Licensed to bill? Nursing home fails to provide hot water or dispose of solid waste (gross); will pay $7 million.
The United States of Licensing
In this, the land of freedom and opportunity, we sure do love slapping licenses on just about anything, don’t we? Want to braid someone’s hair? Better get 300 hours of cosmetology training—because you never know when an innocent braid might turn into a public safety crisis. Want to create a floral arrangement? Well, hold on there, Van Gogh, you’re going to need the state’s blessing for that. It seems like in America, no profession is too trivial for a little bureaucratic love. I mean, why trust a grown adult to shampoo hair without formal approval, right? Apparently, we sleep better knowing the auctioneers, florists, and interior designers of the world are thoroughly vetted and licensed.
Nursing home operators, on the other hand…
Then again, there are good reasons for licensing certain industries. Licensing nursing home operators is important to ensure that the individuals responsible for running these facilities meet the necessary standards for providing safe and quality care. Key reasons include:
Patient Safety and Care Quality: Nursing homes care for vulnerable populations, such as the elderly and disabled. Licensing ensures that operators understand regulations and are equipped to provide appropriate care, maintain safe environments, and manage medical needs.
Accountability: Licensing holds operators accountable to state and federal standards. This ensures compliance with laws related to health, safety, and financial practices, protecting residents from neglect or fraud.
Oversight and Regulation: Licensed operators are subject to inspections and audits, which help ensure they follow proper procedures, maintain staff qualifications, and meet care standards. This reduces the risk of abuse, neglect, or substandard conditions.
Consumer Confidence: Licensing fosters trust among families and patients, ensuring they can rely on nursing homes to meet legal and ethical standards when choosing long-term care.
Legal Compliance: Licensing ensures that operators are aware of and adhere to healthcare laws, such as those related to Medicare and Medicaid reimbursement, preventing fraudulent billing practices and improving the overall integrity of healthcare funding.
Most of these don’t apply to florists, auctioneers, and hair braiders, but are pretty important for taking care of your mom, dad, uncle, or aunt. The residents of the Saratoga Care and Rehabilitation Center found this out the hard way.
The scheme
Ari Schwartz and his business partner Jeffrey Vegh, owners of the Saratoga Center for Care, engaged in a fraudulent scheme tied to their nursing home operations. Beginning in 2013, they entered into a business arrangement with a landlord who owned several nursing homes and helped them financially to fund these ventures. Schwartz and Vegh misrepresented their financial resources and omitted their relationship with the landlord when applying for the state’s approval to operate the Saratoga Center. They certified, under penalty of perjury, that the information in their application was true and accurate, when, in fact, it was not.
The NY State Department of Health licensed, or gave an operating certificate to Schwartz and Vegh. As the licensed operators, Schwartz and Vegh “had the non-delegable authority to: (1) hire and fire key management employees, (2) maintain books and records, (3) dispose of the Nursing Home’s assets and incur liabilities on its behalf, and (4) adopt and enforce policies regarding the Nursing Home’s operations.” That is, they were responsible for those operations. No one else.
However, as the facility struggled financially, Schwartz and Vegh surrendered control to their landlord and his chosen purchaser, Skyline Management, without notifying the authorities. Despite technically retaining the operating certificate, they allowed unlicensed and unauthorized individuals and entities to take over the operation of Saratoga Center.
That decision had severe consequences for the residents. Here’s just some of the problems that the Saratoga Center had: it did not staff the Nursing Home sufficiently; ensure resident safety and attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident; ensure that residents were free of any significant medication errors; prevent residents from unnecessarily falling and injuring themselves; prevent residents from developing avoidable pressure ulcers; adequately treat pressure sores that developed; and ensure that residents were regularly toileted and/or bathed. They also failed to maintain plumbing and plumbing fixtures, and sometimes there was no hot water in parts of the facility; maintain an adequate linen inventory and sometimes make-shift linens were created; and dispose of solid waste. Gross. And dangerous. These failures led to federal fines and the nursing home being listed as one of the worst-performing facilities in the country.
Despite this gross mismanagement, Schwartz and Vegh, as the licensed operators, continued to receive Medicaid payments for the nursing home’s "worthless services." By withholding the true nature of their financial entanglements and allowing unqualified individuals to operate the nursing home, they presented false claims to the government, violating the False Claims Act.
The penalty
The various actors responsible for the fraud — Leon Melohn, Alan “Ari” Schwartz, Jeffrey Vegh, Jack Jaffa, 149 Ballston Ave., LLC, Ballston Two, LLC, Saratoga Center for Care, LLC, and Saratoga Care and Rehabilitation Center, LLC—have collectively agreed to pay $7,168,000 to resolve allegations of violating the False Claims Act by submitting false claims to Medicaid for providing worthless services to residents.
The whistleblowers
There was no information provided about the whistleblowers who likely remained anonymous.
Under the qui tam provision of the False Claims Act, a private party (also referred to as a whistleblower or relator) may file an action on behalf of the United States and receive a portion of the recovery, typically between 15-30%.
If you think you’ve observed fraud or misconduct, we can evaluate your options. Vivek Kothari is a former federal prosecutor who represents whistleblowers. For a free consultation, contact Vivek by email, phone, Signal, or fill out the contact form.