OSC Exposes $123M Medicaid Fraud and Understaffing in NJ Nursing Homes
The Office of the State Comptroller (OSC) conducted an investigation from 2019 to 2024 into two New Jersey nursing homes, Hammonton Center for Rehabilitation and Healthcare and Deptford Center for Rehabilitation and Healthcare, both owned by Daryl Hagler and Kenneth Rozenberg. The investigation revealed systemic understaffing, mismanagement, and self-dealing through related-party transactions resulting in over $123 million in improper Medicaid overpayments and penalties. Hagler and Rozenberg own 46 nursing homes in multiple states and used a complex network of related-party entities to funnel millions of Medicaid funds away from resident care towards inflated rent payments and unnecessary leases. Both facilities consistently failed to meet New Jersey's minimum staffing requirements, understaffed by over 50%, and employed inadequately licensed staff, impacting resident care quality severely. CMS designated both nursing homes as Special Focus Facilities multiple times, indicating persistent poor performance and substandard care leading to preventable suffering and fatalities. The investigation revealed inflated mortgage and rent payments bundled into related-party lease agreements, including an extensive $58.2 million mortgage in 2014 and a $63.2 million HUD-backed refinancing in 2017, driving up costs without corresponding improvements. Hammonton and Deptford concealed over $91 million in related-party transactions in false state and federal cost reports, violating transparency and reporting standards. Further, the nursing homes lacked documentation supporting over $2 million in related-party payments, raising questions about their legitimacy. OSC aims to recover $86.3 million in overpayments linked to understaffing, $35.5 million related to real estate scams, and $2.1 million for unsupported related-party payments, also imposing penalties up to $980,000 for violations, including inadequate RN presence and false claims. The investigation highlighted weaknesses in state oversight, recommending stronger regulatory reforms, including auditing related entities, limiting rent and mortgage scams, and better enforcement of staffing laws to prevent recurrence. These findings emphasize the risks posed by related-party business structures in nursing homes, where opaque financial transactions and prioritization of profit over care compromise resident safety and misuse public Medicaid funds. The OSC continues monitoring and legal actions to safeguard nursing home residents and Medicaid integrity in New Jersey.