scales of justice

The landlord of an upstate New York nursing home and the unlicensed operators who ran the facility for years before its 2021 closure have agreed to pay nearly $7.2 million to resolve False Claims Act allegations.

In a settlement announcement Monday, the Justice Department outlined four years of mismanagement, patient safety violations and fraudulent billing at the Saratoga Center for Rehabilitation and Skilled Nursing Care located in Ballston Spa, about 30 miles north of Albany.

The settling parties were identified as 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. 

Together, they will be responsible for repaying $7,168,000 in Medicaid funding officials say they claimed illegally during years they ran the facility without a license, officials said.

Skyline Management Group had operational control of the facility for at least a year, but only its partner Jaffa was named in the settlement. Skyline’s principal, Joseph Schwartz, is already under federal indictment in New Jersey for an alleged $29.5 million tax fraud; he is reportedly working on a plea deal that could resolve multiple charges across the US.

Troubled beginnings

In 2014, New York officials approved Ari Schwartz and Vegh to operate Saratoga Center with Melohn, who was to serve as the landlord. Under the license, Schwartz and Vegh could not delegate their responsibility to oversee on-site operations.

But the Justice Department alleged that in or around early 2017, “due to a financial dispute,” Melohn forced Ari Schwartz and Vegh to surrender control of Saratoga Center. He replaced them with Jaffa and a business associate of his, along with various corporate entities — all of them unlicensed.

According to a 17-page document detailing the settlement with Schwartz, the financial dispute was over a busted loan meant to get Ari Schwartz, Vegh and a third partner in business at two nursing homes in Massachusetts and one in Pennsylvania. Federal officials said the trio “lacked adequate financial resources to fund the initial operating costs.”

The landlord “advanced them a line of credit through one of his wholly-owned entities rather than Vegh and Ari Schwartz obtaining a bank line of credit,” the settlement agreement said. “The landlord also allowed Schwartz and Vegh each to draw $15,000 per month from the line of credit to pay for their living expenses.”

When they applied for the Certificate of Need approval for Saratoga, officials said the three failed to disclose that ongoing business relationship, or that the two would-be operators were personally indebted to the landlord. 

Around early 2017, the landlord chose Skyline Management Group as a prospective buyer of the operations at Saratoga Center and the three other nursing homes. Skyline worked with Jaffa, who agreed to buy the real estate from Melohn. To “facilitate the transfer of control,” officials described Ari Schwartz — not believed to be related to Joseph Schwartz — and Vegh as signing documents that stated the original Saratoga company would “consult,” “assist,” “advise” and provide various “administrative services” to the center.

“Instead of abiding by the terms of these documents, Ari Schwartz and Vegh acquiesced to Joseph Schwartz, Skyline, Jack Jaffa, and SCRC exercising complete control over Saratoga Center,” the settlement agreement states. Prosecutors said that although Skyline, Jaffa and Scheinbaum took control of the facility, their applications for a CON “were either withdrawn or incomplete and were never approved.” 

That group operated the facility for just over a year when Skyline collapsed in spring of 2018. At that point, federal officials said, Jaffa then partnered with Chaim “Mutty” Scheinbaum and his Alliance Healthcare Management LLC for operations. 

Laundry list of problems

Between 2017 and 2021, the government said Saratoga delivered “worthless services” and allowed physical conditions to deteriorate, leading to regular violations of state and federal requirements.

“Specifically, the operators failed to adequately staff the home, and residents suffered medication errors, unnecessary falls, and the development of pressure ulcers,” a Justice Department press release stated. “Additionally, Saratoga Center did not consistently maintain hot water throughout the facility, have an adequate linen inventory, and dispose of solid waste.”

The building entered the Special Focus Facility program in 2019.

An attorney for Ari Schwartz and Saratoga Center for Care declined to comment when reached by phone Monday evening. McKnight’s Long-Term Care News was unable to immediately track down phone numbers, emails or websites for other individuals and entities involved in the settlement.

In addition to the financial settlement announced Monday, the US Department of Health and Human Services’ Office of Inspector General will exclude the individuals and entities from Medicare, Medicaid and all other federal healthcare programs for at least 10 years. Jaffa will be excluded for 20 years.

As for Saratoga Center, the facility was listed for sale at $7.6 million last spring, about a year after the facility closed amid the state and federal investigation. According to Medicare Care Compare, no skilled nursing facility is currently operating at that location.

The federal investigation was part of the Justice Department’s Elder Justice Initiative, which supports state and local prosecutors and law enforcement with training, resources and investigative support information.

This particular investigation was conducted in conjunction with the US Attorney for the Northern District of New York and New York Attorney General Letitia James, who has in recent months targeted at least four large nursing homes for fraud. She is seeking to recoup as much as $57.2 million she alleges was diverted from the Medicare and Medicaid programs in the three outstanding cases.

“Nursing homes should protect the health and well-being of every resident,” said US 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.”