U.S. Settles Lawsuit Alleging That Bronx Nursing Home Paid Kickbacks For Patient Referrals And Switched Residents’ Healthcare Coverage Without Their Consent

 

Defendants, Including Former Nursing Home Administrator, Agree to Pay a Total of $3.46 Million

 Damian Williams, the United States Attorney for the Southern District of New York, and Naomi Gruchacz, the Special Agent in Charge of the New York Regional Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), announced today that the United States has filed and settled a civil fraud lawsuit alleging that MORRIS PARK NURSING HOME (“MORRIS PARK”), a skilled nursing facility located in the Bronx, New York, engaged in two fraudulent and illegal schemes that violated the False Claims Act and the Anti-Kickback Statute.  The first scheme involved cash payments made to a supervisor at a nearby hospital for patient referrals, and the second scheme involved switching residents’ Medicare coverage without their consent in order to increase the Medicare payments MORRIS PARK received.  The United States’ complaint also names as defendants TZODIK WEINBERG, a/k/a “Justin Weinberg,” MORRIS PARK’s former Administrator, and MAIER ARM for their roles in the fraudulent conduct.    

Under the settlement agreements approved by U.S. District Judge Jennifer H. Rearden, the estate of the owner of MORRIS PARK at the time of the conduct alleged in the Complaint will pay to the United States $2.85 million, WEINBERG will pay $495,000, and ARM will pay $115,000.  Each defendant also made extensive factual admissions regarding their conduct.  The settlement with the estate took into consideration MORRIS PARK’s prior voluntary self-disclosure of facts related to the improper changes made to residents’ insurance coverage. 

HHS-OIG Special Agent in Charge Naomi Gruchacz said: “The misconduct that occurred at Morris Park exhibits the prioritization of profits over residents’ best interests.  This nursing home paid illegal kickbacks to manipulate the resident referral process and changed patients’ health coverage selections without properly obtaining their consent, with no apparent concern for how these events could negatively impact residents.  HHS-OIG and our fellow law enforcement agencies strive to ensure that entities furnishing services to Medicare enrollees are operating in accordance with federal health care laws.”

Medicare beneficiaries may enroll in Medicare Parts A and B, known as Original Medicare, or in Medicare Part C Advantage Plans (“MA Plans”), which are administered by private companies that contract with the government.  Under Original Medicare, the Centers for Medicare & Medicaid Services (“CMS”) directly reimburses healthcare providers, like skilled nursing facilities, on a fee-for-service basis.  In contrast, when reimbursing services provided under MA Plans, CMS pays Medicare Advantage Organizations (“MAOs”), which operate the MA Plans, a fixed, capitated amount each month for each Medicare beneficiary enrolled in the MA Plan.  CMS advises individuals to consider various factors in deciding between enrolling in an MA Plan or Original Medicare, such as differences in out-of-pocket costs and doctor choice.

As alleged in the Complaint filed in Manhattan federal court:

It is well known within the skilled nursing facility industry that it is usually more profitable for the facility to admit residents enrolled in Original Medicare than in MA Plans.  The defendants engaged in two fraudulent and illegal schemes to increase the number of Original Medicare residents at MORRIS PARK.

Payment of Cash Kickbacks for Patient Referrals

From January 1, 2017, through December 31, 2019, MORRIS PARK offered and paid remuneration in the form of cash payments, meals, and sports tickets to a Jacobi discharge planning supervisor (the “Jacobi Manager”) to induce her to refer Original Medicare beneficiaries for admission to MORRIS PARK.  For much of this period, MORRIS PARK paid the Jacobi Manager $150 for each referred patient who was admitted to the facility.  WEINBERG was responsible for delivering the cash payments personally to the Jacobi Manager, often arranging to meet her at a CVS parking lot close to MORRIS PARK.  He regularly reached out to the Jacobi Manager to request patient referrals when MORRIS PARK had empty beds. 

MORRIS PARK paid the Jacobi Manager a total of approximately $5,000 to $10,000 for referring dozens of Original Medicare patients for admission to MORRIS PARK.  In addition, MORRIS PARK offered the Jacobi Manager tickets to Yankees games, invited her and her staff to a MORRIS PARK-sponsored holiday party, and frequently arranged for food to be delivered to her office.

Scheme to Switch Residents’ Medicare Coverage

From January 1, 2018, through December 31, 2019, MORRIS PARK, at the direction of WEINBERG, disenrolled residents from their self-selected MA Plans and enrolled them in Original Medicare without obtaining the consent of the residents or their authorized representatives.  WEINBERG pressured MORRIS PARK staff to disenroll residents from their MA Plans. 

MORRIS PARK staff approached residents, often at their bedside, to try to persuade them to switch their insurance coverage.  When talking to residents and their families, MORRIS PARK staff typically did not fully explain how the change to Original Medicare would impact the resident’s coverage, including potential changes to the resident’s co-payments and deductibles; the potential loss of supplemental coverage available under the resident’s MA Plan; any resulting change in the resident’s drug plan; or limitations on when the resident could re-enroll in the plan after leaving MORRIS PARK.  In most cases, the defendants switched residents’ insurance coverage without getting the residents or their family members to sign a consent form evidencing the resident’s consent to the insurance change.  In certain instances, at the direction of WEINBERG, MORRIS PARK staff offered to reduce or waive the co-payments that would be owed by residents under Original Medicare in order to try to persuade them to agree to disenroll from their MA Plan.   

In the summer of 2018, on WEINBERG’s recommendation, MORRIS PARK retained WEINBERG’s friend, ARM (who worked at another skilled nursing facility) to assist with the improper disenrollments.  MORRIS PARK paid ARM a $1,000 fee for each resident whom ARM helped to switch to Original Medicare.  ARM agreed to split this $1,000 fee with WEINBERG, so WEINBERG would pocket $500 for each resident who was disenrolled. 

The settlement with the estate of the owner of MORRIS PARK at the time of the misconduct includes the following admissions of conduct:

• During the period from 2017 through 2019, MORRIS PARK offered to make, and in fact made, cash payments to the Jacobi Manager for each Original Medicare patient referral that resulted in an admission to the facility.  For much of this period, the Jacobi Manager received the sum of $150 for each referral. 
• During the period from 2017 through 2019, MORRIS PARK admitted dozens of Medicare patients who were referred to the facility by Jacobi.
• In order to persuade residents to disenroll from their MA Plans, in many instances, MORRIS PARK staff did not fully explain to residents and their families how a switch to Original Medicare would affect the resident’s coverage, including potential changes to the resident’s co-payments and deductibles and the potential loss of supplemental coverage that was available under the resident’s MA Plan.  In some instances, MORRIS PARK staff offered inducements to residents or their family members to try to persuade them to agree to the disenrollment.  For example, at the direction of WEINBERG, staff sometimes offered to reduce or waive the co-payments that residents would be required to pay starting on the 21st day of their stay at the facility if they switched to Original Medicare. 
• In most cases, MORRIS PARK disenrolled residents from their MA Plans without obtaining from the resident or any family member a signed disenrollment form or any other document evidencing the resident’s consent to the insurance change.  In several instances, MORRIS PARK disenrolled residents even after the residents and/or their family members had indicated they did not want to switch their Medicare coverage.
• Starting in early 2019, MORRIS PARK paid WEINBERG monthly cash bonuses if the average number of Original Medicare residents at the facility was maintained at a certain level for a given month.  MORRIS PARK also paid bonuses to marketing and admissions staff members that were tied to the admission of new residents with Original Medicare.

As part of his settlement, WEINBERG admits, acknowledges, and accepts responsibility for the following conduct:  

• Starting sometime in 2017, WEINBERG was responsible for delivering the cash payments personally to the Jacobi Manager.  They texted to arrange a time and place to meet in person, often meeting at a CVS parking lot close to MORRIS PARK.  WEINBERG reached out to the Jacobi Manager on numerous occasions to ask for patient referrals so he could fill empty beds at MORRIS PARK.
• During his time at MORRIS PARK, WEINBERG sought to maximize the number of residents who were enrolled in Original Medicare. 
• Shortly after he became Administrator, WEINBERG directed MORRIS PARK’s staff to try to persuade many of the facility’s residents to disenroll from their MA Plans and to enroll in Original Medicare instead.  WEINBERG identified residents who were candidates for disenrollment and then pressured staff to take steps to switch those residents’ insurance coverage. 
• In the summer of 2018, WEINBERG contacted his friend, ARM, who worked full-time at another skilled nursing facility in the Bronx.  WEINBERG asked ARM to assist with the disenrollment process at MORRIS PARK.  MORRIS PARK reached an agreement with ARM under which MORRIS PARK would pay $1,000 to ARM for each MORRIS PARK resident whom ARM helped to disenroll from a Medicare Advantage Plan and enroll in Original Medicare.  WEINBERG and ARM agreed that they would split this $1,000 payment, so that WEINBERG would receive $500 for each resident disenrolled.  WEINBERG did not disclose this arrangement to MORRIS PARK.
• Once ARM was retained, the pace of disenrollments dramatically increased.  WEINBERG continued to exert significant pressure on MORRIS PARK staff to disenroll as many residents from Medicare Advantage Plans as possible.  In one instance in July 2019, WEINBERG directed the facility’s Financial Coordinator to disenroll a resident who clearly lacked the capacity to consent to a change in their insurance coverage.  The Financial Coordinator asked WEINBERG “[h]ow do we do a dis enrollment” when the resident “is not alert” and has no family.  WEINBERG responded: “We just do it.” 

As part of his settlement, ARM admits, acknowledges, and accepts responsibility for the following conduct:  

• ARM understood that MORRIS PARK would benefit from maximizing the number of residents who were enrolled in Original Medicare because the facility typically received a higher daily reimbursement rate for residents enrolled in Original Medicare as compared to MA Plans, and Original Medicare residents were often approved by Medicare for longer stays in the facility.  
• ARM reached an agreement under which MORRIS PARK would pay $1,000 to ARM for each MORRIS PARK resident whom ARM helped to disenroll from a MA Plan and enroll in Original Medicare.  WEINBERG asked ARM to split this $1,000 payment with him, so that WEINBERG would receive $500 for each resident disenrolled.  ARM agreed.  ARM did not disclose this arrangement to anyone else at MORRIS PARK.
• From August 2018 through December 2019, MORRIS PARK paid ARM $1,000 for each MORRIS PARK resident who was disenrolled from their MA Plan and enrolled in Original Medicare.  
• Although ARM usually relied on MORRIS PARK staff to obtain and document the resident’s consent, he did not confirm that the resident had actually consented or signed the disenrollment form before processing the disenrollment.

Mr. Williams thanked HHS-OIG for its assistance with the case.