Kickback Settlement
Numerous websites and news organizations have written about the recent settlement between the DOJ and Murray Forman, Rubin Schron, and Leonard Grunstein, owners and operators of hundreds of nursing homes through various entities such as Mariner, Sava Senior Care and Fundamental Long Term Care Holdings. See articles and press releases here, here, here, here, here, here, here, here, here, here, here, and here.
What is incredible and disappointing about the settlement is the DOJ only made these criminals pay $14 million but did not make them testify, admit guilt, payback the kickback, or take away their ability to continue owning and operating nursing homes. What kind of penalty is $14 million when they have stolen millions more from Medicare and Medicaid? Why did the DOJ make the now defunct Mariner pay but not their successor Sava Senior Care? Why did they allow the Complaint to be dismissed before the settlement? Why did they allow Forman and Grunstein, the masterminds behind the illegal scheme deny any responsibility or wrongdoing? Why didn't they make Forman and Grunstein pay the kickback back to Medicaid and Medicare?
The settlement resolves the United States’ allegations that the defendants solicited and received kickback payments from Omnicare, Inc. (“Omnicare”), the nation’s largest pharmacy that specializes in dispensing drugs to nursing home patients.
"As outlined in the government's complaint, Rubin Schron, Leonard Grunstein and Murray Forman tried to disguise an unlawful kickback payment," said Mary Louise Cohen, a Washington, DC, attorney with Phillips & Cohen LLP, which represents the whistle-blower. "Omnicare's $50 million payment for a small unit of Mariner Health Care -- which had less than $3 million in assets and only two employees -- just didn't add up without figuring out what else Omnicare was getting as part of the deal."
In a Complaint filed in March 2009 and unsealed in November 2009, the United States alleged that Omnicare, Mariner, Sava, Grunstein, Forman, and Schron conspired to arrange for Omnicare to pay $50 million in exchange for agreements by Mariner and Sava to use Omnicare’s pharmacy services for 15 years. In 2004, Grunstein and Forman proposed that Schron provide financial backing for the acquisition of Mariner, which at that time was one of Omnicare’s largest customers. Grunstein and Forman attempted to arrange the Mariner acquisition so that Schron would have to contribute as little cash as possible. To achieve this end, Grunstein and Forman pursued a plan to sell to Omnicare the right to continue providing pharmacy services to Mariner, even though Forman was warned by lawyers that selling the right to provide pharmacy services would constitute an illegal kickback.
Grunstein and Forman thereafter arranged for Omnicare to pay them $50 million to purchase a Mariner company that had only two employees and no tangible assets. Omnicare paid $40 million of this amount up front, prior to actually acquiring the Mariner business unit, and simultaneously obtained new 15-year pharmacy contracts from Mariner and from Sava, a new nursing home chain that Grunstein and Forman created from Mariner. Grunstein and Forman illegally tied the new pharmacy contracts to Omnicare’s agreement to purchase the small Mariner business unit, and that the total $50 million purchase price for the business unit actually was a kickback by Omnicare to keep the future business of Mariner and Sava. In 2006, after the Government issued subpoenas concerning the transaction, the individual defendants created backdated documents in a further attempt to hide the kickback.
In November 2009, the United States and Omnicare entered into a $98 million settlement agreement that resolved Omnicare’s civil liability under the False Claims Act for paying kickbacks to keep the Mariner and Sava business. So Forman and Grunstein coerced OmniCare to pay them a $50 million kickback and Omni had to pay $98 million but Forman and Grunstein and their companies only had to pay $14 million!?!
As part of the settlement, Mariner has entered into a corporate integrity agreement. This agreement provides for Mariner to put in place procedures and reviews to avoid and promptly detect conduct similar to that which gave rise to this matter. At the same time, OIG-HHS has reserved its rights to seek exclusions of Sava, Grunstein, Forman, and/or Schron from participation in Medicare, Medicaid, and all other Federal health care programs.
"I suspect that if you got [Grunstein, Schron and Forman] all in a room and asked them whose fault this was, they'd all be pointing at someone else," says one person familiar with the case. "And that's really what this transaction was about --setting up all these different entities and shells and moving pieces so that nobody had responsibility."
Rubin Schron, a New York real estate investor who along with National Senior Care Inc., bought Mariner Health Care Inc., which is at the center of the kickback scheme. -- Leonard Grunstein, a New York real estate attorney who was a partner with the law firm, Troutman Sanders. He was Schron's agent in the purchase of Mariner Health Care Inc. and in the alleged kickback scheme. -- Murray Forman, an associate of Grunstein's and Schron's who also is president of a Long Island school board. -- Mariner Health Care Inc., a Delaware corporation with headquarters in Atlanta, Georgia, that operates nursing homes and, according to the government's complaint in this case, is controlled by Schron. -- SavaSeniorCare Administrative Services LLC, a privately held Delaware company with headquarters in Atlanta, Georgia, also reportedly controlled by Schron. Sava affiliates lease and operate nursing homes.
This settlement is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $3 billion
