South Carolina Nursing Home Blog : South Carolina Nursing Home Lawyer & Attorney : Poliakoff & Associates Law Firm : Elderly Care, Senior Care

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

 

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Below is a great old article about attorney Jay Reinan from Colorado who fought on behalf of John Gordy against the infamous Mariner chain.  Reinan had been a nursing home defense lawyer until he saw the light.   Here is the full article. 

John Gordy's story is tragic and typical of many residents in nursing homes.   He was neglected and abused by those he entrusted with his safety and care.   In 2002 he was admitted to the Red Rocks facility.  Right away, things started going wrong. Though Red Rocks' advertising promised excellence in wound care, Gordy felt like he had to train every new aide who walked into his room. And because of constant turnover, there were many. An ulcer on his foot was ignored to the point of needing surgery. Twice. He almost died after being given the wrong antibiotic. He was forced to lie helpless, despite his protests, as a hot towel scalded the flesh of his chest, leaving him with second-degree burns -- an attempt to warm him when the heat at the facility was broken. But nothing was as bad as the nighttime. Gordy's call light was his only defense in an emergency, but it took aides hours to answer. One night he was left near the side of his bed, with the bed rail down. As he felt himself sliding toward the edge, he yelled out for help, knowing it would only be a matter of time before he fell. He screamed all night, but no one came. At the 6 a.m. shift change, someone finally checked on him; just as the aide entered the room, Gordy crashed off the bed and landed on his face, smashing his teeth.

Jerome "Jay" Reinan is a Denver lawyer who spends his days fighting for abused and neglected clients such as John Gordy, wasn't always on the side of right.  He used to work for what he calls "the dark side," defending corporate nursing homes against such claims. "I was probably one of the primary nursing-home defense lawyers in the state before I switched over," he says matter-of-factly. 

Despite courtroom successes, there were early signs that defense work didn't suit Reinan. He didn't like not being able to choose cases, and he hated that clients were billed on an hourly basis. "You have to keep track of every minute," he says. "If I was on a phone call with a client, I would have to have a piece of paper or a computer program where I kept track of every second I was talking to that person, and it drove me nuts."

It wasn't until 1996 that Reinan took the case that would end his career in nursing-home defense. It started with the families of four residents of Cedars Health Care Center in Lakewood but would grow to include everyone who had lived there between 1993 and 1998, nearly 200 people. During the course of the litigation, the nursing home's owner went through a series of mergers to create Mariner Post-Acute Network. The sheer size of the case was overwhelming, and it absorbed almost all of Reinan's efforts as well as that of one of his partners and two associates. But in the midst of the massive undertaking, Mariner stopped paying its legal bills -- $250,000 worth. (The company would file for bankruptcy in 2000 and emerge as Mariner Health Care Inc. in 2002.) "The mentality you get into on the defense side is, if you have one big client, you're going to kiss that client's butt," Reinan says. "Even if they're not paying the bills on time or they're cutting your bills back, you just have to take it."

But Reinan didn't want to take it anymore. He knew if he was ever going to switch sides and represent people injured by nursing homes, the time was right.  Reinan fired Mariner and demanded payment for what he was owed. His partners protested, but he told them it was his client, his decision. Mariner eventually paid, but the partners split, and Reinan started his own practice in October 1999.

Jay Reinan accepted a case against Red Rocks Healthcare Center for allowing resident Chris Tisserat to starve and dehydrate. But when he filed suit, he got an interesting call from Mariner Health Care Inc., Red Rocks' owner and the company he once represented. "I get a call from their national counsel saying Mariner's almost going bankrupt. They're running out of money and can't pay very much for this claim. 'You'd better take what I'm offering today because it may not be here tomorrow.'"

So he did. Reinan knew if he held out for more and the company filed for bankruptcy protection, his client might end up with nothing. His mistake in taking the bait didn't occur to him until months later.

In summer 2005, John Gordy's case against Red Rocks was referred to Reinan. It was exactly the type of case that Reinan prefers to take. Not only could he show what horrors Gordy had suffered, but records from the Colorado Department of Public Health and Environment showed a pattern of substandard care. Between 2002 and 2005, Red Rocks had been cited with seven deficiencies for failure to prevent or treat pressure sores, five deficiencies for failure to adequately maintain clinical records on residents, and four for failure to prevent falls. Across the state, nearly all of Mariner's thirty nursing homes were cited with serious deficiencies. Eleven were cited for pressure sores at a time when the company was promising superior wound prevention. In fact, the company had such a bad record that the U.S. Department of Health and Human Services had previously sued it for fraud because Mariner facilities hadn't provided the minimum standard of care required by Medicare and Medicaid.

In early 2002, Mariner paid $26 million in fines and entered a Corporate Integrity Agreement with the Office of the Inspector General. A 47-page document specifies every care and accountability standard that Mariner facilities must meet if the company wants to keep its Medicare and Medicaid checks coming.

As Reinan prepared to file Gordy's case, he thought about his last settlement with Mariner. He assumed the company had managed to avoid bankruptcy, as he hadn't heard any more talk of an impending filing. He ran a simple Internet search in late 2005 to check the company's status and found that Mariner hadn't been paying creditors or even its own attorneys: Gulf South Medical Supply was suing Mariner for nearly $5 million it was owed for supplies, and Brunini, Grantham, Grower and Hewes PLLC, a defense firm in Mississippi that represented Mariner, was suing the company for nearly $1 million owed in legal bills. Reinan was glad he had fired Mariner as a client when they owed him only $250,000.

He also found that a group of real-estate investors had formed a company called National Senior Care Inc. in order to purchase the publicly traded Mariner Health Care Inc. The $1 billion deal that went through in December 2004 was a leveraged buyout, as NSC sold off much of Mariner's real-estate assets -- 180 facilities -- to finance the sale. Interestingly, the owners of the companies who bought the assets have ties to NSC, including Leonard Grunstein whose brother is NSC president Harry Grunstein. That sale left the now-privately owned Mariner -- which continued to operate under its own name -- a shell of its former self, worth only $5 million to $12 million, compared to its earlier billion-dollar valuation. Separating the real-estate holdings from the actual health-care operation had an upside for the company's new owners: It reduced their exposure to liability lawsuits, because such cases can only be filed against the company holding the license to provide care, and Mariner's post-sale bottom line looked too emaciated to afford big payouts.

When Reinan took a closer look at the ownership of Red Rocks Healthcare Center, he found a tangled web of companies. But as he traced back the licensure documents, he noticed that the same names kept reappearing: real-estate moguls Harry and Leonard Grunstein and Rubin and Avi Schron. "The land is owned by a company owned by these four guys, and the building is owned by another company owned by these four guys, and the staff is managed by a company that is owned by these four guys. Then there's layers of companies that lease the staff and the building to other companies owned by these four guys, and pretty soon you have something like literally ten or twelve companies that all have their little fingers in running Red Rocks Healthcare Center," he says.

"Why do they do that? It allows them to own all the assets that used to be Mariner, but at the same time avoid liability to the people they hurt, maim and kill at their facilities."

Reinan amended the complaint in the Gordy suit, adding all the specific companies involved and their individual owners. He also included that long list of defendants in a new lawsuit on behalf of Peggy Mussehl, whom he claimed was neglected at another Mariner facility, Fort Collins Health Care Center.  Reinan got a call from Mariner's local attorney, a former colleague, assuring him that adding the additional companies and individuals as defendants would only complicate and drag out the case. It wasn't necessary, he explained, because Mariner had liability insurance.

Reinan agreed to dismiss the extra parties from the complaint, with a warning: "If I hear a whiff of evidence from anyone that Mariner doesn't have money, Mariner doesn't have insurance, I'm going to refile this thing pronto."

A month later, in March, Reinan got a letter in the mail from Martin Stein in New York, the same man who had urged him to settle the Tisserat suit: There are currently approximately 300 open claims against the Mariner entities, alleging injury and/or loss. These include many high exposure cases which are scheduled for trial over the next few months. With respect to almost all of these cases, including the above-captioned matter, there is no insurance available for the first $1 million of loss (including fees and expenses). This means that any judgment in such cases up to $1 million (less fees and expenses incurred) will have to be satisfied from the Mariner assets, if any, available at the time of judgment.

Under the circumstances, I hereby offer $35,000 to settle the [John Gordy] case on behalf of Mariner and its related entities.Š Finally, please be advised that on February 8 and 9, 2005, Mariner won three defense verdicts in professional liability cases, two in Florida and one in Texas.

Two days later, Reinan received the same form letter regarding the Mussehl case. As part of Colorado's tort reform in 1986, nursing homes and other medical facilities were required to obtain insurance as a trade-off for caps being set on awards. Colorado law now requires each nursing home to have at least $3 million in insurance, so Reinan requested the licensure information from the state health department. In the affidavits, signed in 2005, company officials had sworn that each facility had the necessary insurance.

Stein maintains that he has "never said that Mariner does not have insurance" and has "never sent a letter to any attorney on behalf of Mariner saying that Mariner doesn't have any insurance." When asked to clarify the content of the letter, he refused and hung up the phone. Attempts to contact Mariner's in-house counsel and Leonard Grunstein, who is named individually in Reinan's complaints, were unsuccessful. 

Reinan suspects that the new owners are hoping trial lawyers will shy away from claims against Mariner once they find that there's no money and no insurance. Most attorneys would rather take cases against financially sound companies with whom they can settle quickly. In April, Reinan again amended his complaints against Mariner to add the individual owners and associated companies, then filed a new suit in federal court.

Reinan also sent letters to the Colorado Department of Public Health and Environment, the Colorado Department of Regulatory Agencies Division of Insurance and the U.S. Office of the Inspector General detailing what he knew about Mariner's insurance situation and including copies of his letters from Stein and the affidavits submitted to the state health department. "Obviously, one of two things has happened," he wrote. "Either Mariner is employing fraudulent insurance-claims tactics by pretending it has no money in order [to] save on claims payments, or Mariner truly has no money and no insurance, and the affidavits issued by [company officials] are phony and fraudulent. In either case, the State of Colorado must investigate this matter."

 

 

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Jackson Free Press had an interesting and scary article about presidential contender Haley Barbour's flip flopping on Medicare and history as a lobbyist and Tom Delay's indictment for illegal campaign donations.   When Haley Barbour was head of the Republican National Committee from 1993 to 1997, he loathed Medicare, and tried to gun it down in the GOP “Contract with America.”  By 2000, Barbour had returned to his lobbyist job at Barbour Griffith & Rogers, and had dramatically flip-flopped on Medicare, then lobbying for more federal tax dollars to be directed into the program. 

The Alliance for Quality Nursing Home Care Inc. was formed in 2000 as a corporate coalition of 14 of the country’s largest for-profit nursing home companies to help ease the way for the corporate consolidation of the nursing-home industry.   The coalition opposed Medicare cuts and government regulation of nursing-home standards and consolidation, and, perhaps most vitally, wanted low caps on the lawsuit damages the companies had to pay for abusing and neglecting nursing-home residents. The coalition paid top dollar to ensure the election of candidates who agreed with its agenda.   It directed impressive campaign donations to mostly Republican candidates around the country who would, in turn, honor the wishes of one of the country’s most tenacious industries.

That resolve is how a check for $100,000 written three years ago this week ended up illegally funding Republican candidates for the Texas statehouse.  That’s also how that canceled check ended as a primary exhibit in the case of State of Texas v. Thomas Dale Delay et al.

Unlike Mississippi, the state of Texas has long taken campaign-finance violations seriously, especially donations coming from outside the state to try to tell Texans what to do, and how to vote.  Violation is a felony, punishable by hefty fines and up to life in prison.

Rep. Tom Delay appears to have put considerable effort into circumventing that law. The former bug exterminator from Sugar Land became majority leader of the U.S. House of Representatives by his complicated web of political friends and family members including his own wife, Christine, and daughter, Danielle Ferro.

Delay has run a creative maze of schemes since the mid-1990s to get Republicans elected to office and “keep Republicans in lockstep,” using “threats and incentives,” as The Wall Street Journal characterized his style in June 2004.  He has been investigated five times and brought before the House Ethics Committee for his strong-arming of fellow members of Congress, trying to use donations to a children’s charity for a donor cruise, rewarding check-writers with face time with GOP stars, and other irregularities.

What prompted a grand jury of his home-state peers to indict him in September and again earlier this month on conspiracy and money laundering charges was his Texans for a Republican Majority Political Action Committee, known as TRMPAC.  Delay used the PAC to collect illegal corporate contributions (a third-degree felony) from January 2001 through the end of 2002 from corporations and then slip the money to 2002 candidates for the Texas statehouse (a first-degree felony). Much of the money was used to fund a last-minute campaign blitz—another violation of Texas law.

In return, the donors had a laundry list of demands—including tort reform and a blind eye to their consolidation plans.  The nursing-home industry, with its heavy reliance on government payouts for profits, is ripe for exploitation. And stories about the internal workings of nursing-homes aren’t exactly sexy enough for front page news.

“What we have seen is these corporations evolve to trying to shield themselves from liability or from paying taxes in such a way to finagle the law in ways no one imagined just a few years ago,” said Mississippi Rep. Jamie Franks, a lawyer and Democrat from Mooreville who is leading an effort to more closely monitor Mississippi’s nursing home industry.  “It’s amazing what high-dollar lawyers and high-dollar accountants can do.” He added: “And high-dollar lobbyists. You can throw that in there, too.”

What those high-dollar strategists did in 2000 was form the Alliance for Quality Nursing Home Care Inc., so that the industry giants—for-profit nursing homes that were members of the American Health Care Association—could pool their resources to overcome regulations regarding standard of care and limit lawsuit damages in as many states as possible and, ultimately, on the federal level in order to supersede state law.

The Alliance heavily lobbied the federal government to increase Medicare payments because for-profit nursing homes take more money from Medicare than Medicaid, which tends to sustain their competitors, the non-profit nursing homes. 

In October 2002, the Alliance invested in Delay’s scheme to pack the Texas statehouse (and thus Congress) writing a check for $100,000 to TRMPAC, dated Oct. 18 and signed by Alliance leader Stephen L. Guillard of Harborside Healthcare Corp. in Boston. On Oct. 21, Chris Winkle—then the chief executive of Mariner Health Care in Atlanta—met state Rep. Tom Craddick, R-Midland. They talked about the need to limit liability in lawsuits against nursing homes; then Winkle presented Craddick with the check, which TRMPAC deposited two days later. On Oct. 24, the Alliance contributed another $300,000 to the Texas Association of Business, an employers’ group that is now also under indictment in Texas for allegedly helping collect and launder illegal contributions.

After the 2002 election, in which 21 additional Republicans were elected to the Texas statehouse, Craddick became speaker of the Texas House of Representatives, and the Legislature quickly gave industry its desired “tort reform”—including $250,000 in non-economic damage caps and special provisions to shield nursing homes—that would become the model for industry efforts in other states, such as Mississippi in 2004 (which ended up compromising on $500,000 damage caps).

Ironically, it was one of the alleged conspirators who exposed the scam. The Texas Association of Business, or TAB, could hardly contain its glee over its success, reporting in a newsletter to members that it “blew the doors off the Nov. 5 election, using an unprecedented show of muscle that featured political contributions and a massive voter education drive.” And as the Wall Street Journal reported, its president, Bill Hammond, a former Texas legislator, bragged to the media that the group had used corporate money to finance a $2 million advertising campaign backing Delay’s slate of candidates.

Watchdog groups like Texans for Public Justice in Austin took notice and started following the money, ultimately finding that TRMPAC’s tax return showed that it had raised $1.5 million to help with the state races—and that $600,000 had come from corporate donations. Travis County District Attorney Ronnie Earle started investigating TRMPAC’s activities after Texans for Public Justice filed a complaint based on the revelations on the tax returns.

In September 2004, the indictments began when a Travis County grand jury handed down 32 indictment counts against TRMPAC and TAB and their leaders, as well as against eight companies that had supplied corporate funds, including State Farm Insurance, AT&T, the Union Pacific Railroad and the Alliance for Quality Nursing Home Care. On May 25, 2005, District Judge Joe Hart ruled in a civil case brought by 2002 Democratic candidates against TRMPAC that the use of corporate funds had violated the Texas Election Code.

On Sept. 28, 2005, the grand jury indicted Tom Delay and associates Jim Ellis and John Colyandro for conspiracy in the illegal scheme, and then on Oct. 3, a different grand jury indicted Delay on two new charges of money laundering.

Other friends of TRMPAC and its donors, such as now-Gov. Haley Barbour—who lobbied for the Alliance until he left his hefty stock in Barbour Griffith & Rogers in a reversible blind trust so he could take over the governor’s mansion in Mississippi—are distancing themselves from the beleaguered Alliance, if not from Delay.   It is not in dispute, that Barbour was lobbying in his client’s interest to block Medicare cuts at the same time that his client was presenting a $100,000 check to Craddick. (The $300,000 check from the Alliance to TAB followed a few days later.)

Andrew Wheat, the research director of Texans for Public Justice, balks at the idea that Barbour was not privy to the Alliance’s agenda—especially since his lobbying firm represented three of the corporate TRMPAC donors (the Alliance, Kindred Healthcare and Reliant Energy)—lobbying contracts worth $440,000 to Barbour Griffith & Rogers in 2002 alone. Barbour’s clients gave more money to TRMPAC than any of the other 10 lobbying firms who were represented. He was CEO of Barbour Griffth & Rogers and representing the nursing homes when the Alliance was created in 2000.

The Alliance’s agenda is one that is wreaking havoc in states like Texas, Arkansas and Mississippi, where its members control much of the nursing-home business and are now getting their way, thanks to a nationwide corporate realignment, consumer advocates say. The changes in the historically tightly regulated nursing-home industry are profound.

Franks points to the December 2004 sale of Mariner Health Care for $1.05 billion to National Senior Care, owned by New York real estate investor Harry Grunstein. Harry is Leonard Grunstein's brother.  Leonard Grunstein is partners with Murray Forman.  Harry sold Mariner’s assets to cover the costs of the acquisition, reducing the worth and assets of Mariner to $12 million and, critics say, operating the nursing homes more like rental units. “It basically became a real-estate transaction rather than a group caring for vulnerable adults,” Franks said. He added that, now, the nursing homes seem to be escaping accountability with these transfers. “There is no background check to find out whether they are financially solvent, or good corporate citizens. They simply transfer the license,” he said.

Because it is the licensee that is regulated, the process of stripping that licensee of its assets is essentially a tricky end run, allowing the real-estate owners, such as Grunstein, to escape liability. This, combined with the increased “tort reform” damage caps sought by the Alliance, insulates the corporate owners from the regulatory safeguards that are meant to protect patients and the elderly.   In turn, those licensees are now defaulting on money owed to vendors in states like Mississippi. And because assets are being ripped away from the nursing homes themselves, they end up with little to be sought in lawsuits brought by the vendors looking to be repaid.

One unpaid Mississippi vendor is the law firm Brunini, Grantham, Grower & Hewes in Jackson, which is suing Mariner for $951,915.17 in legal fees for defending the nursing homes. In the complaint, filed in Hinds County Chancery Court, Brunini describes Mariner’s “leveraged buyout” scheme, which it alleges is “fraudulent.”   Franks points to hearings in Arkansas, called by a Republican and a Democrat, that just concluded that the state has ended up with “no” regulatory power over these companies, due to their maneuvering. “This is not partisan,” Franks said. “It’s a consumer issue. It’s about protecting vulnerable citizens and our tax dollars.”

 

 

 

Key Members

Advocat Inc.
1621 Galleria Boulevard
Brentwood, TN 37027
William R. Council, III, President and CEO

Alden Management Services, Inc.
4200 West Peterson Avenue
Suite 140
Chicago, IL 60646
Floyd A. Schlossberg, CEO/President

Britthaven
P.O. Box 6159
Kingston, NC 28501
N. Randy Uzzell, President

CommuniCare Health Services
4700 Ashwood Drive, Suite 200
Cincinnati, OH 45241
Stephen L. Rosedale, Chairman & CEO

Complete Health Care Resources
200 Dryden Road, Suite 2000
Dresher, PA 19025
Peter J. Licari, President and CEO

Consulate Health Care, LLC
800 Concourse Parkway South, Suite 200
Maitland, FL 32751
Joe Conte President and CEO

Direct Supply, Inc.
6767 N. Industrial Road
Milwaukee, WI 53223
Robert J. Hillis, President and CEO

Extendicare, Inc.
111 W. Michigan St., 5th Floor
Milwaukee, WI 53203
Timothy L. Lukenda, President & CEO

FUNDAMENTAL
930 Ridgebrook Road
Sparks, MD 21152
Mark L. Fulchino, President and CEO

Genesis HealthCare Corporation
101 East State Street
Kennett Square, PA 19348
George Hager, Chairman and CEO

HCR Manor Care Corp.
333 North Summit Street
P.O. Box 10086
Toledo, OH 43699-0086
Stephen L. Guillard, Executive Vice President and COO

Kindred Healthcare
680 South Fourth Avenue
Louisville, KY 40202
Paul Diaz, President & CEO

Medical Facilities of America
P.O. Box 29600
2917 Penn Forest Blvd.
Suite 200
Roanoke, VA 24018
W. Heywood Fralin, Chairman and CEO

NHS Management, LLC
931 Fairfax Park
Tuscaloosa, AL 35406
Norman Estes, President

Sun Healthcare Group, Inc.
18831 Von Karman, Suite 400
Irvine, CA 92612
Richard K. Matros, Chairman and CEO

UHS-Pruitt Corporation
1626 Jeurgens Court
Norcross, GA 30093
Neil L. Pruitt, Jr., Chairman and CEO

 

 

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The March 2005 article in Counsel to Counsel discusses the complex but supposedly legal transaction involving Mariner and other entities including National Senior Care.  The article mentions the complexity of the billion dollar transaction.   After all, the deal took nearly seven
months to complete; involved roughly 80 attorneys from a half-dozen law firms; and hinged on the sale and lease-back of Mariner’s most valuable assets—its skilled nursing facilities.  Through its operating subsidiaries, Mariner owned, leased or managed nearly 260 skilled nursing facilities in more than 20 states and over a dozen long-term acute care hospitals in four states.

NSC (Harry Grunstein, Defendant Leonard's brother from Israel) came calling in April 2004. NSC wanted to take the company private and made Mariner and its shareholders an offer that really was too good to refuse—$30 per share for a stock that was at that time trading in the low $20 range, plus the assumption of some $350 million in debt.  Specifically, the deal involved selling
170 of Mariner’s 260 skilled nursing facilities to a third party—SMV, a real estate investment company—to help NSC finance the merger. Under terms of the proposed agreement, SMV would lease the properties back to either Mariner (which by then would be an NSC subsidiary), or to another company, Sava SeniorCare. Further, after establishing a bridge loan to pay off Mariner’s shareholders, NSC would use the approximately $600 million realized by the sale of  the properties to finance the acquisition—including paying off both the bridge loan and Mariner’s
outstanding debt.

Executive compensation attorneys came in to review and restructure Mariner’s senior management agreements and benefit packages—including an employee retention plan
developed after NSC made it clear it wanted to keep the Mariner management  team in place.

Many readers may be wondering how this kickback scheme affects residents in a nursing home. Jim Edwards wrote on a blog recently that "The scariest wrinkle in the Omnicare kickback case is just how vulnerable old people in nursing homes are to schemes in which drug companies allegedly induce pharmacies to prescribe drugs they otherwise wouldn’t." Edwards cites one case where one patient cited by the government’s complaint received 67 — sixty-seven! – different drugs under Omnicare’s “care”. Those drugs included Cipro, Neurontin, Heparin, Pepcid, Oxycodone and Seroquel or their generics, according to the complaint.

Remember we as taxpayers pay for these medications and services to provide for the most vulnerable citizens in our country not to go into the pockets of corrupt and greedy corporate owners.

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My next three entries will discuss the exploits and complaints against OmniCare, Mariner, SavaSeniorCare, and Murray Foreman, Rubin Schron, and Leonard Grunstein who own and operate hundreds of nursing homes through a complex maze of corporate shenanigans, and were finally caught gaming the system to make millions and deprive our loved ones of the necessary care they deserve.  Our taxes are going into the pocket of these greedy corrupt men.

There have been numerous articles on these cases and I will try to organize, summarize, and paraphrase most of them in the next three days.  It is interesting that none of the article discusses Murray Foreman and Leonard Grunstein's ownership of Fundamental Long Term Care Company that owns and operates hundreds of other nursing homes using the THI name.

The Wall Street Journal wrote geriatric pharmacy company Omnicare Inc. will pay $98 million to settle charges that it engaged in several kickback schemes with drug makers and nursing homes.  The Justice Department alleged that Omnicare regularly paid kickbacks to nursing homes in order to induce the homes to refer their patients to Omnicare for pharmacy services.  Separately, the department said it was intervening in a lawsuit alleging that two nursing-home chains, Mariner Health Care Inc. and SavaSeniorCare Administrative Services, accepted kickbacks from Omnicare in return for pharmacy-service contracts.

Reuters had an article that added additional facts.   DOJ filed a complaint against two large nursing home chains, Mariner Health Care Inc. and SavaSeniorCare Administrative Services LLC, both of Atlanta, and their principals, Leonard Grunstein, Murray Forman, and Rubin Schron, for accepting a kickback from Omnicare in return for pharmacy services contracts.  The company allegedly solicited and received kickbacks in exchange for agreeing to recommend that physicians prescribe Risperdal, a  dangerous antipsychotic drug, to nursing home patients.

The government further alleged that Omnicare regularly paid kickbacks to nursing homes by providing consultant pharmacist services at rates below the company's cost and below the fair market value of such services in order to induce the homes to refer their patients to Omnicare
for pharmacy services.

The United States alleges that Omnicare, Mariner Health Care, SavaSenior Care, Grunstein, Forman, and Schron conspired to arrange for Omnicare to pay the nursing home chains $50 million in exchange for the right to continue providing pharmacy services to the nursing homes, which together constituted one of Omnicare's largest customers. Defendants attempted to disguise the $50 million kickback as a payment to acquire a small Mariner Health Care business unit that had only two employees and was worth far less than $50 million.

After they became aware of the government's investigation, Grunstein, Forman, and Schron allegedly created false backdated documents in a further attempt to hide the kickback. These
allegations are detailed in a separate complaint that was unsealed recently.  Read the Complaint here.

More to come tomorrow.

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The children of 94-year-old Alice Limbrick claim their mother's legs had to be amputated  because of negligent care during her stay at the Green Acres Parkdale nursing home.

The trial of Roy Limbrick vs. Mariner Health Care Inc. (Green Acres) began Jan. 23.  The defense will attempt to convince the jury that the amputating Alice Limbrick's legs had to be taken because of Alice's medical conditions and old age.

Alice Limbrick was admitted to Green Acres for long-term care with multiple health problems.  During her residency, Alice fell fracturing her left hip.

The plaintiffs say Limbrick was admitted to the hospital as a result of the preventable fall where she developed pressure ulcers (bed sores) and eight blisters on both heels and left leg. She was in stable condition and was discharged back to Green Acres.

A week later, she was readmitted to the hospital with gangrene on both heels.   The decubitus ulcers to her heels and left leg continued to deteriorate.  Limbrick's legs were amputated below her knees. 

In the suit, the plaintiffs allege that Green Acres' nurses were negligent in the following ways:

Failing to properly monitor, treat and care for the decubitus ulcers, which progressed and worsened while Alice was a resident;

Failing to properly assess Alice's risk level in the progression of pressure ulcers;

Failing to prevent the progression of Alice's decubitus ulcers;

And by failing to prevent infection in Alice's decubitus ulcers.

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