells, they were ignored by overworked staff.
In several messages attached to the lawsuit, supervisors at the facilities allegedly pleaded to bar new admissions to the nursing homes and informed executives about the dismal staffing ratios leading to harmful conditions for residents. But the corporation declined to cease intake, admitting new residents even as staff struggled to provide for the residents already in their care. Staffing levels remained dismal.
Recruiting long-term care staff has long been a difficulty in New York.
Stephen Hanse, president of New York State Health Facilities Association which represents nursing and assisted living providers, referred to a “change in the paradigm” nearly a decade ago, citing minimum wage hikes that meant nursing home workforces started shifting towards other, lucrative options in the labor market like retail stores or fast food restaurants.
As a result, the long-term care workforce was decimated, and remains so, Hanse said.
By Raga Justin
Raga Justin is an investigative reporter covering politics and policy with the Capitol Bureau, where she was previously a Hearst fellow. She is a native Texan and University of Texas at Austin graduate and has worked for the Hearst Connecticut Media Group, the Dallas Morning News in Washington, D.C., and the Texas Tribune. Send tips, feedback or rants to raga.justin@hearst.com.
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