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Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Wednesday, June 2, 2021

Manhattan U.S. Attorney Files Suit Against Eleven Skilled Nursing Facilities And Their Management Company, Owner, And A Senior Employee For Fraudulently Billing Medicare For Unnecessary Services

Suit Alleges That Eleven New York-Based Facilities Fraudulently Inflated Medicare Reimbursements by Prolonging Patient Stays Without Regard to Patients’ Medical Needs and Billing for Excessive Rehabilitation Therapy That Patients Did Not Need

Audrey Strauss, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health and Human Services, Office of the Inspector General (“HHS-OIG”), announced today that the United States has filed a civil healthcare fraud lawsuit against ISSAC LAUFER, TAMI WHITNEY, MONTCLAIR CARE CENTER, INC., EAST ROCKAWAY CENTER LLC, EXCEL AT WOODBURY FOR REHABILITATION AND NURSING, LLC, LONG ISLAND CARE CENTER INC., TREETOPS REHABILITATION & CARE CENTER LLC, SUTTON PARK CENTER FOR NURSING & REHABILITATION, LLC, SUFFOLK RESTORATIVE THERAPY & NURSING, LLC, OASIS REHABILITATION AND NURSING, LLC, FOREST MANOR CARE CENTER, INC., SURGE REHABILITATION & NURSING LLC, QUANTUM REHABILITATION & NURSING LLC, and PARAGON MANAGEMENT SNF LLC (collectively the “Defendants”).  The lawsuit seeks damages and civil penalties under the False Claims Act for fraudulently billing Medicare for unreasonable and unnecessary services provided to patients at eleven skilled nursing facilities located in New York (the “Facilities”).

The complaint alleges that, during the period from at least January 2010 through September 2019, Defendants systematically kept patients at the Facilities longer than necessary in order to maximize the amount billed to Medicare for the patients’ stays.  During those stays, the Facilities systematically put patients on higher levels of rehabilitation therapy than necessary based on their actual clinical needs in order to bill Medicare at the highest rate.  ISSAC LAUFER, who is a part owner of ten of the eleven Facilities and operates all eleven Facilities through PARAGON MANAGEMENT SNF LLC, and TAMI WHITNEY, the Coordinator of Rehabilitation Services for the Facilities, instructed and pressured staff to engage in these fraudulent practices.  As a result, according to the complaint, the Facilities submitted, or caused to be submitted, false claims for payment for rehabilitation services that were unreasonable and unnecessary, or in some cases, did not even involve the provision of skilled therapy.  

U.S. Attorney Audrey Strauss said: “As alleged, ISSAC LAUFER, TAMI WHITNEY and the skilled nursing facilities ISSAC LAUFER owns and/or operates prioritized profits above their obligation to focus on their patients’ actual medical needs.  In clear violation of the governing regulations, the Defendants fraudulently inflated their Medicare reimbursements by unnecessarily prolonging patient stays and billing for therapy that offered little or no clinical benefit.  This Office will continue vigorously to pursue companies and individuals who engage in these practices at the expense of the public fisc.”

HHS-OIG Special Agent in Charge Scott J. Lampert said: “The Medicare program is designed to protect both beneficiaries and taxpayers.  When medical providers bill for unnecessary or improper services, patient care is put at risk and the financial integrity of our federal health care system is compromised.  Working with our law enforcement partners, we will continue to ensure that medical providers are held accountable for their billing practices and the services they provide.”               

The following allegations are based on the Complaint that was filed in White Plains federal court today: 

The eleven facility defendants are skilled nursing facilities located in the New York metropolitan area.  LAUFER is a part owner of ten of the eleven Facilities and operates all eleven Facilities through PARAGON MANAGEMENT SNF LLC.  WHITNEY is the Coordinator of Rehabilitation Services for the Facilities and as such is involved in decisions regarding the provision of, and billing for, rehabilitation services.

From at least January 2010 through September 2019, the Defendants systematically kept Medicare patients at the Facilities longer than reasonable or necessary, and put those patients on higher levels of rehabilitation therapy than reasonable or necessary.  These practices were designed to increase the amounts billed to Medicare beyond what was justified based on patients’ clinical needs.  In some instances, the Facilities went so far as to intentionally limit patients’ progress in order to create the appearance of a continued need for services.  In one instance, WHITNEY reported to LAUFER that the Facilities should not allow patients to go to the bathroom by themselves because they would then “think they are ready to go home.”  

LAUFER and WHITNEY directed the Facilities to engage in this conduct.  Specifically, WHITNEY carefully tracked the length of stay for each Medicare patient and expected staff at the Facilities to justify discharges scheduled to take place before the patient’s stay approached 100 days—the maximum compensable by Medicare.  Together with management at the Facilities, WHITNEY devised strategies for extending patient stays, including giving patients unnecessary tests to gauge their balance proficiency at the point they were ready for discharge to create a pretext for extending their stays.  WHITNEY reported on the success of these “discharge prevention” measures to Laufer, noting both areas where these measures succeeded and those where the Facilities had to work harder to prolong patient stays—such as for patients who were “younger and smarter” or “high level.”  LAUFER, in turn, received daily updates from the Facilities reporting the number of Medicare patients who had been discharged, and, on a number of occasions, instructed WHITNEY to curb discharges.  LAUFER gave these instructions without any information about the patients’ clinical needs and made explicit that they were designed to increase revenue. 

WHITNEY, with LAUFER’S knowledge, also instructed the Facilities to provide virtually all Medicare patients with therapy at the “Ultra High”—i.e., highest billing—level, without regard to the patients’ needs or whether, due to their conditions, they could benefit from this intense therapy.  To qualify for the Ultra High level, a patient must receive at least 720 minutes of skilled therapy services (i.e., physical, occupational or speech therapy requiring the services of a trained therapist) per week.  Employees understood that there was virtually no wiggle room when it came to determining how much rehabilitation therapy a patient would receive.  The pressure to provide this level of therapy in turn led the Facilities to bill for services that did not actually qualify as skilled therapy and thus were not eligible for Medicare reimbursement (such as simply moving the limbs of patients with severe cognitive impairments or assisting with routine self-care tasks).

LAUFER and WHITNEY’S efforts to keep Medicare patients at the Facilities for as close as possible to 100 days and to provide almost all patients, without regard to need, with therapy at the Ultra High level succeeded.  During the relevant period, the Facilities were significant outliers, compared to other skilled nursing facilities, with respect to Medicare patients’ average length of stay and levels of rehabilitation therapy.

These practices resulted in the Facilities submitting claims to Medicare for rehabilitation therapy that was not reasonable or necessary, was billed at a higher rate than appropriate, or did not involve the provision of skilled services and, accordingly, were ineligible for payment.  In addition, the Facilities made or used false statements and records that were material to false claims submitted to Medicare for payment for rehabilitation therapy that was unreasonable, unnecessary, or unskilled.

The Government intervened in a private whistleblower lawsuit before the Honorable Cathy Seibel that had previously been filed under seal pursuant to the False Claims Act.

Ms. Strauss thanked HHS-OIG for its assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Jacob Bergman and Rachael Doud are in charge of the case.

Topic(s): 
Financial Fraud
Contact: 
Nicholas Biase, James Margolin (212) 637-2600
Press Release Number: 
21-127
Updated June 2, 2021