Landlord and Former Operators of Upstate New York Nursing Home Pay $7,168,000 to Resolve False Claims Act Allegations of Worthless Services Provided to Residents
The Justice Department, together with the New York State Office of the Attorney General, announced today that the United States and New York State have entered into settlement agreements with the landlord and several individuals and entities involved in the operation of Saratoga Center for Rehabilitation and Skilled Nursing Care (Saratoga Center), a nursing facility in Ballston Spa, New York. 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 (the Settling Parties) collectively agreed to pay $7,168,000 to resolve allegations that they violated the False Claims Act by causing the submission of false claims to the Medicaid program for worthless services provided to residents. Saratoga Center closed in February 2021, after this investigation was initiated.
“This settlement demonstrates the Department of Justice’s ongoing commitment to ensuring that nursing home residents receive the quality of care to which they are entitled,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “When individuals or entities put the welfare of these vulnerable residents in jeopardy, they will be held accountable.”
Before issuing a license to operate a nursing home, the New York State Department of Health (NYSDOH) thoroughly reviews, among other things, an applicant’s character and competence to ensure that the operator will provide a consistently high level of care to residents. After a months-long vetting process, in 2014, NYSDOH approved Schwartz and Vegh to operate Saratoga Center with Leon Melohn, through entities he managed and controlled, acting as its landlord (Melohn and his entities are hereinafter referred to as the Landlord). This license vested in Schwartz and Vegh the nondelegable duty to oversee the operations of the home. But in or around early 2017, due to a financial dispute, the Landlord required the legally licensed operators to surrender control of Saratoga Center. The Landlord replaced them with Jaffa and a business associate of his, along with various corporate entities, even though none of them had – and they never obtained – the necessary license from the NYSDOH. Jaffa and his associate undertook all the nondelegable duties that remained the responsibility of Schwartz and Vegh.
These unlicensed individuals operated Saratoga Center from February 2017 until it closed in February 2021. During that period, the United States contends that Saratoga Center delivered worthless services to residents, and its physical conditions deteriorated to such a degree that it violated federal and state regulations. Specifically, the operators failed to adequately staff the home, and residents suffered medication errors, unnecessary falls, and the development of pressure ulcers. Additionally, Saratoga Center did not consistently maintain hot water throughout the facility, have an adequate linen inventory, and dispose of solid waste. In 2019, Saratoga Center was placed on the Centers for Medicare and Medicaid Services Special Focus Facility list – a list of the worst-performing nursing homes in the United States. Saratoga Center remained on the list until its closure.
The United States contends that, between February 2017 and February 2021, the Settling Parties knowingly submitted or caused the submission of false claims for payment to Medicaid for worthless nursing services. This settlement resolves those allegations.
“Nursing homes should protect the health and well-being of every resident,” said U.S. Attorney Carla Freedman for the Northern District of New York. “That did not happen at Saratoga Center. Instead, a business dispute between the operators and landlord led to dangerous conditions for residents and staff, and caused the submission of false claims to Medicaid for worthless services. This case demonstrates that we will hold responsible people accountable when they pocket federal funds while providing substandard care. Thank you to Attorney General James and her office for collaborating on this case.”
“We trust nursing homes to protect New Yorkers during their most vulnerable days, but the owners, unlicensed operator and landlord of Saratoga Center repeatedly violated the law for their own benefit,” said New York Attorney General Letitia James. “Instead of providing the quality care and compassion that residents deserved, the owners of Saratoga Center deceived regulators and left residents to suffer deplorable conditions and neglect. I am grateful to U.S. Attorney Freedman and team for their partnership in holding Saratoga Center accountable for putting New Yorkers in harm’s way. My office will continue to ensure nursing home residents are protected, and I encourage anyone who has witnessed alarming conditions, resident neglect, or abuse at a nursing home to contact my office.”
In connection with the settlement, the United States Department of Health and Human Services, Office of Inspector General (HHS OIG), negotiated voluntary exclusions of the individuals and entities. Schwartz; Saratoga Center for Care, LLC; 149 Ballston Ave, LLC; and Ballston Two, LLC will be excluded from Medicare, Medicaid, and all other Federal health care programs, as defined in 42 U.S.C. § 1320a-7b(f), for a period of ten years. Vegh will be excluded for eleven years. Jaffa and Saratoga Care and Rehabilitation Center, LLC, will be excluded for twenty years.
“Ensuring safety and quality of care for nursing home residents is a top priority,” said Inspector General Christi A. Grimm of the HHS OIG. “When nursing home owners, operators, and landlords are responsible for substandard care in their facilities, HHS OIG will not hesitate to pursue their exclusion and bar them from future participation in federal health care programs.”
The resolution obtained in this matter was the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of New York, the Justice Department’s Civil Division Commercial Litigation Branch, Fraud Section, the New York State Office of the Attorney General’s Medicaid Fraud Control Unit, and the United States Department of Health and Human Services, Office of Inspector General.
Assistant U.S. Attorney Christopher R. Moran for the Northern District of New York and Attorneys Carol Wallack and Lyle Gruby of the Justice Department’s Civil Division handled this matter for the United States. Special Assistant Attorneys General Emily Auletta and Hillary Gray Chapman handled this matter for the Office of the New York Attorney General’s Medicaid Fraud Control Unit. The exclusions of the individuals and entities were negotiated by Senior Counsel Felicia Heimer for HHS OIG.
The United States’ investigation was part of its Elder Justice Initiative, which supports the efforts of state and local prosecutors, law enforcement, and other elder justice professionals to combat elder abuse, neglect, and financial exploitation, with the development of training, resources and information. Learn more about the Justice Department’s Elder Justice Initiative at http://www.justice.gov/elderjustice.
The claims resolved by the settlement are allegations only and there has been no determination of liability.