Investigation Uncovers Millions of Dollars of Fraud, Waste, and Abuse at New Jersey’s Worst Nursing Home
Report by Office of the State Comptroller exposes years of hidden profiteering by the owner/operators of South Jersey Extended Care.
PRESS CONTACT: Pamela.Kruger@osc.nj.gov
TRENTON—An investigation finds that the owner and operators of South Jersey Extended Care (SJEC), a for-profit nursing home, improperly funneled millions of dollars of Medicaid funds out of the nursing home into their own businesses and personal charities, leaving residents to live in a dismal, understaffed, and under resourced facility, according to a report by the Office of the State Comptroller (OSC).
Consistently given the lowest, one-star rating by the U.S. Centers for Medicare & Medicaid Services, the Bridgeton, NJ-based nursing home, on paper, is owned by Mordechay “Mark” Weisz. In actuality, OSC found Weisz was a straw owner who yielded all control to his cousin, Michael Konig, and Konig’s brother-in-law, Steven Krausman. During the period under review, April 2018 until March 2023, Konig and Krausman were in charge of SJEC finances, operations, and administration, signing the checks, making the decisions and enriching themselves with public funds – to the detriment of SJEC residents, the investigation by OSC’s Medicaid Fraud Division found.
OSC examined tens of thousands of documents, including financial and medical records, and conducted sworn interviews with Weisz, Konig, and Krausman, among others. During the investigative period, OSC found that SJEC took in $35.6 million in Medicaid funds but paid $38.9 million to businesses owned and controlled by brothers-in-law, Krausman and Konig. By serving as both seller and buyer, vendor and customer, Krausman and Konig were able to charge grossly inflated prices and pocket the profits, ensuring that “the customer never complained,” according to the 52-page report.
“This was a massive scam, perpetrated for years,” said Acting State Comptroller Kevin Walsh. “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.”
OSC, with the approval of the Attorney General, is suspending those responsible for this conduct from New Jersey Medicaid, including SJEC, Sterling Manor Nursing Center, Konig, Krausman, Weisz, and their related entities and partners. “As a result of the dedicated work of State Comptroller Kevin Walsh, today’s report reveals serious concerns about financial irregularities, staff qualifications and credentials, and the ability to provide for the State’s most vulnerable residents,” said Attorney General Matthew J. Platkin. “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.”
To avoid self-dealing and fraud, state and federal laws require nursing homes to disclose transactions with vendors that are related parties – entities with common ownership or control—and cap related party costs at actual cost or fair market value, whichever is lower. By installing Weisz as the straw owner and never reporting the vendors as related parties, Krausman and Konig were able to avoid scrutiny and maximize their profits.
The scheme appears to stretch back decades. In the mid-1990s, Massachusetts and Connecticut both barred Konig from owning nursing homes after several Konig-owned and/or -operated facilities were found to have severe deficiencies, including alleged sexual and physical abuse of residents, according to newspaper reports. Around the same time, Konig transferred ownership of his New Jersey nursing homes, including SJEC, in an apparent attempt to avoid scrutiny in New Jersey.
OSC found that Konig, Krausman and Weisz drained SJEC of cash, driving the nursing home to the brink of insolvency. In 2018, SJEC had $1.5 million in assets. By 2022, SJEC reported just $171,913 in assets. SJEC’s liabilities also ballooned, from $10.4 million in 2018 to $14.8 million in 2022. Weisz, meanwhile, extracted at least $1.3 million from SJEC for himself– at a time when SJEC was paying out more than it was taking in and despite admitting to OSC that he had “absolutely no” involvement in running the business.
During the five years under review, OSC found Krausman, Konig, and their related businesses managed, operated, and/or provided services to ten New Jersey nursing homes. A review of available tax returns for four of the six related entities that Krausman and Konig controlled shows Krausman and Konig together made profits of $45.5 million from the 10 nursing homes.
SJEC received more one-star ratings than any other nursing home in New Jersey, making it the worst-rated nursing home in the state. A review of state and federal inspection reports shows that SJEC frequently failed to meet the minimum health and safety standards required by Medicaid. Reports describe a bedroom reeking of urine with a urine catheter bag lying on the floor, a toilet that had “brown debris and paper products” with no running water, dirty curtains and/or walls with brown/dark stains, and a refrigerator with a long strand of hair and black particles. Residents sometimes received medications hours later than medically needed, and medical needs frequently were not documented or met.
One surveyor, for instance, found that a nurse’s aide confined a resident with dementia to a bedroom by tying the resident’s bedroom door handle with a plastic trash bag and attaching the other side of the trash bag to the door. Another found that a staff member manhandled a resident, who then fell out of a wheelchair and ended up in the hospital with an abdominal injury.
OSC’s investigation found that Krausman’s and Konig’s businesses routinely overcharged and under-delivered. In just a two-year review period, Konig’s Broadway Health Care Management was paid over $10 million to provide nursing and other services to SJEC, yet OSC found SJEC was perpetually understaffed. It lacked sufficient, qualified staff on every single day of the 75 days OSC reviewed. Critical positions were filled with unqualified individuals. A Director of Social Work wasn’t a licensed social worker. A Director of Nursing not only wasn’t an actual registered nurse, her license as an LPN (licensed practical nurse) had been suspended after she failed to respond to questions regarding her arrest on charges of forging prescriptions, among other things.
Additionally, SJEC medical records were still in paper form and in disarray, missing crucial documents, including residents’ care plans, medication administration records, and documentation of whether residents received assistance with activities of daily living, like eating, walking or going to the bathroom.
Nine other New Jersey nursing homes similarly contracted with Krausman and Konig owned/controlled entities and were charged inflated prices. The Konig-controlled entity, Geriscript Supplies, was contracted to provide medical supplies to all ten nursing homes. Records show the company spent $6 million on consulting and management fees to another Konig business during the review period. Another $800,000 went to a religious charity controlled by Konig. Just $3.6 million was spent on supplies.
In total, Krausman and Konig owned/controlled businesses received a total of $253 million from SJEC and the nine other nursing homes – 76 percent of the total amount of Medicaid funds these nursing homes received during the five-year period. While OSC did not analyze the financial condition of the nine other facilities, OSC found a similar pattern at work -- chronically low-quality ratings, apparent conflicts of interest, and great disparities between the expenditures for goods/services and the costs of those goods/services. (Weisz also was listed as owner of three of the ten facilities - SJEC, Sterling Manor Nursing Center in Maple Shade, and Oceana Rehab and Nursing Center. All of them consistently received one-star ratings.)
OSC’s investigation is ongoing. OSC may pursue recovery of overpayments, civil monetary penalties and administrative sanctions. The suspension will go into effect in 60 days. The interest of the residents of any impacted facilities will be paramount, and OSC will coordinate with the Department of Health, the Department of Human Services, and the Office of the Long Term Care Ombudsman to ensure that residents’ needs are met.
OSC has made several recommendations to the Department of Health, the Department of Human Services, and the Legislature. “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,” said Walsh. “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.”
Read the report.
