For nearly forty years, nursing homes have been highly regulated, both at state and federal levels, to ensure quality care for a vulnerable population. Congress enacted the Nursing Home Reform Act (NHRA) in 1987, which established specific standards of care for nursing homes receiving Medicaid or Medicare funds. The Act also established a nursing home resident Bill of Rights that recognizes residents are entitled to adequate care, privacy, participation in care planning, and freedom from retaliation if they complain about their living conditions.<\/p>\n
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Even prior to Congress acting, in 1976, New Jersey passed its own Nursing Home Responsibilities and Rights of Residents Act, N.J.S.A. 30:13-1 to -19, which included a resident Bill of Rights. Nursing homes are also subject to multiple state regulatory codes, including the Standards for Licensure of Long-Term Care Facilities, N.J.A.C. 8:39-1.1 to -47.5. In 2020, New Jersey codified minimum patient care ratio staffing requirements by shift. N.J.S.A. 30:13-18. The minimum staffing requirements are based on the number of residents living in a facility and differ depending on time of day.<\/p>\n
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Eligibility and terms of reimbursement for nursing facility services are detailed in N.J.A.C. 10:166-2.1 to -2.21. The primary goal of the state and federal regulations is to ensure that nursing homes deliver cost-prudent services that meet the residents\u2019 medical, nursing, dietary, and psychosocial needs to attain and maintain their highest physical, mental, emotional, and functional status. 42 U.S.C. 1396r(b)(2); 42 U.S.C. 1395i-3; N.J.A.C. 10:166-2.1(a)(2). The New Jersey Department of Human Services (DHS) created the nursing facility reimbursement rate formula to \u201ccomply with Federal requirements that rates are reasonable and adequate to meet the cost that efficiently and economically operated facilities must incur to provide care.\u201d N.J.A.C. 10:166-3.1(f)(1). Medicaid rules aim to prevent fraud, abuse, and unnecessary costs. N.J.A.C. 10:166-3.1(f)(3). Moreover, the Centers for Medicare & Medicaid Services\u2019 (CMS) Provider Reimbursement Manual states that costs incurred by nursing homes should \u201cnot exceed what a prudent and cost-conscious buyer pays for a given item or service.\u201d CMS Provider Manual \u2013 Part 1, Ch. 21 \u00a7 2102.1. See also 42 C.F.R. 413.9. Excess costs expended by a nursing home are not reimbursable by NJ Medicaid. N.J.A.C. 10:166-3.1(d) and N.J.A.C. 10:166-3.1(f).<\/p>\n
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In 2020, New Jersey enacted a law that directs the DHS Commissioner to establish a \u201cdirect care ratio reporting and rebate requirement.\u201d N.J.S.A. 30:4D-7cc. This law and its implementing regulation require nursing homes to report their total revenues collected and to identify the portion of revenues spent on direct care staff wages, other staff wages, taxes, administrative costs, improvements to the facility\u2019s equipment or building, and any other information required by DHS. N.J.A.C. 10:49A-2.2 to -2.6. If a nursing home spends less than 90 percent of Medicaid funds on direct resident care, the nursing home is required to return funds to the State. N.J.A.C. 10:49A-3.1.<\/p>\n
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B. Nursing Home Use of Related Parties<\/strong><\/p>\n Caring for residents in long-term care facilities requires a spectrum of goods, services, and staff for nursing care, rehabilitative services, meals, building maintenance\/cleaning, medical supplies, medication, operations management, and more. Often, nursing homes contract for all or some of these goods and services. In many instances, they contract with companies that share common ownership or control with the nursing home, which are known as related parties. 42 C.F.R. 413.17. Federal law recognizes that if a nursing home obtains goods or services from a business that is a separate legal entity, but that entity is owned or controlled by some or all of the nursing home owners, they are essentially obtaining these goods and services from themselves. 42 C.F.R. 413.17(c)(2).[1]<\/a><\/p>\n \u00a0<\/p>\n It is common for nursing homes to use related-party companies for staffing, management of the facility, and lease agreements with a property company for the building and the land. Conducting business with related parties is legal and commonplace, but the practice creates the potential for significant fraud, waste, and abuse if unchecked. The risks created by related-party businesses include conflicts of interest and self-dealing by the owner. Also, the quality of care will suffer if funds intended for resident care are diverted to provide excessive profit to those with ownership and control. Studies document that related-party management companies and property companies are frequently involved in siphoning funds from nursing homes.[2]<\/a> According to a recent study by Andrew Olenski and Ashvin Gandhi, \u201c[e]ssentially, owners are moving money from their left pocket to their right, and then showing they have no money in their left pocket.\u201d[3]<\/a><\/p>\n \u00a0<\/p>\n Unscrupulous owners may cut back on hiring nurses and certified nurse aides\/assistants (CNAs) to have more funds to divert toward related-party businesses. A recent report found that the use of related parties in nursing homes results in less staff, more health deficiencies, and lower quality ratings as determined by CMS\u2019 Five-Star Quality Rating System.[4]<\/a><\/p>\n \u00a0<\/p>\n C. Transparency R<\/strong>equirements for Related-Party Transactions<\/strong><\/p>\n To account for the expenditure of state and federal funds, limit excess profit-taking, and assist CMS in establishing appropriate reimbursement rates, nursing homes are required to submit to CMS and the State annual cost reports detailing their finances and expenditures. 42 C.F.R. 413.20; N.J.A.C. 10:166-3.2.<\/p>\n \u00a0<\/p>\n Pursuant to federal requirements, nursing homes must identify all related party vendors. 42 C.F.R. 413.17 and CMS Provider Manual \u2013 Part 2, Ch. 30 \u00a7 3024. In addition, for each of these vendors, they must describe the nature of the services and list the actual expenses incurred by these related parties. 42 C.F.R. 413.17(c)(2) and CMS Provider Manual \u2013 Part 2, Ch. 30 \u00a7 3024. These costs are only allowable if they do not exceed the price of comparable services, facilities, or supplies that could be purchased elsewhere. 42 C.F.R. 413.17(a). Goods and services must be delivered at cost or fair market value, whichever is less \u2013 as if the nursing home had engaged in a true arm\u2019s-length negotiation with a third-party company. 42 C.F.R. 413.17(c). Any expense above that amount is considered unallowable and those costs must be adjusted on the cost reports. 42 C.F.R. 413.17(c)(2).<\/p>\n \u00a0<\/p>\n Like the federal requirements above, state regulations also provide that related-party costs must be less than, or equal to, the competitive price of comparable goods and services purchased elsewhere. N.J.A.C. 10:49A-2.1(e). This requires the nursing home to submit a substantive analysis for each related party demonstrating that the reported cost is equal to, or less than, fair market value. N.J.A.C. 10:49A-2.1(e). Nursing homes are required to maintain documentation and evidence to allow DHS to verify their compliance with nursing home patient care ratio requirements. N.J.A.C. 10:49A-3.4.<\/p>\n The Office of the State Comptroller (OSC), Medicaid Fraud Division conducted this investigation in accordance with the Medicaid Program Integrity and Protection Act, N.J.S.A. 30:4D-53 to -64. Among other things, OSC is responsible for the prevention, detection, and investigation of fraud and abuse and the recovery of improperly expended Medicaid funds.<\/p>\n \u00a0<\/p>\n OSC began this investigation after learning that the New York Office of the Attorney General Medicaid Fraud Control Unit (MFCU) filed a Petition alleging that Daryl Hagler (Hagler), Kenneth Rozenberg (Rozenberg), Centers for Care, LLC (Centers), and others, had defrauded the New York Medicaid program of approximately $83 million through four of their Medicaid-funded nursing homes. Hagler, Rozenberg, and Centers are also the owners\/operators of Deptford Center for Rehabilitation and Healthcare (Deptford) and Hammonton Center for Rehabilitation and Healthcare (Hammonton) in Gloucester and Atlantic Counties, respectively. OSC\u2019s investigation, which remains ongoing, focuses on the period January 1, 2019 to June 16, 2024.[5]<\/a><\/p>\n \u00a0<\/p>\n In connection with this investigation, OSC reviewed thousands of pages of documents, including staff timesheets and timecards, staff licenses and certifications, bank account records, tax returns, cost reports, vendor contracts, general ledgers, invoices, incorporation documents, and other financial information. OSC also reviewed property records, appraisals, mortgages, loans, promissory notes, police call logs, and other government records. OSC analyzed data collected by CMS, the Division of Medical Assistance and Health Services (DMAHS), and the Department of Health (DOH), and interviewed an accountant and representative of Hagler and Rozenberg. OSC issued subpoenas for testimony to Hagler and Rozenberg, but they declined to be interviewed, citing the right against self-incrimination under the Fifth Amendment to the United States Constitution.<\/p>\n OSC also consulted with and interviewed various stakeholders and experts regarding aspects of this investigation, including representatives from the Office of the Long-Term Care Ombudsman, DOH, DHS, and others.<\/p>\n A. Daryl Hagler and Kenneth Rozenberg<\/strong><\/p>\n Daryl Hagler and Kenneth Rozenberg are next door neighbors residing in Rockland County, New York. They have been friends for more than 30 years. They have collaborated on business deals for more than 25 years. They are heavily intertwined financially\u2014bank records show Hagler transferred over $108 million to Rozenberg and Rozenberg transferred over $17 million to Hagler during the timeframe of this investigation. Together, they either own or are involved with at least 46 nursing homes nationwide, including in New Jersey, New York, Kansas, and Missouri. Their largest presence in the nursing home industry is in New York, where they are involved with over 31 nursing homes.<\/p>\n \u00a0<\/p>\n As detailed below, members of Hagler\u2019s and Rozenberg\u2019s families are involved in the related entities that provide services to their nursing homes. Those individuals include: Rozenberg\u2019s wife, Beth Rozenberg; Rozenberg\u2019s daughter, Shoshana Rozenberg Areman; Rozenberg\u2019s son, Eli Rozenberg; Rozenberg\u2019s daughter-in-law, Elisabeth Farkas; and Hagler\u2019s son, Jonathan Hagler.<\/p>\n \u00a0<\/p>\n B. Hammonton Center<\/strong><\/p>\n Located in Atlantic County, Innova Atlantic WH Operations LLC a\/k\/a Hammonton Center for Rehabilitation and Healthcare (Hammonton) is DOH-certified to provide 240 nursing home beds. During the review period, on average, approximately 178 residents resided at the facility on a daily basis. The facility is primarily funded by Medicaid; on average, approximately 88 percent of its residents are Medicaid beneficiaries.<\/p>\n \u00a0<\/p>\n As with many nursing homes, the ownership of the nursing home is split\u2014an operating company handles operations and holds the nursing home license while a property company owns the property, land, and fixtures. Nursing home owners establish this arrangement to protect themselves from liability and, in some cases, to create related parties through which they can siphon funds. In this case, the operating company, Innova Atlantic WH Operations LLC, is majority-owned by Hagler (99 percent). The property company, Atlantic Health Land Holding Co. LLC, is owned by Rozenberg and M&J Klein Family Enterprises, LLC (KFE). Morris Klein, and now his son, Gedalia Klein, are the managing members of this family company. The other members are Rafael Klein, Elisheva Hacoen, Eliezer Klein, Joseph Klein, and Sarah Klein, all of whom hold a 10 percent share of M&J Klein Family Enterprises. The operating company pays rent to the property company monthly pursuant to a lease.<\/p>\n C. Deptford Center<\/strong><\/p>\n Innova Gloucester Deptford Bridge Operations LLC, aka Deptford Center for Rehabilitation and Healthcare (Deptford) is located in Gloucester County. Deptford is DOH-certified to provide 240 nursing home beds. Between January 1, 2019 and mid-2024, according to the census, an average of slightly more than 199 residents resided at the facility on a daily basis. Eighty-four percent of Deptford\u2019s residents are Medicaid beneficiaries, with Deptford receiving approximately $12.8 million annually.<\/p>\n \u00a0<\/p>\n Just as in Hammonton, the ownership of the operations and property are split. The operating company, Innova Gloucester Deptford Bridge Operations LLC, is majority-owned by Hagler. The property company, Gloucester Health Land Holding Co. LLC, is owned by Rozenberg and KFE. The operating company pays rent to the property company monthly pursuant to a lease.<\/p>\n \u00a0<\/p>\n In the facilities that Hagler and Rozenberg own and operate in New York, the ownership structure is flipped\u2014Rozenberg owns the operating companies and Hagler owns the property companies.<\/p>\n \u00a0<\/p>\n D. Centers for Care, LLC d\/b\/a Centers for Specialty Care<\/strong><\/p>\n Centers, which is jointly owned by Hagler and Rozenberg, is used to operate and control their many nursing homes and related-party businesses located in multiple states. Rozenberg is Centers\u2019 Chief Executive Officer. Hagler was the Chief Financial Officer until at least 2022. According to Hagler, Rozenberg is his supervisor.<\/p>\n \u00a0<\/p>\n Hagler\u2019s and Rozenberg\u2019s individual shares of ownership in Centers have fluctuated. During the five-and-a-half-year period of OSC\u2019s review, Centers was jointly owned by Hagler and Rozenberg until at least June 22, 2022, when Hagler was interviewed by the New York Attorney General\u2019s office in connection with the investigation into four of his New York nursing homes. Tax returns suggest he divested his ownership of Centers at some point after that. Their shares of ownership of Centers during the period under investigation are shown below.<\/p>\n \u00a0<\/p>\n Figure 1: Changes in Centers\u2019 Ownership Between 2019 and 2023<\/strong><\/p>\n \u00a0<\/p>\n Centers is located at 4770 White Plains Road, Bronx, New York. It holds itself out as \u201ca premier network of skilled nursing, rehabilitation, and senior care services with locations in New York and New Jersey.\u201d Centers reports having 37,000 employees. Centers provides services to most, if not all, of the nursing homes that Hagler and Rozenberg own and control.<\/p>\n \u00a0<\/p>\n In New Jersey, Hammonton\u2019s and Deptford\u2019s agreements with Centers state that Centers will provide services related to financial management, accounting, cost reports, bookkeeping, payroll, accounts payable, billing, accounts receivable, coordinating vendors and suppliers, and marketing. The agreements also state that Centers will provide a licensed administrator to assist each nursing home\u2019s licensed administrator, act as a liaison to Centers, and recruit necessary personnel. The agreements acknowledge common ownership between Centers and the nursing homes.<\/p>\n \u00a0<\/p>\n Together, Hammonton and Deptford paid Centers more than $27 million over the course of OSC\u2019s review ($14 million and $13 million respectively). Based on invoices provided to OSC, Centers appeared to charge the nursing homes a lump sum amount for fiscal, administrative, clinical, and marketing expenses, totaling $176,300 per month. Centers received the second largest sum of money paid to any vendor of the nursing homes. And, because the majority of the revenue for both facilities comes from Medicaid funds, these payments were primarily funded with Medicaid dollars.<\/p>\n \u00a0<\/p>\n As shown below, the agreements state that Centers intends to charge Hammonton and Deptford for services at \u201cactual cost,\u201d as would be required for services provided by a related party, and state that it is not the intention of Centers to profit from the provision of services.<\/p>\n \u00a0<\/p>\n Figure 2: Snapshot of Agreement with Centers<\/strong><\/p>\n Despite the contractual language pledging to provide services \u201cto the maximum extent possible\u201d at \u201cactual costs\u201d and not to profit from its contracts with its related-party nursing homes, tax documents show that Centers had sizeable ordinary business income (profits) from its many nursing homes, including $15.1 million, $18.9 million, and $41.5 million in profits in 2019, 2020, and 2021 respectively. Hagler and Rozenberg kept a large portion of those profits for themselves. In 2019, Hagler received over $6 million and Rozenberg received over $4.9 million from Centers. Similarly, in 2020, Hagler received over $7.8 million and Rozenberg received over $6.4 million from Centers. And, in 2021, the owner distributions to Hagler and Rozenberg were even higher, with each receiving $8.4 million that year.<\/p>\n \u00a0<\/p>\n E. Hagler’s and Rozenberg\u2019s Other Business Interests \/ Related Parties<\/strong><\/p>\n Hagler, Rozenberg, and their close relatives also have interests in numerous other businesses that provided goods or services to the nursing homes. OSC identified at least seven additional businesses owned by Hagler, Rozenberg, and family members or close associates that were paid to provide goods and services to Hammonton and Deptford. Centers handles the bookkeeping and accounting for most or all of these entities, while Hagler prepares the tax returns for many of the entities. These entities include:<\/p>\n \u00a0<\/p>\n \u00b7\u00a0 \u00a0 \u00a0 \u00a0BIS Funding Capital LLC<\/strong> (BIS), which is owned by Hagler and his son, Jonathan Hagler. BIS is registered at Hagler\u2019s personal residence. Hagler has described BIS as a \u201crepository\u201d for information technology (IT) leases with other vendors servicing Centers\u2019 nursing homes. According to Hagler, BIS contracts with external vendors for software and allocates the services to Centers\u2019 nursing homes.[6]<\/a> Although Hagler denied that BIS provides computer hardware, invoices state payments are for \u201cMajor Moveable Equipment\u201d and \u201cSoftware Rental\u201d or \u201cComputer Rental\u201d and provide no additional detail as to what equipment, software, or hardware was allegedly provided. Neither Hammonton nor Deptford has a written contract with BIS. BIS was not disclosed as a related party on cost reports submitted to the federal government from 2019 to 2022, except for 2022 (Deptford only). It was reported by both Hammonton and Deptford in 2023.<\/p>\n \u00a0<\/p>\n \u00b7\u00a0 \u00a0 \u00a0 \u00a0Skilled Staffing, LLC<\/strong>, which is owned by Shoshana Rozenberg Areman, Rozenberg\u2019s daughter, and Elisabeth Farkas, Rozenberg\u2019s daughter-in-law. The company, registered in New York, holds itself out on social media as an agency that provides contract nursing personnel. The phone number listed on Skilled Staffing\u2019s social media page is also associated with Regional Care Network (RCN), another staffing company, reportedly owned by Jared Dubin, a former Centers employee. Invoices indicate the company bills for direct care staff for the nursing homes, as well as \u201cQuarterly Management \/ Consulting\u201d from January 2020 to October 2021. Neither Hammonton nor Deptford has a written contract with Skilled Staffing. Skilled Staffing, LLC was not disclosed as a related party on cost reports submitted to the federal government from 2019 to 2023.<\/p>\n \u00a0<\/p>\n \u00b7\u00a0 \u00a0 \u00a0 \u00a0CFSC Downstate, LLC<\/strong>, which is owned by Rozenberg; Hagler; Rozenberg\u2019s daughter, Shoshona Rozenberg Areman; Hagler\u2019s son, Jonathan Hagler; Amir Abramchik (Abramchik), Centers\u2019 Chief Operating Officer; and Abramchik\u2019s wife, Deborah Abramchik. Abramchik operates CFSC Downstate. It appears to be a staffing company, also registered in New York. Invoices show bills are primarily for housekeeping, health insurance, and patient activities but occasionally for a minimum data set (MDS) coordinator, Director of Nursing (DON), or hourly finance staff. Neither Hammonton nor Deptford has a written contract with CFSC Downstate. CFSC Downstate was not disclosed on cost reports submitted to the federal government from 2019 to 2023.<\/p>\n \u00a0<\/p>\n \u00b7\u00a0 \u00a0 \u00a0 \u00a0 CFSC Maintenance<\/strong>, which is a New York company doing business as One70 Group.[7]<\/a> Hagler testified that One70 Group is owned by himself and Issac \u201cYitzy\u201d Laniado. CFSC Maintenance reportedly does construction and repair work for Centers\u2019 nursing homes, and Laniado operates the company. Invoices show payments for interior renovation work. Neither Hammonton nor Deptford has a written contract with CFSC Maintenance. CFSC Maintenance was not disclosed on cost reports submitted to the federal government from 2019 to 2023.<\/p>\n \u00a0<\/p>\n \u00b7\u00a0 \u00a0 \u00a0 \u00a0 Centers Lab NJ, LLC, d\/b\/a MedLabs Diagnostics<\/strong>, which is a wholly owned subsidiary of Centers Agency LLC, which was owned by Rozenberg and his wife, Beth Rozenberg, during the timeframe of this review. According to contracts with Hammonton and Deptford, Centers Lab NJ was contracted to provide medical diagnostic services to the nursing homes. Centers Lab was not disclosed on cost reports submitted to the federal government from 2019 to 2023.<\/p>\n \u00a0<\/p>\n \u00b7\u00a0 \u00a0 \u00a0 \u00a0Centers Business Office NJ LLC<\/strong>, which is located at the same address as Centers. According to its website, it offers full-service consultancy services to help nursing homes maximize profitability and efficiency. During the period of investigation, the following individuals have, or had, an ownership interest in this entity: Hagler; Rozenberg; Rozenberg\u2019s wife, Beth Rozenberg; Rozenberg\u2019s daughter, Shoshana Rozenberg Areman; and Rozenberg\u2019s son, Eli Rozenberg. Neither Hammonton nor Deptford has a written contract with Centers Business Office. Invoices provided by Centers Business Office indicate that this entity billed the nursing homes for worker compensation premiums, employee benefits, office contracted services, office supplies, rent and utilities, supplies, and services, wages, and benefits. Centers Business Office was not disclosed on cost reports submitted to the federal government from 2019 to 2023, except for Deptford\u2019s in 2022.<\/p>\n \u00a0<\/p>\n OSC finds that all of these entities are \u201crelated parties\u201d as defined by CMS. The test for related parties involves whether there is common ownership or control\u2014where control includes \u201cany kind of control, whether or not it is legally enforceable and however it is exercisable or exercised. It is the reality of the control which is decisive, not its form or the mode of its exercise.\u201d The entities shared common ownership or control with Hagler and\/or Rozenberg, either directly or through their ownership and control of Centers, or with the nursing homes themselves.[8]<\/a>\u00a0The exception is Skilled Staffing, reportedly owned by Rozenberg\u2019s daughter and daughter-in-law. That entity is also a related party pursuant to the CMS Provider Manual, which states that existence of an immediate family relationship, including parent, child, and daughter-in-law, creates an irrebuttable presumption of related party status. Centers for Medicare & Medicaid Services. CMS Provider Manual \u2013 Part 1, Ch. 10 \u00a7 1004.<\/p>\n \u00a0<\/p>\n The chart below represents Centers\u2019 relationship with its related parties and how much they received in Medicaid funding from New Jersey:[9]<\/a><\/p>\n \u00a0<\/p>\n Figure 3: Centers\u2019 Payment of $92 Million of Medicaid Funds to Related-Party Entities<\/strong><\/p>\n \u00a0<\/p>\n A. Hagler and Centers Chronically Understaffed the Nursing Homes.<\/strong><\/p>\n This investigation of the Hammonton and Deptford nursing homes revealed a persistent failure to meet New Jersey’s state-mandated staffing requirements, highlighting chronic understaffing issues that compromised resident care. Both facilities consistently fell short of the staffing ratios established by New Jersey\u2019s minimum staffing law, effective February 2021, which outlines specific staff-to-resident ratios for different shifts to ensure adequate care and supervision. In violation of that statute, Hammonton and Deptford operated with significant staffing shortages, undermining resident safety and well-being. Moreover, OSC’s investigation uncovered that the nursing homes used unlicensed and unqualified personnel, further exacerbating the harm caused by inadequate staffing and further jeopardizing the health and dignity of residents.<\/p>\n \u00a0<\/p>\n 1. \u00a0 \u00a0 Requirements of New Jersey\u2019s Staffing Laws<\/strong><\/p>\n New Jersey\u2019s minimum staffing law, N.J.S.A. 30:13-18 established the following minimum staffing ratios:<\/p>\n Additionally, nursing homes must have a DON, who must be an RN licensed in New Jersey and have at least two years of supervisory experience in a nursing home before working as DON. N.J.A.C. 8:39-25.1. Facilities with more than 150 beds must have an RN on duty \u201cat all times.\u201d N.J.A.C. 8:39-25.2(e). Both Hammonton and Deptford are licensed for 240 beds, which means that they must always have an RN on duty at all times.<\/p>\n \u00a0<\/p>\n 2. \u00a0 \u00a0 Hammonton Direct Care Staffing Analysis<\/strong><\/p>\n OSC reviewed Hammonton\u2019s direct care staffing based on a random sample of 82 days from February 1, 2021 to May 31, 2024. To complete this analysis, OSC issued a subpoena to Hammonton for, among other things, all timesheets during this timeframe for any and all direct care staff (full-time, part-time, and contracted).[10]<\/a> Hammonton unreasonably delayed providing responsive documents.[11]<\/a> In response to a preliminary draft of this report, and legal action by OSC, counsel produced hundreds of pages of additional documentation, including timecards for over 280 additional staff members that were not part of Hammonton\u2019s initial response to the subpoena.<\/p>\n \u00a0<\/p>\n During the 2021 to 2024 staffing investigative period, Hammonton\u2019s average census was 178, which means Hammonton was required to have a total of 53 direct care staff providing care to residents daily to comply with state law. On average, Hammonton should have had 22 CNAs during the day, 18 direct care staff during the evening shift, and 13 direct care staff on the overnight shift.<\/p>\n \u00a0<\/p>\n After taking into account the late-produced documentation, OSC found that Hammonton still failed to meet state minimum staffing requirements for every single day of the 82 sample days reviewed. On average, Hammonton should have had at least 53 direct care staff in total but had a shortage of nearly 28 direct care staff each day. This amounts to a daily deficiency rate of 52 percent. Also, for 46 days within the 82 sample days reviewed, Hammonton did not have an RN on duty, as required. According to CMS, there is substantial \u201cevidence of a relationship between nursing home staffing levels and resident outcomes,\u201d and \u201ca clear association between nurse staffing ratios and nursing home quality of care.\u201d[12]<\/a> Hammonton did not have nearly enough staff, failing to meet even half the minimum staff required, and thus provided poor quality care, day after day, for years. See Appendix A for a summary of the staffing violations.<\/p>\n \u00a0<\/p>\n Figure 4: Hammonton\u2019s Average Deficiency Rate per Shift<\/strong><\/p>\n \u00a0<\/p>\n 3. \u00a0 \u00a0 Deptford Direct Care Staffing Analysis<\/strong><\/p>\n OSC also reviewed Deptford\u2019s direct care staffing based on a random sample of 64 days.[13]<\/a> Again, OSC issued subpoenas for all timesheets for any and all direct care staff (full-time, part-time, and contracted) and followed up numerous times with counsel but did not receive any additional documentation until court involvement. In response to the report, and legal action by OSC, counsel produced hundreds of pages of additional documentation, including timecards for over 300 additional staff members that were not part of Deptford\u2019s initial response to the subpoena. During this period, Deptford\u2019s average census was 199, which means Deptford was required to have had a total of at least 59 direct care staff providing care to residents daily to comply with state law. On average, Deptford should have had at least 25 CNAs during the day, 20 direct care staff during the evening shift, and 14 direct care staff on the overnight shift.<\/p>\n \u00a0<\/p>\n OSC found that Deptford failed to meet state minimum staffing requirements for 62 of 64 days it reviewed. On average, Deptford should have had at least 59 direct care staff in total but had a shortage of nearly 32 direct care staff each day. This amounts to a deficiency rate of 54 percent. And, for 52 days within the 64 sample days reviewed, Deptford did not have an RN on duty, as required. Deptford provided dangerously low staffing. See Appendix A for a summary of the staffing violations.<\/p>\n \u00a0<\/p>\n Figure 5: Deptford\u2019s Average Deficiency Rate per Shift<\/strong><\/p>\n \u00a0<\/p>\n 4. \u00a0 \u00a0 Unlicensed\/Unqualified Staff\u00a0<\/strong><\/p>\n OSC\u2019s investigation not only found that Hagler and Centers chronically understaffed Hammonton and Deptford but also revealed that they utilized unlicensed and unqualified individuals to provide care to residents at both nursing homes.<\/p>\n \u00a0<\/p>\n As noted above, facilities with more than 150 beds must have an RN on duty \u201cat all times.\u201d N.J.A.C. 8:39-25.2(e). LPNs are not qualified to work as RNs and are prohibited from doing so by rules governing their scope of practice and by nursing home requirements. LPNs must work under the supervision of a physician or an RN, and tasks that must be performed by an RN cannot be delegated. N.J.A.C. 13:37-6.2 to -6.5; N.J.A.C. 8:39-25.1 to -25.2.<\/p>\n \u00a0<\/p>\n Nursing homes that participate in Medicaid are required to care for residents \u201cin such a manner and in such an environment as will promote maintenance or enhancement of the quality of life of each resident.<\/strong>\u201d[14]<\/a> To do so, nursing homes must provide services and activities that will \u201cattain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident in accordance with a written plan of care.\u201d[15]<\/a> Hammonton\u2019s and Deptford\u2019s consistent short-staffing led to poor quality care, as described in more detail below. This systemic and egregious understaffing harmed the health and well-being of the residents for which these facilities were entrusted by the Medicaid program to care.<\/p>\n \u00a0<\/p>\n 5.\u00a0 \u00a0 \u00a0Staffing Violations Overpayment<\/strong><\/p>\n Due to Hammonton\u2019s and Deptford\u2019s pervasive and egregious violations of staffing requirements intended to ensure a minimum standard of care for residents, N.J.S.A. 30:13-18, N.J.A.C. 10:49-9.8(a), and N.J.A.C. 10:49-5.5(a)(17), OSC found that Medicaid payments made to the facilities on days that did not meet these minimum standards were improper and must be recouped. Moreover, each facility falsely certified compliance with all laws and requirements to the Medicaid program, despite failing to adequately staff its operations for almost every day in OSC\u2019s sample and receiving full Medicaid payment for those days.<\/p>\n \u00a0<\/p>\n OSC will seek to recover the extrapolated overpayment for the facilities’ failure to meet staffing requirements. Because direct care staffing is so essential to the basic daily care that nursing home residents need, OSC will not provide partial credit for any other elements of care. Even if the facility did provide residents with food or beds on those days, without direct care to answer call bells or assist residents with eating, dressing, bathing, going to the bathroom, or getting out of bed\u2014activities of daily living that direct care staff provide\u2014the facility has so completely failed to provide the minimum standards of care and dignity that it must not receive Medicaid funds for those days. The nursing homes were required to provide one thing\u2014a quality home that provides basic standards of care and dignity\u2014and they were paid for that accordingly, but instead, they provided something entirely different, enriching themselves in the process. Thus, using extrapolation, a statistical method to estimate overpayments based on sampled data, OSC calculated that during the timeframe of this analysis, Hammonton was overpaid at least $42,089,243[16]<\/a> in Medicaid funds that it must return to the Medicaid program, and Deptford was overpaid at least $44,163,302[17]<\/a> in Medicaid funds that it must return to the Medicaid program.<\/p>\n \u00a0<\/p>\n Additionally, due to Hammonton\u2019s and Deptford\u2019s serious violations of N.J.A.C. 8:39-25.2(e), in which each facility failed to have an RN on duty for more than half of the days sampled, OSC determined, in accordance with N.J.S.A. 30:4D-7(h), N.J.S.A. 30:4D-17(e), N.J.S.A. 30:4D-57(d)(2), and N.J.A.C. 19:70-4.4, that Hammonton should be subject to a civil penalty of $460,000 calculated at $10,000 per day for 46 days. Similarly, OSC is imposing a civil penalty of $520,000 on Deptford for the same violation, calculated at $10,000 per day for 52 days.<\/p>\n \u00a0<\/p>\n In total, including the overpayment and penalty, OSC is seeking to recover $42,089,243 for staffing deficiencies at Hammonton and $44,163,302 for staffing deficiencies at Deptford, as well as a $980,000 penalty. In total, OSC finds that Hammonton and Deptford must repay $87,232,545 for their pervasive and egregious staffing violations.<\/p>\n \u00a0<\/p>\n 6. \u00a0 \u00a0 Response to OSC Findings\u00a0<\/strong><\/p>\n In their response to a draft of this report detailing OSC\u2019s preliminary findings, counsel argued that OSC\u2019s sampling was not random. Counsel contended that MFD\u2019s selected days were \u201cnot a random, representative sample and thus are not a proper basis for extrapolation.\u201d They speculated \u201cwhether different days . . . tell a different story.\u201d OSC stands by its statistically valid random sample. Specifically, OSC selected two statistical samples, one for each facility. When a proper statistical sample is selected, as it was in this case, those samples will be representative of their respective universes. OSC further ensures its statistical samples are representative for purposes of the target variable by performing t-tests on the means, f-tests on the standard deviations, and calculating confidence intervals. Although OSC provided the sampling and extrapolation information to counsel for verification, counsel has not provided OSC with a challenge by any competent or qualified personnel (i.e., a statistician).<\/p>\n \u00a0<\/p>\n In response to the report, counsel also argued that the minimum staffing statute is unconstitutional and was impossible to comply with due to the lack of available direct care staff. The Legislature was aware of the impact of short-staffing on resident care in nursing homes; it established these requirements so that residents would not continue to be subject to the harms caused by inadequate staffing. The statute is presumed constitutional unless and until a court holds otherwise. In their response, counsel fails to cite to any steps the nursing homes took to increase staffing levels by addressing poor wages and benefits or staff burnout and exhaustion. They argue that the staffing levels in Hammonton and Deptford were the same or similar to the rest of the nursing homes in New Jersey. But that is not true. As shown in the chart below, based on self-reported staffing data that CMS uses to derive staffing-specific star ratings, both facilities self-reported<\/strong> that they were below the New Jersey average for almost the entire review period.<\/p>\n \u00a0<\/p>\n Figure 6: Staffing Star Rating by Year<\/strong><\/p>\n \u00a0<\/p>\n Additionally, in their response to OSC\u2019s staffing analysis, counsel claimed that OSC miscalculated the number of days that the nursing homes did not have an RN. Between 2021 and 2023, Hammonton and Deptford improperly used LPNs, a lower-level qualification than an RN, to work out of scope as RNs. Hammonton improperly used LPNs to work as RNs on 66 days out of the 82-day sample. Deptford used LPNs to work as RNs on 60 days out of the 64-day sample. The nursing homes failed to provide an RN for between 1 to 18 hours a day, not mere minutes as counsel claimed.<\/p>\n \u00a0<\/p>\n B. Hagler, Rozenberg, and Centers Provided Poor-Quality Care that Caused Resident Suffering in Hammonton and Deptford.<\/strong><\/p>\n Alarming quality of care issues at Hammonton and Deptford are directly linked to the chronic staffing deficiencies at the nursing homes. The lack of adequate staff resulted in widespread neglect, preventable suffering, and tragic outcomes for residents, who experienced delays in care, improper administration of medications, and unsanitary living conditions, severely impacting their health and overall well-being.<\/p>\n To assess the quality of care, OSC reviewed various quality trackers such as CMS Star ratings, health and complaint inspections by DOH, and facility-maintained staffing information. The investigation also uncovered distressing patterns of neglect through analyses of 911 calls, volunteer reports, and news articles, highlighting a pervasive failure to meet basic care, safety, and resident dignity standards. These findings vividly illustrate how insufficient staffing directly contributed to the unacceptable conditions and outcomes experienced by residents, which underscores why it is so important for facilities to meet the state\u2019s minimum staffing requirements.<\/p>\n 1. \u00a0 \u00a0 CMS Star Ratings<\/strong><\/p>\n Between January 2019 and June 2024, Deptford had an average overall star rating of 1.5. During this same period, Hammonton averaged an overall star rating of 1.8. The state average was 3.4 stars.<\/p>\n \u00a0<\/p>\n One star is the worst rating that a nursing home can receive based on CMS\u2019s five-star rating system. Nursing homes that consistently receive one-star ratings mean they regularly and systematically have more widespread, serious, and uncorrected deficiencies than nursing homes with higher star ratings. According to CMS, \u201cnursing homes with 1 star are considered to have quality much below average.\u201d<\/p>\n \u00a0<\/p>\n 2. \u00a0 \u00a0 Special Focus Facility<\/strong><\/p>\n In addition to consistently receiving 1 and 2 stars in their CMS ratings, both Hammonton and Deptford were selected as Special Focus Facility (SFF) candidates multiple times during the review period. CMS launched the SFF Program in 1998 to identify and decrease the number of \u201cpersistently poorly performing nursing homes.\u201d Each month, CMS identifies nursing homes in every state that are considered the most troubled and problematic and designates them as \u201cSFF candidates.\u201d Nursing homes that are selected as SFFs are subject to increased scrutiny and attention, including more frequent health inspections (every 6 months instead of every 12 to 15 months) and progressive enforcement actions until the nursing home either graduates or is terminated from the Medicaid\/Medicare Programs.<\/p>\n \u00a0<\/p>\n During the review period, both Hammonton and Deptford were selected as SFF candidates more than once. Deptford was an SFF candidate from July 2022 through the end of September 2022, and then again from January 2023 through the end of September 2023. Hammonton was designated as an SFF candidate in May 2023, again from September 2023 through the end of June 2024, and then again in October 2024. OSC found that Hammonton and Deptford provided substandard quality of care to their residents not just during the months the nursing homes spent as SFF candidates but during OSC\u2019s entire review period.<\/p>\n \u00a0<\/p>\n 3. \u00a0 \u00a0 Surveys and Inspections<\/strong><\/p>\n As part of this investigation, OSC reviewed DOH health inspection surveys of Hammonton and Deptford. The surveys revealed troubling and persistent findings, including lack of staff, lack of appropriate documentation, and failure to administer appropriate medications and treatment. These failures violated legal requirements and severely jeopardized the health and well-being of the residents, in some instances leading to fatalities. Examples of some of the most egregious DOH survey findings are included below.<\/p>\n \u00a0<\/p>\n Hammonton Surveys<\/strong><\/p>\n Deptford Surveys<\/strong><\/p>\n In their response, counsel alleges that OSC\u2019s presentation of the information documented in DOH\u2019s surveys is \u201cinappropriate, misleading, and should be removed.\u201d OSC stands by the summary of DOH findings contained in this report.<\/p>\n \u00a0<\/p>\n 4. \u00a0 \u00a0 911 Calls from the Nursing Homes<\/strong><\/p>\n OSC also reviewed police call logs and found that Hammonton and Deptford residents and their loved ones made an alarming number of calls for assistance to local law enforcement.[19]<\/a> During OSC\u2019s review period, records show there were more than 2,400 calls placed to Deptford Police relating to the Deptford facility. Call after call documented pleas of assistance from residents experiencing severe neglect. Examples include a resident left sitting in their own urine and feces for hours, call bells disregarded, and pleas for assistance from nurses and staff that were ignored. One resident reported they had a broken catheter that had fallen out a few days prior, but there was no nurse on staff to fix the issue. Another incident report, presumably from the facility itself, noted that a \u201cresident is missing\u201d and \u201chasn\u2019t been there all day.\u201d The report was made at 1:39 PM, despite the resident not having been at the facility \u201call day.\u201d The resident was not reported as returned until 8:03 PM.<\/p>\n \u00a0<\/p>\n For Hammonton, the police logs also portray a facility in distress. During the review period, there were approximately 1,000 calls made to Hammonton Police. Just as with Deptford, these calls document instances of neglect, non-responsive staff, and unanswered calls for help. In September 2019, a resident repeatedly called 911 for an ambulance due to a swollen tongue, but facility staff continually canceled the resident\u2019s ambulance requests. A police officer drove to the facility to check on the resident and personally called an ambulance. In February 2020, after numerous calls from a resident complaining that no staff had changed them for hours, police intervened, finding the resident still lying in feces. A third party called 911 on behalf of one resident with dementia, who was left immobile with a broken back and received no response from staff when they requested assistance. Another resident reported \u201cbeing fed dog food or not being fed at all.\u201d In June 2023, police responded to the facility after a family member called to report their loved one had chest pains and nursing home staff were not addressing it after 40 minutes. Police found there were only 4 nurses and 12 CNAs for all of the 260 residents, with a police officer noting that \u201cwhile in the building, I was unable to locate a nurse and could hear screaming from more than one patient requesting\u201d assistance.<\/p>\n \u00a0<\/p>\n 5. \u00a0 \u00a0 Deptford Volunteer Report and Hammonton News Report<\/strong><\/p>\n OSC also interviewed a volunteer at Deptford who started visiting the nursing home on a weekly basis beginning prior to the COVID-19 pandemic. The volunteer, who was not affiliated with the State, reported to OSC that residents at Deptford were not receiving the respect and attention that they deserved. The volunteer conveyed that the nursing home was disgusting, with dirty floors and bathrooms, uncomfortable room temperatures (too hot and too cold), and an overall lack of sanitation. The volunteer also observed that the staff does not check on the residents\u2019 basic needs, noting that residents are often left hungry and thirsty, not cared for, hygiene not maintained, and staff response is slow.<\/p>\n \u00a0<\/p>\n The volunteer observed abuse and neglect of Deptford\u2019s residents, and provided OSC with the following pictures to corroborate these observations:<\/p>\n \u00a0<\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The toenails of two residents were left so overgrown that the volunteer confronted staff to have this addressed. Staff advised that a podiatrist comes only once a month to service all of the facility\u2019s residents.<\/p>\n \u00a0<\/p>\n Figure 7: Photographs of Residents\u2019 Overgrown Toenails<\/strong><\/p>\n Figure 8: Photograph of Severed Call Bell Cord<\/strong><\/p>\n Figure 9: Photograph of Resident\u2019s Fallen Meal Tray and Dirty Diapers<\/strong><\/p>\n Figure 10: Photographs of Dirty, Used Diapers on the Ground in Resident\u2019s Room<\/strong><\/p>\n Figure 11: Photograph of Meal Tossed on Resident\u2019s Floor<\/strong><\/p>\n Figure 12: Photograph of Flies<\/strong><\/p>\n Figure 13: Photograph of Feces in Resident\u2019s Hand<\/strong><\/p>\n In addition to the volunteer\u2019s report to OSC about Deptford, an in-depth May 2024 news article described similar findings and circumstances in Hammonton.[20]<\/a> An excerpt from the article is below, in which a daughter describes what she encountered when visiting her 72-year-old mother at the Hammonton facility:<\/p>\n \u00a0<\/p>\n Her stay at the Hammonton Center was marked with red flags, according to her family: An improperly placed catheter. The wrong antibiotics. Long spells where she couldn\u2019t reach her water cup or food, resulting in dehydration. Ignored lab results. Empty hallways devoid of staff members. A burst pipe spraying water onto another patient.<\/p>\n \u00a0<\/p>\n \u2018You could see her decline every time we visited her,\u2019 said her daughter\u2026 recalling her mom\u2019s time at Hammonton. \u2018Understaffed is an understatement. I\u2019d watch her sit in the hallway with no one attending to her. It was shocking the condition she was in after being in their care such a short period of time. She never came back to the way she was the day she walked in that place.\u2019<\/p>\n \u00a0<\/p>\n The last straw, [she] said, was a six-hour delay in sending [her mother], who had acute kidney failure, to the emergency room.<\/p>\n \u00a0<\/p>\n The article also describes other harrowing conditions experienced by residents at Hammonton, including patients left unattended for extended periods, severe understaffing that led to inadequate care, critical medications administered incorrectly or not at all, and unsanitary conditions such as residents sitting in their own bodily fluids for hours.<\/p>\n \u00a0<\/p>\n The facts contained in the volunteer\u2019s report and news article were not independently verified by OSC, but the reporting and pictures are consistent with OSC\u2019s findings from its review of survey reports, quality metrics, staffing records, and police reports for both Hammonton and Deptford \u2013 these facilities provided such consistently substandard quality care to their residents that they harmed their health and overall well-being and deprived them of dignity. Despite legal mandates designed to ensure the highest practicable physical, mental, and psychosocial well-being of nursing home residents, both facilities consistently failed to meet these standards. The documented deficiencies in staffing, medication administration, and basic resident care, led to severe neglect, preventable suffering, and tragic fatalities.<\/p>\n \u00a0<\/p>\n C. Inflated Rent Payments and Related Party Siphoning Were Drivers of Insufficient Staffing and Poor Quality Care.<\/strong><\/p>\n This investigation also revealed that Hagler, Rozenberg, and KFE prioritized their own financial gain over the welfare of residents. They redirected funds meant for staffing and resident care into overleveraged and inflated real estate transactions and related-party expenses, which significantly increased costs and left the facilities severely understaffed and unable to provide adequate care. Hagler, Rozenberg, and KFE, the related-party property owners, personally profited from these practices by diverting funds to themselves that were then taken as distributions. This diversion of Medicaid funds toward property company profits (and other unreasonable related-party profits) deprived the facilities of funds and left both Hammonton and Deptford unable to meet the minimum staffing requirements or standards of care, which harmed their residents.<\/p>\n \u00a0<\/p>\n 1. \u00a0 \u00a0 Excessive $58.2 Million Mortgage in 2014 Bundled Three Nursing Homes Together and Drove Up Costs<\/strong><\/p>\n As discussed above, ownership of the operations and the property for the Hammonton and Deptford nursing homes was split between different companies\u2014Hagler owned the operations, while Rozenberg and KFE owned the properties.<\/p>\n \u00a0<\/p>\n The 2014 Mortgage<\/strong><\/p>\n In 2014, Hagler and Rozenberg purchased Hammonton and Deptford, along with Mount Laurel Center for Rehabilitation and Healthcare (Mount Laurel). Hagler and Rozenberg agreed to pay $48.2 million for the operations of the three nursing homes and $20.6 million for the three property companies. The total price for the three nursing home operations and properties combined was $68.8 million (30 percent attributable to the acquisition of the properties, 70 percent attributable to the acquisition of the operating companies). Under the parties\u2019 agreement, the purchase required only a 1.5 percent deposit of the purchase price.<\/p>\n \u00a0<\/p>\n Figure 14: 2014 Purchase Price Breakdown for Three Nursing Homes<\/strong><\/p>\n \u00a0<\/p>\n They financed these purchases with a $58.2 million mortgage from M&T Bank and a $10 million seller-financed promissory note.[21]<\/a> Rozenberg also obtained a separate $8 million construction loan for all three properties. Both Hagler and Rozenberg personally guaranteed the $58.2 million mortgage, which was secured by the three properties, as well as the operations for the three nursing homes.<\/p>\n \u00a0<\/p>\n By bundling the acquisition of the operations and properties into a single mortgage, Rozenberg obtained a much higher mortgage of $58.2 million, far exceeding the $20.6 million purchase price for the three properties alone. Rozenberg used the mortgage to finance his and Hagler\u2019s significant acquisition costs for the three nursing home operations ($48.2 million)\u2014and then passed on these costs to the nursing homes and the Medicaid program as \u201crent\u201d for the properties.<\/p>\n \u00a0<\/p>\n The 2014 Promissory Notes<\/strong><\/p>\n Around the same time, in November 2014, Hagler and Rozenberg also caused the nursing homes to enter into two $15 million promissory notes, further burdening the operating companies with excessive and unnecessary related-party debt. The promissory notes state that they were issued to finance the purchase of the operating companies. There is no evidence that the $15 million principal ever changed hands, though the notes required the operating companies to pay the property companies annual interest of $451,000 each, with a balloon payment of the principal due at the end of the 20-year term, totaling $24 million per note, or $48 million in total. These promissory notes were duplicative and unnecessary because Rozenberg, through the property companies, had already secured a loan from M&T Bank for the full value of the operating and property companies, and as described more fully below, the costs of those loans were already being passed through to the nursing homes as \u201crent.\u201d One document stated that the notes were merely created for \u201caccounting purposes when the borrower acquired the property,\u201d and yet, the nursing homes were charged interest on the notes for years, and the $15 million balloon payment for each nursing home, a total of $30 million, is still due at the end of the term.<\/p>\n The 2014 Triple Net Leases<\/strong><\/p>\n In connection with the $58.2 million mortgage, Hagler then entered the operating companies into triple net lease agreements[22]<\/a> with Rozenberg\u2019s property companies, with each nursing home paying the property companies base rent of $1.1 million annually.[23]<\/a> The base rent as reflected in the lease agreements did not include any other costs or expenses associated with the property; the operating companies were responsible for paying all expenses associated with the property separately, including insurance, maintenance, and taxes as \u201cadditional rent.\u201d<\/p>\n \u00a0<\/p>\n But the $1.1 million base rent was already inflated because it was based on a mortgage that included the acquisition costs of the properties and operating companies. See Figure 14 above. And on top of this, the property companies also charged the nursing homes the interest from the unnecessary promissory notes, as well as millions more in \u201cadditional rent\u201d annually per facility, driving rent costs as high as $5.9 million per year.<\/p>\n \u00a0<\/p>\n Cost reports submitted by the facilities from 2014 to 2017, show that these \u201cadditional rent\u201d payments vastly exceeded base rent, adding millions more to the cost. Hammonton\u2019s and Deptford\u2019s \u201cBuilding and Fixtures\u201d costs were reported as shown below.<\/p>\n \u00a0<\/p>\n Figure 15: Excessive and Duplicative \u201cAdditional Rent\u201d Charges (2014 – 2017)<\/strong><\/p>\n Loading…<\/p>\n This excessive and unnecessary debt led to exorbitant and wasteful \u201crent\u201d payments paid primarily with Medicaid funds, diverting millions of dollars that could have been used to hire additional staff, pay existing staff higher wages, upgrade the facilities, or offer additional therapies or activities to residents.<\/p>\n \u00a0<\/p>\n 2. \u00a0 \u00a0 HUD Re-Financing in 2017 Drives Up Costs Even More, While Gaining Federal Protection against Default<\/strong><\/p>\n The 2017 HUD-Backed Mortgages<\/strong><\/p>\n Just a few years later, in 2017, Rozenberg and KFE refinanced the bundled mortgage for three nursing homes, this time entering into individual loans for Hammonton and Deptford, each one backed by the Federal Housing Administration of the United States Department of Housing and Urban Development (HUD) through its Section 232 program, which focuses on healthcare facilities. This was done at or around the same time that CMS terminated the provider agreement for the Mount Laurel nursing home in June 2017 due to poor conditions and failure to improve after multiple inspections.[24]<\/a><\/p>\n \u00a0<\/p>\n By refinancing with a HUD-backed loan, Rozenberg and KFE gained federal protection from default.[25]<\/a> Rozenberg obtained a $31.4 million mortgage for Deptford and a $31.8 million mortgage for Hammonton, for a combined $63.2 million in mortgage debt. (The 2014 purchase price, when they purchased all three facilities<\/strong> (real estate and operations), was approximately $68.8 million, and when they refinanced in 2017, just two<\/strong> of the nursing homes (real estate and operations) were valued at over $63 million.) The value of the operating companies was again wrapped into the mortgages, as were an $8 million construction loan and $10 million seller-financed promissory note, loading the properties up with millions and millions of dollars in additional debt.[26]<\/a>, The $15 million promissory notes that were entered into in 2014 for the purchase of the operating companies also remained in effect, requiring Hammonton and Deptford to each pay $451,000 a year in interest, on top of the rent.<\/p>\n The appraisals conducted in connection with the 2017 refinancing did not separately value the costs of the operations and property\u2014but the additional costs associated with the refinancing (e.g., the construction loan and seller-financed note) appear to be primarily related to the properties. Thus, with the refinancing, it appears that the ratio of property- to operations-related costs was split as follows:<\/p>\n \u00a0<\/p>\n Figure 16: Breakdown of Property- and Operations-Related Mortgage Costs<\/strong><\/p>\n \u00a0<\/p>\n Note: Operations costs are evidenced by the 2014 promissory note, and property costs include half of the remaining balance on the seller finance note and construction loan.<\/p>\n \u00a0<\/p>\n The 2017 Triple Net Leases<\/strong><\/p>\n As a result of the refinancing, the two facilities entered new triple net leases with their related-party property companies in which they agreed to double their base rent payments from $1.1 million each to $2.2 million for Hammonton and $2.3 million for Deptford per year.[28]<\/a> HUD specifically required that \u201c[t]he minimum annual lease payment must be at least 1.05 times the sum of the annual principal, interest, mortgage insurance premium, reserve for replacement deposit, property insurance, and property taxes.\u201d Based on this requirement, the underwriter estimated that the minimum annual lease payment should therefore be $2,230,271 for Hammonton and $2,308,145 for Deptford. Those were the amounts that would satisfy the amount needed to repay the HUD-backed loan.<\/p>\n \u00a0<\/p>\n In addition to the now-doubled base rent obligation for each facility, both facilities were again required to pay to the related-party property companies the costs for insurance, taxes, and reserves for each facility. Based on the underwriter\u2019s estimate, those amounts should have been included within the approximately $2.2 million and $2.3 million base rent obligations. Indeed, that is roughly what the property companies paid the bank each year to cover the mortgage principal, interest, insurance, taxes, and reserves. But bank records show that in addition to this, the property companies also tacked on $575,000 to $10.4 million in duplicative \u201cadditional rent\u201d charges per year. Those additional payments totaled more than $31.4 million over the review period, only a portion of which was used to pay insurance, taxes, or reserves. They were used primarily as a vehicle to divert approximately $27.8 million in profits to Rozenberg and KFE.<\/p>\n \u00a0<\/p>\n The table below sets forth rent payments from January 1, 2019, through June 16, 2024, the day before a Receiver was appointed.[29]<\/a> The base rent in the lease agreements was set at an amount high enough to cover most, if not all, of the debt service,[30]<\/a> including not only the principal and interest but also the cost of taxes and insurance. Appendix B includes additional detail related to these costs.<\/p>\n \u00a0<\/p>\n Figure 17: Over $31.6M in \u201cAdditional Rent\u201d Payments on Top of Mortgage Costs* (January 1, 2019 \u2013 June 16, 2024)<\/strong><\/p>\n \u00a0<\/p>\n * According to underwriter\u2019s estimates, minimum rent would have been enough to cover mortgage principal, interest, insurance, taxes, and reserves.<\/p>\n \u00a0<\/p>\n ** For 2024, the total rent paid includes only six months of payments, so the base rent amounts have been prorated.<\/p>\n \u00a0<\/p>\n 3. \u00a0 \u00a0 Improper Reporting of Approximately $7.8 Million of Operating Company Acquisition Costs as Property-Related Expenses<\/strong><\/p>\n Between January 1, 2019, and June 16, 2024, OSC identified significant financial discrepancies in the reporting practices of Hammonton and Deptford concerning buildings and fixtures costs. Specifically, as shown in Figure 17 above, the nursing homes paid \u201crent\u201d to cover the costs of a mortgage that included the owners\u2019 acquisition of the operating companies. By reporting this as a \u201cbuilding and fixture\u201d cost, they misrepresented these operating company expenses as though they were legitimate property-related costs.<\/p>\n \u00a0<\/p>\n During the timeframe of this investigation, Deptford\u2019s property company paid a total of $8.1 million in principal and interest (P&I) to M&T Bank against the $31.4 million mortgage. As noted above, this mortgage covered the acquisition costs of both the operating and property companies. However, only a portion of these payments related to actual property expenses. The operating company, valued at $15 million per the 2014 promissory note, accounted for approximately 48 percent of the total mortgage, equating to roughly $3.9 million of the principal and interest payments made during this timeframe ($8.1M \u00d7 48% = $3.9M).[31]<\/a><\/p>\n \u00a0<\/p>\n Hammonton similarly misreported operating company expenses as property company expenses. With a $31.8 million mortgage, 47 percent was attributable to the purchase of Hammonton\u2019s operating company (also valued at $15 million per the 2014 promissory note). See Figure 16. During the timeframe, Hammonton paid $8.2 million to M&T Bank for P&I, with $3.9 million of these payments attributable to the operating company acquisition ($8.2M * 47% = $3.9M).<\/p>\n \u00a0<\/p>\n This misuse of Medicaid funds\u2014totaling $7.8 million\u2014constitutes fraud and abuse that was made possible when related-party owners misrepresented their business acquisition costs as legitimate property expenses on federal cost reports. N.J.S.A. 30:4D-57d(2) and (3). The cost of acquiring a nursing homes\u2019 operations company (e.g., the company holding its license, contracts, or receivables) is not a property-related cost, nor is it an allowable cost. According to CMS, reimbursable costs must be reasonable and directly related to resident care.[32]<\/a> Costs should reflect what a prudent, cost-conscious buyer would pay, and \u201cin the absence of clear evidence that the higher costs were unavoidable, the excess costs are not reimbursable under the program.\u201d CMS Provider Manual \u2013 Part I, Ch. 21, \u00a7 2102.1. Here, the nursing homes (and, by extension, the Medicaid program) were required by Hagler and Rozenberg to pay costs that vastly exceeded what a reasonable prudent purchaser would pay. A landlord, particularly a related party one, should not be permitted to load up a property with unnecessary and unrelated debt and pass it off to the government as \u201crent\u201d or an allowable property expense.<\/p>\n \u00a0<\/p>\n The misclassification of these payments as \u201cbuildings and fixtures\u201d in federal cost reports undermines the integrity of the Medicaid program and Medicaid funding. It is imperative that nursing homes accurately report expenses, ensuring that they are both reasonable and directly related to resident care. By disguising operating company acquisition costs as allowable property expenses, Hammonton and Deptford improperly obtained and utilized Medicaid funds, thereby violating federal \u201creasonable cost\u201d guidelines, cost reporting requirements, and state Medicaid documentation requirements that obligate providers to fully and accurately document services provided.<\/p>\n \u00a0<\/p>\n In their response, Hagler and Rozenberg, through counsel, argue that obtaining a loan and mortgage that covers operating and property costs is common in the nursing home industry. They contend that HUD approved the mortgage and was aware that the mortgage was in part used to pay to acquire the business. Their argument is in essence that they can take out a business loan of nearly any amount, secure it through a mortgage on a nursing home property, call all mortgage payments \u201crent,\u201d and thereby avoid paying anything for the nursing home company. These practices are a wasteful and abusive use of public funds. No state or federal law authorizes business loans to be disguised as rent. The actual cost related to the acquisition of the property is far below the full cost of the mortgage. That HUD approved the mortgage under a program that funds more than Medicaid-funded nursing homes, does not mean that all payments under the mortgage are permissible under Medicaid.<\/p>\n \u00a0<\/p>\n Accordingly, during the timeframe of this review, approximately $7.8 million<\/strong> of Medicaid funds paid toward business acquisition costs was improperly spent and should be repaid.<\/p>\n \u00a0<\/p>\n 4. \u00a0 \u00a0 Rozenberg and KFE Diverted Over $27 Million to Themselves through Illegitimate \u201cAdditional Rent\u201d Payments<\/strong><\/p>\n This investigation also found Hammonton\u2019s and Deptford\u2019s property companies diverted approximately $27.8 million in inflated \u201cadditional rent\u201d payments to Rozenberg and KFE, exploiting related-party transactions to establish unauthorized profit centers and compromising funds meant for resident care. As noted above, bank records show that during the review period, Hammonton paid its property company approximately $26.9 million in total rent payments. See Figure 17. In that same period, the property company paid approximately $12.7 million to M&T Bank and $13.4 million to Rozenberg and KFE ($5.8 million and $7.6 million, respectively). Similarly, Deptford paid its property company approximately $29.3 million in total rent and the property company paid approximately $14.1 million to M&T Bank and $14.4 million to Rozenberg and KFE ($6 million and $8.4 million, respectively). Combined, Rozenberg and KFE received approximately $27.8 million from the property companies.<\/p>\n \u00a0<\/p>\n Figure 18: \u201cAdditional Rent\u201d Diverted to Rozenberg and KFE<\/strong><\/p>\n \u00a0<\/p>\n This shows that the \u201cadditional rent\u201d payments charged to the nursing home were not used to pay for taxes, impositions, maintenance, or the like\u2014those amounts were already covered by the base rent payments. Most of the additional rent was actually used to pay profits to the property companies\u2019 owners, Rozenberg and KFE. These exponentially inflated payments to the related-party property companies were the primary means through which Rozenberg and KFE fraudulently and wastefully extracted millions for themselves, improperly diverting funds away from resident care. CMS has specifically stated that related-party transactions are not intended to be used as a means to create additional profit centers for owners. Here, not only were the costs charged to the nursing home well in excess of the property companies\u2019 actual costs, but the operating companies fraudulently reported these \u201cprofits\u201d as though they were allowable property related costs. OSC will seek to recover this $27.8 million in improperly spent Medicaid funds.<\/p>\n \u00a0<\/p>\n D. Hagler, Rozenberg, and Centers Knowingly Falsified Cost Reports to the State and Federal Government by Omitting Related-Party Transactions.<\/strong><\/p>\n State and federal law require nursing home owners to submit annual \u201ccost reports\u201d that detail the nursing home\u2019s costs in various areas, including property costs, staffing, and management services. As part of these cost reports, nursing homes are required to disclose all payments to related parties. CMS has explained that the rationale for this requirement is twofold: \u201c(1) to avoid the payment of a profit factor to the provider through the related organization (whether related by common ownership or control), and (2) to avoid payment of artificially inflated costs which may be generated from less than arm\u2019s-length bargaining.\u201d[33]<\/a> That is, these disclosures are meant to prevent such owners, who are both demanding the payment and writing the check to themselves, from inflating their costs and using public funds for their own personal profit, at the expense of resident care.<\/p>\n \u00a0<\/p>\n For cost report purposes, nursing homes are required to disclose \u201callowable\u201d related-party costs. Allowable related-party payments are those that are for goods\/services provided at documented cost or the documented fair market value of such good\/service.[34]<\/a><\/p>\n \u00a0<\/p>\n State cost reports include a certification that the report is true and correct that must be signed by an authorized representative of the facility. Federal cost reports similarly require nursing homes to certify that the information on the report is correct and that they have complied with all applicable rules and regulations. The federal cost report signature page includes the certification, which must be signed by a nursing home officer, warning that any misrepresentation on the cost reports is punishable by fine and\/or imprisonment. The person signing the cost report on behalf of the nursing home must certify that the signer has read the certification, has examined the report, and to the best of his or her knowledge, the cost report is true, correct, complete, and that it was prepared from the nursing home\u2019s books and records. 42 C.F.R. 413.24(f)(4)(iv)(B). OSC reviewed all federal cost reports for 2019 to 2023, and all state cost reports for 2022 to 2023.<\/p>\n \u00a0<\/p>\n Figure 19: Excerpt from 2022 Deptford Cost Report Preparer Page, Signed by Daryl Hagler<\/strong><\/p>\n Despite the disclosure and accuracy requirements above, OSC found that Hammonton and Deptford failed to identify at least eight related-party companies they used to provide staffing, management, administrative, property rental, and other services on their state and federal cost reports.[35]<\/a> They inconsistently disclosed two related parties, BIS Funding Capital LLC and Centers Business Office LLC. The related parties that Hagler and Rozenberg failed to disclose were: Centers for Care; Atlantic Health Land Holding, LLC; Gloucester Land Holding Co., LLC; CFSC Downstate LLC; CFSC Maintenance LLC[36]<\/a>; Skilled Staffing LLC; Centers Agency; and Centers Lab NJ LLC. Moreover, by failing to disclose these related parties in their cost reports, Hagler and Rozenberg also circumvented the requirement that they report only the allowable costs attributable to these parties; instead, they reported the full amounts Hammonton and Deptford paid to these related parties. Bank records from the nursing homes show that Hammonton paid these related parties a total of $45 million over the timeframe of this review and Deptford paid related parties a total of $47 million over the review period. Only $882,666 of the $92 million was disclosed to the federal government.<\/p>\n Figure 20: Failure to Disclose Over $91 Million in Related-Party Transactions<\/strong><\/p>\n \u00a0<\/p>\n Centers retained the services of an accounting firm to prepare Hammonton\u2019s and Deptford\u2019s cost reports. Centers provided the accounting firm with the data needed for the firm to fill out and submit the forms to CMS and the State. Centers was always owned by Rozenberg and for many years, until at least 2022, by Hagler. Hagler signed and certified the cost reports as accurate. Their repeated failure to disclose their related parties and their repeated failure to reflect the allowable costs paid to these parties was not a mere one-time oversight. On multiple questions, on multiple pages, in multiple years, they omitted material cost information while Hagler certified that the report was accurate. OSC found that between 2018 and 2023, Hagler submitted cost reports in which he signed and certified that Hammonton and Deptford did not have business transactions with any related-party companies, except for the two parties that Hammonton and Deptford inconsistently disclosed (BIS Funding Capital LLC and Centers Business Office LLC).<\/p>\n \u00a0<\/p>\n Hagler is a licensed tax preparer who is responsible for Centers\u2019 financial operations, including accounts receivable, billing, payroll, reporting, accounts payable, and billing. Centers performs the bookkeeping and accounting for many of its related parties, overseen by Hagler. Hagler himself prepares the tax returns for many of the related parties. The consistent failure to disclose the vast majority of their related parties is part of a larger scheme to evade government scrutiny of their related parties and thereby circumvent government requirements limiting allowable costs to fair market value or costs of the related party.<\/p>\n \u00a0<\/p>\n Centers also concealed most of its related parties from the accountant preparing the cost reports. OSC interviewed the accountant who prepared Hammonton\u2019s and Deptford\u2019s cost reports and he testified under oath that Centers was asked about related parties and denied having any, other than BIS and Centers Business Office.<\/p>\n \u00a0<\/p>\n Hagler and Rozenberg, through Centers, also omitted material information in cost reports submitted in New York and several other states. In a Settlement Agreement that Centers entered with the federal government on June 17, 2025, Centers admitted that it had made false statements, including material omissions on its cost reports, by failing to list related parties for 44 of its nursing homes located in New York, Rhode Island, Kansas, and Missouri.[37]<\/a> Hagler and Rozenberg agreed that they made false statements when they denied business transactions with related parties, omitted calculations and disclosures regarding the related parties\u2019 allowable costs, and falsely claimed that related-party transactions were not associated with a home office (Centers). This is the same scheme that OSC identified in Hammonton and Deptford.<\/p>\n \u00a0<\/p>\n The following table includes all of the undisclosed related parties in Hammonton\u2019s and Deptford\u2019s cost reports identified by OSC.[38]<\/a><\/p>\n \u00a0<\/p>\n Figure 21: Undisclosed Related Parties Identified by OSC<\/strong><\/p>\n Name of<\/strong><\/p>\n Related Party<\/strong><\/p>\n<\/td>\n Type of Service<\/strong><\/p>\n<\/td>\n Ownership<\/strong><\/p>\n<\/td>\n Disclosed on Federal Cost Report 2019 to 2023<\/strong><\/p>\n<\/td>\n Disclosed on State Cost Report 2022 to 2023<\/strong><\/p>\n<\/td>\n<\/tr>\n Gloucester Land Holding Co, LLC (Deptford PropCo)<\/p>\n<\/td>\n Land and Building<\/p>\n<\/td>\n Kenneth Rozenberg and Klein Family Enterprises LLC<\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n Atlantic Health Land Holding LLC (Hammonton PropCo)<\/p>\n<\/td>\n Land and Building<\/p>\n<\/td>\n Kenneth Rozenberg and Klein Family Enterprises LLC <\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n Centers for Care LLC<\/p>\n<\/td>\n Management and Consulting<\/p>\n<\/td>\n Daryl Hagler, Kenneth Rozenberg, and Beth Rozenberg<\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n Centers Business Office LLC<\/p>\n<\/td>\n Management and Consulting<\/p>\n<\/td>\n Kenneth Rozenberg, Beth Rozenberg, Shoshana Rozenberg, Daryl Hagler, and Eli Rozenberg<\/p>\n<\/td>\n 2022 for Deptford only<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n CFSC Downstate LLC<\/p>\n<\/td>\n Housekeeping\/Staffing<\/p>\n<\/td>\n Amir Abramchik (Centers\u2019 Chief Operating Officer), Deborah Abramchik, Shoshana Rozenberg, Daryl Hagler, Jonathan Hagler, and Kenneth Rozenberg<\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n CFSC Maintenance LLC (dba One70 Group)<\/p>\n<\/td>\n Repair, Construction, Maintenance<\/p>\n<\/td>\n Daryl Hagler, Jonathan Hagler, and Isaac \u201cYitzy\u201d Laniado<\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n Skilled Staffing LLC<\/p>\n<\/td>\n Staffing<\/p>\n<\/td>\n Shoshanah (Rozenberg) Areman and Elizabeth Farkas<\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n Centers Lab NJ LLC\/ Centers Agency LLC<\/p>\n<\/td>\n Laboratory Services<\/p>\n<\/td>\n Kenneth Rozenberg and Beth Rozenberg<\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n BIS Funding Capital LLC<\/p>\n<\/td>\n IT Services and Software<\/p>\n<\/td>\n Daryl Hagler and Jonathan Hagler<\/p>\n<\/td>\n 2022 for Deptford only; 2023 for Deptford and Hammonton<\/p>\n<\/td>\n Yes<\/p>\n<\/td>\n<\/tr>\n One70 Group LLC[39]<\/a><\/p>\n<\/td>\n Unknown<\/p>\n<\/td>\n Daryl Hagler, Isaac \u201cYitzy\u201d Laniado, Tzvi Miller, and Benjamin Diamond.<\/p>\n<\/td>\n No<\/p>\n<\/td>\n No<\/p>\n<\/td>\n<\/tr>\n \u00a0<\/p>\n Hagler made at least 107 material misrepresentations or omissions on federal cost reports submitted to the federal government for Hammonton. Hammonton also made at least 37 material misrepresentations or omissions on reports submitted to the State.<\/p>\n \u00a0<\/p>\n Hagler made at least 93 material misrepresentations or omissions on federal cost reports submitted to the federal government for Deptford. OSC also identified at least 32 material misrepresentations or omissions on reports submitted to the State.<\/p>\n \u00a0<\/p>\n The extensive misrepresentations on cost reports evidence Hagler and Rozenberg\u2019s longstanding pattern of trying to evade government scrutiny, using related-party transactions to inflate costs that they then siphon for their own gain. The rules on cost reporting exist to prevent inflated costs caused by non-arm\u2019s length transactions and to ensure that transactions reflect true market value. By intentionally omitting material information on state and federal cost reports, they undermined protections meant to provide transparency and ensure that government funds are used for resident care, not excessive and unjustifiable profit-taking.<\/p>\n \u00a0<\/p>\n OSC will seek to recover penalties, including false claims act penalties as appropriate, for the extensive, material, false statements to the state and federal government.<\/p>\n \u00a0<\/p>\n E. Payments to Related Parties Lacked Documentation.<\/strong><\/p>\n In addition to failing to report related-party transactions on cost reports and siphoning money from the nursing homes through related-party property companies, Hammonton and Deptford also failed to provide or maintain adequate documentation to support a portion of the goods and services allegedly provided by their related parties thereby failing to document that those goods or services were provided at a reasonable cost or were provided at all.<\/p>\n \u00a0<\/p>\n![\"](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/12\/fig1.png\")
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