AG James Sues Nursing Homes For Abuse And Fraud From Harlem To The Hudson

New York Attorney General Letitia James today filed a lawsuit against Cold Spring Hills Center for Nursing and Rehabilitation (Cold Spring Hills).

A Nassau County nursing home, its related businesses, their owners, and senior managers, for years of financial fraud and self-dealing that led to severe understaffing and resident neglect and harm.

An investigation by the Office of the Attorney General (OAG) found that Cold Spring Hills’ owners diverted over $22.6 million in Medicaid and Medicare funds from resident care through a fraudulent network of companies that were used to conceal up-front profit taking.

The lawsuit alleges that long before the COVID-19 pandemic, the owners repeatedly cut staffing at the 588-bed facility, which created poor working conditions and endangered residents.

Through her lawsuit, Attorney General James seeks to prevent new residents from entering the facility, install monitors to oversee the facility’s operations and finances, and ban existing and hidden owners from their roles. This is the third lawsuit filed by Attorney General James to stop pervasive financial fraud in nursing homes and protect vulnerable residents.

“Cold Spring Hills’ owners put profits over patient care and left vulnerable New Yorkers to live in heartbreaking and inhumane conditions,” said Attorney General James. “From Buffalo to Long Island, every nursing home in New York must abide by laws that require the best care for New Yorkers. As Attorney General, I am determined to use the full force of my office to hold nursing homes to that standard, and ensure New Yorkers are protected. I encourage anyone who has witnessed alarming conditions, resident neglect, or abuse at a nursing home to contact my office.”

Under New York law, owners of nursing homes have a “special obligation” to ensure the highest possible quality of life for residents and to staff the facility at a level sufficient to provide adequate care to all residents. The lawsuit alleges that the owners and operators of Cold Spring Hills engaged in fraudulent financial schemes that violated numerous laws designed to protect nursing home residents, resulting in preventable neglect and harm of vulnerable New Yorkers.

Financial Fraud

The operators of Cold Spring Hills used 13 companies to create the appearance that they were paying for services for the nursing home but were in fact diverting Medicaid and Medicare funds to themselves as up-front profit instead of using the funds for resident care. This complex network of companies was also used to hide the real owners of the nursing home and to orchestrate multiple deceptive schemes to extract funds for their personal financial benefit, while disregarding the nursing home’s duty to provide required care.

From 2017 through 2021, Cold Spring Hills received over $157 million from New York’s Medicaid program and over $88 million from Medicare to provide critical care to its elderly and disabled residents. Cold Spring Hills’ operators used three primary fraudulent schemes to siphon over $22.6 million in Medicaid and Medicare funds from Cold Spring Hills.

The lawsuit alleges that the respondents paid more than $15.3 million in fraudulent “rent” to Cold Spring Realty, which is owned by the same individuals who operate the nursing home, and paid more than $5.2 million to several deceptive entities for supposed “consulting.” In addition, the lawsuit alleges that the respondents engaged in a $2 million fraudulent promissory note scheme when they purchased the facility. The respondents also funneled another $10.6 million in concealed self-dealing transactions through what were ostensibly insurance companies, and another $8.1 million through an entity that purportedly provided services and supplies to Cold Spring Hills. In total, the respondents transferred over $42.4 million to its owners and related parties from 2016 to 2021.

Resident Abuse and Neglect

Testimony from numerous staff and family members of residents describe bleak conditions at the facility. Family members of residents often observed that the facility was unclean and that critical care equipment, such as wheelchairs, beds, shower chairs, and air conditioners, were broken. Residents were routinely left sitting in soiled briefs and were not bathed for long periods of time. Cold Spring Hills repeatedly failed to provide proper wound care and prevention for residents, causing wounds to develop and existing wounds to deteriorate, leading to infections. Residents and their families cited numerous other deficiencies in services, including failure to provide safe and adequate nutrition, medication, and sanitation.

Additional allegations of abuse, mistreatment, and neglect as detailed in the lawsuit include:

• A diabetic resident had difficulty walking and was given a wheelchair by Cold Spring Hills that did not have footrests. To use the wheelchair, he had to drag both of his feet on the floor and as a result developed sores on his right foot. He was taken to the hospital and had to have part of his toe amputated because of the severity of his infections. Shortly after returning to Cold Spring Hills, he died. His co-guardian was never informed of his condition after he returned to the facility and was not told when he died.
• A man was admitted to Cold Spring Hills to regain mobility after a car crash left him badly injured. During his time at Cold Spring Hills, he received such poor care that he lost at least 30 pounds and his injury worsened. He had a preexisting pressure sore, and Cold Spring Hills’ medical records reflect that his pressure injury increased in size and advanced from a stage 3 to the most severe stage 4 while he was under the care of Cold Spring Hills. In August 2021, he was admitted to the hospital for severe malnutrition, dehydration, a stage 4 sacral pressure injury, and right foot osteomyelitis (an infection in his bone). He reportedly told his wife, “They tried to kill me at Cold Spring Hills.”
• A woman was admitted to Cold Spring Hills after suffering from a stroke that affected her ability to walk, use her right arm and hand, and speak. She was at the facility for only five months, and during her entire time there she only received three showers. Her daughter reported that her mother sat in an unchanged brief for hours. While visiting the facility, her daughter noticed that her mother’s nails on her right paralyzed hand were so long that they caused abrasions on the inside of her hand. Her daughter complained to the Cold Spring Hills administrator about her mother’s nails and was ignored.

COVID-19 Pandemic

Due to years of fraud, financial abuse, and unnecessary staffing cuts before the COVID-19 pandemic, Cold Springs Hills residents needlessly suffered during the pandemic. In February 2020, the principal owner orchestrated a plan to cut $1.6 million in expenses by reducing staff. He made these budget cuts despite the Department of Health (DOH) notifying Cold Spring Hills on February 6, 2020 that all nursing homes must prepare for the coming pandemic. The facility was dangerously understaffed before the pandemic and during the height of the pandemic. Cold Spring Hills’ staff confirmed that insufficient staffing was a problem at the facility before the pandemic, and that it continued into 2022.

From March 1, 2020 to June 4, 2020, 166 residents of Cold Spring Hills died, 98 from COVID-19 and 68 from other causes. Cold Spring Hills fraudulently failed to report 51 of those 98 COVID-19 deaths to DOH, underreporting by 52 percent.

Respondents

The companies named in the lawsuit are Cold Spring Hills, the actual facility; Cold Spring Realty Acquisition, LLC (Cold Spring Realty), which owns the property where the nursing home is located; Ventura Services, LLC, Highview Management Inc., B&L Consulting, LLC, all of which claim to provide consulting services to nursing homes; Graph MGA, LLC, Graph Management, LLC, Graph Insurance Company A Risk Retention Group, which purportedly act as insurance brokerages; Philipson Family, LLC, which is a partial owner of Cold Spring Realty; Lifestar Family Holdings, which is a partial owner of Cold Spring Realty; Comprehensive Care Solutions, LLC, which purported to provide services and supplies; and Ross CSH Holdings, LLC, Rosewell Associates, LLC, and ZBL Management, LLC, all pass-through companies. Also named in the suit is the principal owner, Bent Philipson, whose role was concealed, Benjamin Landa, whose concealed his ownership; Joel Leifer; as well as David Zahler, his wife Chaya Zahler, their adult children Rochel David, Leah Friedman, Chaim Zahler, and Jacob Zahler, Avi Philipson (Bent Philipson’s adult son), Esther Farkovits (Benjamin Landa’s adult daughter), Rochel David and Leah Friedman (the Zahlers’ daughters) were straw owners of the nursing home, put in place to conceal their fathers’ control. Also named in the suit is Cheskel Berkowitz, Joel Zupnick, and the Estate of Deborah Philipson.

Remedies

The owners of Cold Spring Hills and their families engaged in repeated and persistent fraud and illegality in operating Cold Spring Hills, including but not limited to violating several laws designed to protect nursing home residents and cutting necessary staffing in order to further enrich the owners and their families. In her lawsuit filed today, Attorney General James seeks to:

• Prohibit Cold Spring Hills from admitting any new residents unless and until staffing levels meet appropriate standards;
• Require Cold Spring Hills to engage and pay for a financial monitor to oversee the facility’s financial operations;
• Require Cold Spring Hills to engage and pay for an independent healthcare monitor to oversee the facility’s healthcare operations and ensure residents’ outcomes improve;
• Remove Bent Philipson, Avi Philipson, Joel Leifer, Esther Farkovits, Rochel David, and Leah Friedman, and any of their related entities, from further serving or having any role at Cold Spring Hills;
• Direct all respondents to fully disgorge any and all funds wrongfully received as part of the scheme; and
• Direct all respondents corporate and individual to pay restitution and penalties.

Attorney General James has been investigating nursing homes throughout New York state based on concerns of patient neglect and other conduct that may have jeopardized the health and safety of residents and employees, both before and during the COVID-19 pandemic. In January 2021, Attorney General James released a report revealing that many nursing homes were ill-equipped and ill-prepared to deal with the pandemic crisis because of poor staffing levels and a lack of compliance with infection control protocols. Earlier this week, Attorney General James sued Fulton Commons nursing home for financial fraud and resident neglect. Last month, Attorney General James filed a lawsuit against The Villages of Orleans Health and Rehabilitation Center, a nursing home in Albion, New York, for years of financial fraud that resulted in significant resident neglect and harm. These lawsuits are a direct result of OAG’s nursing home investigations, which are ongoing.

Attorney General James encourages anyone with information or concerns about alarming nursing home conditions, or resident abuse or neglect to file a confidential complaint online or call the MFCU hotline at (833) 249-8499.

The investigation was conducted by a multi-disciplinary team from the Medicaid Fraud Control Unit, including Assistant Attorneys General Christina Pinnola, Karen McDonald, Anthony I. Giacobbe, Jr., and Brian Steinwascher; Medical Analyst Mary Conway, RN; Detective Supervisors Ronald Lynch and Luis Nieves, Detectives Ryan Ricker, Patrick Lubin, Robert Hatt, Dawn Scandaliato, Thomas Bolen, and Michael McNally, supervised by Deputy Chiefs William Falk and Kenneth Morgan; Auditor-Investigators Alexa Policano, David Stringer, and Brenna Magruder, Sr. Auditor-Invs. Patrick Beltrani and Michelle George, Principal Auditor-Inv. MaryAnn Carney, and Regional Chief Auditor Gretchen Hugh; Lead Data Scientist Si Lok Chao, Sr. Research Analyst Cally Connelly, and RA Elise Roche, with Confidential Systems Analysts Doreen Lankowicz and Anil Varghese; and Legal Support Analyst Anne Liptak.  The investigative teams were supervised by Regional Director Veronica Bindrim-MacDevitt, Chief of Civil Enforcement Alee N. Scott and Chief of Criminal Investigations Thomas O’Hanlon. MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney. MFCU is a part of the Division for Criminal Justice, which is led by Chief Deputy Attorney General José Maldonado and overseen by First Deputy Attorney General Jennifer Levy.

Attorney General James thanks the New York State Department of Health and Commissioner Mary T. Bassett, M.D.; and the United States Department of Health and Human Services, Office of the Inspector General, Assistant Special Agent-in-Charge Elysia Doherty.

MFCU’s total funding for federal fiscal year (FY) 2023 is $65,717,936. Of that total, 75 percent, or $49,288,452, is awarded under a grant from the U.S. Department of Health and Human Services. The remaining 25 percent, totaling $16,429,484 for FY 2023, is funded by New York state. Through MFCU’s recoveries in law enforcement actions, it regularly returns more to the state than it receives in state funding.