'A massive scam': Millions of dollars in fraud found at ‘New Jersey’s worst nursing home’

12 December 2024

woman in black and white long sleeve shirt sitting on black wheelchair

The owner and operators of a South Jersey nursing home pocketed millions of dollars in Medicaid money while its 110 residents lived in a dirty, understaffed facility, a scheme that went unnoticed for years by the state agencies tasked with oversight, the state Comptroller’s Office has found.

Acting state Comptroller Kevin D. Walsh said Thursday that his Medicaid fraud team first began looking into South Jersey Extended Care, a for-profit nursing home in Bridgeton, because it was the state’s worst, having received more one-star ratings than any of New Jersey’s roughly 350 nursing homes.

They soon uncovered evidence of “a massive scam, perpetrated for years,” Walsh said.

Investigators found that Michael Konig — who had been barred from operating nursing homes in Connecticut and Massachusetts because of serious violations — and his brother-in-law Steven Krausman ran the home, while its supposed owner, Konig’s cousin Mordechay “Mark” Weisz, was just a straw owner.

They discovered that the home took in $35.6 million in Medicaid funds from April 2018 to March 2023, but paid $38.9 million over that period to health care management businesses Konig and Krausman owned or controlled. The duo charged the home inflated prices while essentially acting as both customer and vendor — an arrangement that “ensured that the customer never complained,” investigators wrote in their report.

State and federal laws require nursing homes, as a way to avoid self-dealing and fraud, to disclose transactions with vendors that are related parties and cap related-party costs at actual cost or fair market value, whichever is lower. Konig and Krausman did neither, Walsh said.

“These individuals were able to amass a fortune by pretending to be independent parties. In reality, they operated as one unit, providing terrible care to the sick, the elderly, and the poor, so they could make big profits.” Walsh said in a statement.

Konig’s Broadway Health Care Management took in $10 million over two years to provide nursing and other services to the home, according to the report. Yet investigators found the home had perpetual staff shortages and unqualified people in key positions — the director of social work wasn’t a licensed social worker, while the director of nursing was a licensed practical nurse whose license had been suspended after her arrest on charges of forging prescriptions.

The home often failed to meet minimum health and safety standards required by Medicaid, investigators found. Inspection reports documented filthy conditions, late medications, and residents’ medical needs that went unmet.

The three men drove the home to the brink of bankruptcy, draining it of cash, investigators found.

The problems went beyond Bridgeton. Konig and Krausman contracted with nine other New Jersey nursing homes — in Trenton, Union, Manahawkin, Perth Amboy, Teaneck, Cape May Court House, Toms River, and Maple Shade — and charged them inflated prices too, profiting $45.5 million in the process, investigators found.

Geriscript Supplies, which Konig controlled, was contracted to provide medical supplies to all 10 nursing homes. But the company spent just $3.6 million on medical supplies — and meanwhile it paid $6 million on consulting and management fees to another Konig business and $800,000 to a religious charity Konig controlled, the report says.

Krausman and Konig’s businesses received $253 million from the 10 nursing homes over the five years investigators examined — 76% of the total Medicaid funds the homes received, investigators found.

Their scheme went unchecked even though the men racked up penalties in other probes, according to the report:

A federal judge ordered a staffing agency owned by Konig to pay $636,000 in back wages after the U.S. Department of Labor found it failed to pay overtime to at least 150 workers at 10 nursing homes in New Jersey.The Federal Trade Commission determined an internet company owned by Konig, Krausman, and a third person lied to consumers about rebates. The commission barred the trio from similar schemes and they agreed to pay the FTC $600,000.In the mid-1990s, officials in Massachusetts and Connecticut barred Konig from owning nursing homes after learning of alleged sexual and physical abuse of residents and other severe deficiencies at facilities he owned or operated in those states.

Konig lost a building he owned after he racked up more than 9,000 housing code violations in Brooklyn and filed for bankruptcy, according to the New York Daily News, which called him the “landlord from hell.”Walsh said his office, with the approval of the state attorney general’s office, suspended the three men, the nursing home in Bridgeton, Sterling Manor Nursing Center in Maple Shade (which Weisz also owns), and 11 others from New Jersey’s Medicaid program and is coordinating with state agencies to ensure residents get care.

“These notices of suspension to South Jersey Extended Care and Sterling Manor Nursing Center and 11 other related individuals and entities will allow the State to take necessary steps to address the problems, and most importantly, protect the nursing home residents and get them the care they need,” Attorney General Matt Platkin said in a statement.

Walsh said he also might try to recover overpayments and seek civil fines and administrative sanctions.

The New Jersey Monitor couldn’t reach the men for comment. But their attorneys told the Comptroller’s Office that the men were not related parties, the Bridgeton home now has a two-star rating, and their profits “were within acceptable profit margins.” They accused the office of failing to understand licensing requirements, financial documents, and applicable laws.

They also offered hundreds of pages of exhibits, “many of which undercut their own arguments, were internally inconsistent, or differed in significant ways from documents previously provided to OSC and other state and federal oversight bodies,” according to the report.

“OSC stands by its findings,” the report says.

Walsh made several recommendations to legislators, as well as the departments of health and human services, to tighten oversight of nursing homes.

This is the second time Walsh has sounded the alarm on New Jersey’s worst nursing homes. He issued a report in March 2023 that identified Weisz and Krausman as the owners or operators of several of the state’s lowest-rated nursing homes.

Walsh’s investigation remains ongoing, he added.

“Our report lays bare in great detail how unscrupulous nursing home operators are able to exploit weaknesses in the system and fleece the Medicaid program,” Walsh said. “We owe it to nursing home residents, and taxpayers, to take this moment seriously, to learn from this investigation, and to ensure this can’t happen again.”

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New Jersey Monitor is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. New Jersey Monitor maintains editorial independence. Contact Editor Terrence T. McDonald for questions: info@newjerseymonitor.com.

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