Credit: gorodenkoff/Getty Images Plus

New York’s attorney general wants a state court to force the owners of a Syracuse nursing home to answer questions about “pocketing” $37.6 million in government funding, while the accused’s attorneys say such related-party transactions and other suspect business transactions are common and acceptable. 

Uri Koenig and Efraim Steif, owners of Van Duyn Center for Rehabilitation and Nursing, face numerous allegations of diverting Medicaid funds for their own financial gain, inadequate staffing, and neglect. NY Attorney General Letitia James’ office also alleges that the owners are intentionally “keeping staffing levels low,” according to a June 7 court filing asking the New York Supreme Court order to compel the owners to talk.

The case is the latest in the AG’s quest to spotlight what she considers predatory and illegal financial practices that have in some cases led to reduced staffing and serious patient care concerns. This is at least the fourth case James has pursued against for-profit owners since November of 2022.

In November, James sued the owners and operators of Comprehensive at Orleans LLC, doing business as The Villages of Orleans Health and Rehabilitation Center, a 120-bed nursing home in upstate New York, alleging the illegally diverted $18.6 million in Medicare and Medicaid funds. In December, she filed similar cases against Cold Spring Hills Center for Nursing and Rehabilitation and Fulton Commons Care Center, both located on Long Island.

The most recent Medicaid case demonstrates the lengths some states are going to to rein in regularly used business practices amid an equally aggressive pursuit by federal regulators to bring transparency to the nursing home sector.

“The Attorney General should be permitted to question Respondents about these financial arrangements, which served to siphon government funds from their intended purpose of supporting required resident care,” says a filing the AG’s office shared with McKnight’s Long-Term Care News on Friday.

“The policies that keep staffing levels low and resident census high appear to stem from decisions made by those who control Van Duyn’s operations and business decisions, including Respondent owners,” the filing added. “This is further supported by financial documents demonstrating that Respondent owners diverted money away from resident care and into their pockets by way of disbursements and related company transactions.”

The filing notes that the 513-bed facility has 78 citations from the state Department of Health, including two pertaining to Actual Harm or Immediate Jeopardy. The facility has been a candidate for placement on the Special Focus Facility list, which denotes the poorest performers in the country, since 2018, officials added. The Attorney General’s Medicaid Fraud Control Unit initially opened an investigation into Van Duyne in late 2017, the filing said. 

“[The] investigation has also shown that, during the period of Van Duyn’s poor performance, significant fund transfers out of the nursing home, whereby Respondents funneled millions of dollars paid to Van Duyn by government programs for resident care to themselves and related party companies,” the court document said. “Indeed, a non-profit organization’s analysis found that Van Duyn’s owners routinely engage in related company transactions designed to siphon taxpayer funds away from resident care.”

According to the court document, Koenig and Steif either “own or are strongly affiliated” with related parties that conduct business with the nursing home, including Upstate Services Group, LLC, which provides administrative consulting services to Van Duyn; Fiscal Care, LLC, which provides Van Duyn’s billing services; CFare Foods, LLC, which provides Van Duyn’s food services. Koenig and Steif also control all or part of the company to which the facility pays a “vastly inflated rent,” the document said. 

David R. Ross, an attorney with O’Connell and Aronowitz, however, said the owners intend to provide a response to the Attorney General’s office showing that the way Van Duyn conducts business is in accordance with state regulations. 

“Related party transactions are the norm, as they create economies of scale and resulting cost savings which benefit everyone,” Ross said in a statement to McKnight’s. “These related party transactions are standard practices that are commonplace in New York State and throughout the country, and are characteristic of for-profit and nonprofit nursing homes, as well as hospitals. All related party transactions are fully transparent and are required to be, and have been, reported to the New York State Department of Health in annual cost reports.”