Medicaid Shift Fuels Rush for Profitable Clients

Submitted by New Jersey Fraud Attorney, Jeffry Hark.



“They coerced people. They told residents they would lose their Medicaid if they didn’t sign,” said Robert Rosenberg, right, with his roommate, Howard Kucine. Storm evacuees were pressed to sign up with a managed care company. Credit Ruth Fremson/The New York Times

When Hurricane Sandy flooded two adult homes in Queens, hundreds of disabled, elderly or mentally ill residents were caught in the surge. After weeks in public shelters, they were bused, over their objections, to a dilapidated four-story building called King’s Hotel, in a crime-ridden section of Brooklyn.

Many had not showered in days. Crammed three cots to a room, they lacked basics like clean underwear. But in the parallel universe of New York’s redesigned Medicaid program, they represented a gold mine.

Business managers from CenterLight Healthcare, a managed care company specializing in long-term services, huddled in a ground floor hotel room, poring over health data and spreadsheets that identified residents by name and room number. At the managers’ direction, crews of enrollment nurses tracked down residents to pressure as many as possible to sign up with the company’s long-term care plan, according to current and former CenterLight employees who were there.

To CenterLight, which had struck an unusual deal with the state to run the hotel as a temporary adult home, the evacuees were a captive audience, and each signature was worth $45,600 a year in fixed monthly Medicaid fees. To an agency supplying aides there, the signatures also meant more money.


Vincent Piazza, 67, is a resident of Garden of Eden in Bensonhurst, Brooklyn. Credit Ruth Fremson/The New York Times

But for taxpayers, the sign-up frenzy at King’s Hotel points to hidden costs and potential abuses in an ambitious Medicaid overhaul in New York that has shifted $6 billion in public spending on long-term services for disabled and aged people to managed care companies like CenterLight. The state’s goal was savings, but the changes set off a scramble among managed care companies and service providers to enroll clients requiring minimal care, including residents of adult homes who could be brokered in bulk, an investigation by The New York Times found. Many frail people with greater needs were dropped, and providers jockeying for business bought, sold or steered cases according to the new system’s calculus: the more enrollees, and the less spent on services, the more money the companies can keep.

Adult home residents, like those caught in the hotel, had long been victimized under the old fee-for-service Medicaid system, in which providers were paid for services rendered. Now, under managed care, they find themselves prey to new versions of old tactics, including intimidation to accept services they do not need.

“They came like vultures — ‘Sign here, sign here!’ — with their doughnuts and cookies,” recalled Robert Rosenberg, 61, who has a spinal disorder and Crohn’s disease, and, at 4 feet 4 inches tall, had waded through hip-high water to escape the flood at Belle Harbor Manor in Queens. “They coerced people. They told residents they would lose their Medicaid if they didn’t sign.”

Ronald White, 70, a former Marine now back at New Gloria’s Manor, recalls refusing a $10 payment for his signature at the hotel (“a hellhole”), only to be awakened at night by a woman who said she was his aide. “I don’t need an aide!” he said he had protested. “It sounded like a get-rich-quick scheme.”

They were among many displaced residents whose accounts of the enrollment campaign were corroborated by CenterLight employees who were part of it. State officials had received similar complaints about the company’s summer-long marketing push at Belle Harbor Manor before the storm, email exchanges show. Since then, other emails have reported enrollment violations involving other companies, including attempted bribes.

But state officials see no systemic problems with the shift to managed long-term care, which they call a popular success. They cite an 87 percent satisfaction rate in a mail survey of members. “Any suspected violations of the law or contracts with the state are investigated,” Bill Schwarz, a State Health Department spokesman, said.

No complaints, he said, were reported from the hotel by state officials, who permitted the enrollment push and paid CenterLight about $350,000 for running the hotel for three weeks and supplying services. The state and the companies said they were proud of their work there and denied any improprieties.

“The driving factor,” Mr. Schwarz said, “was to protect and serve the hundreds of vulnerable individuals impacted by this unprecedented natural disaster.”


Cecilia Johnson said her mother had suffered after her home care was stopped. Credit Piotr Redlinski for The New York Times

His statement was echoed by Constance Tejeda, a spokeswoman for CenterLight, who called its staff’s work heroic. Colin Mahoney, a public affairs consultant for Edison Home Health Care, which supplied the aides, cited “unprecedented circumstances.”

But the heavy-handed tactics revealed at the hotel are part of a larger pattern that emerges from interviews with industry insiders and patient advocates alike, and from court records, legislative hearings and emails obtained by The Times that discuss mass transfers of patients for money.

Michael Irvin, who was at the hotel as a marketing manager for CenterLight, said he complained to his supervisors and soon left for a better job. But he wound up working for a different managed care company where he fielded one offer to sell him cases by the thousand, and others that promised enrollees in exchange for money. He reported those illicit proposals to state officials, to little effect.

“It is a gold rush,” Mr. Irvin said. “You’ve got the Wild West, where everybody can do everything to get a case, to the extent of bribing people to switch over cases.”

The turbulence has intensified as the industry prepares for the next phase. Later this year, under a federal waiver obtained by Gov. Andrew M. Cuomo of New York, 25 Medicaid long-term care companies will also gain access to billions of dollars in federal Medicare payments. Companies can automatically enroll qualified members into combined plans that are supposed to yield greater government savings and more coordinated care. Whether those benefits are realized remains to be seen, but the change will mean even more revenue for the companies.

At the hotel, many residents had refused CenterLight’s repeated sales pitches before the storm because they did not even need its services; some were clients of a rival company, ElderServe, which had already been sanctioned by the state for aggressive marketing; others did not have Medicaid, or were wandering the halls, disoriented.

But the nurses who cornered them had enrollment goals to meet — and authority to evaluate eligibility.

The threshold for enrollment in such plans is no longer a score on a numerical assessment of impairment, as before, but an ill-defined “need for 120 days of long-term care services” — services ranging from a few minutes’ help from an aide and a few hours at a social center, to round-the-clock home care or nursing home placement.


Ronald White, 70, said he did not sign up for a care plan but was awakened by a woman who said she was his aide. Credit Ruth Fremson/The New York Times

The biggest loophole, experts agree, is that New York’s new system has no independent assessment of whether enrollees actually need services. Mr. Irvin, now a veteran of several companies’ marketing efforts, was blunt: “Allowing the companies to perform their own assessments is like leaving a hungry dog to guard the meat shed.”

Patient Selection

No group suffered more from the old system than the mentally ill residents of profit-making adult homes. Under fee-for-service Medicaid, many neglected residents were subjected to unnecessary treatment, even surgery.

Though disability money has long gone to the homes to supply meals and personal care, operators kept cutting services. They forced residents to use favored providers of home health care, who typically billed Medicaid at inflated rates, and paid inflated rent for access to the residents. Some of the same providers also pumped up Medicaid receipts outside adult homes by assigning low-paid aides to cases around the clock, at high profit, regardless of need.

Governor Cuomo’s redesign was supposed to change all that. The first step, in April 2011, was to reformulate and shrink reimbursement for home care. Later, Medicaid beneficiaries already receiving more than 120 days a year of such services would be required to join a managed care plan that paid companies a fixed premium.

The state projected savings at more than $200 million annually, and says it succeeded. But a state plan obtained under the Freedom of Information Law noted a downside: “It may provide agencies an incentive to ‘cherry pick’ patients by serving only those with lower acuity and less intense needs.”

That is just what happened.

Farrah Rubani, then senior vice president of Extended, a home health agency becoming a managed long-term care company, said she was told to get rid of clients receiving round-the-clock home care. “I said, ‘What do you want me to do, load them up and drop them off at the Verrazano?’ ” Ms. Rubani said, adding: “They were bed-bound, they were desperate. We just chopped them up and threw them away.”

The company denied Ms. Rubani’s account, calling her a disgruntled former employee.

It is uncertain if those clients were sent elsewhere. But in a class-action suit over patient dumping brought against five other agencies, the case of Ena Johnson, an 85-year-old Brooklyn grandmother, is instructive.

Bed-bound and incontinent after strokes, Mrs. Johnson received round-the-clock home care for years. But when the reimbursement changed, her home care agency, Personal Touch, sent her to the hospital for a two-day procedure, then refused to reinstate her care, the lawsuit says. By the time lawyers won her return home with 24-hour aides, she had a bone-deep 13-inch bedsore; she died two months later. “She suffered,” her daughter, Cecilia Johnson, said.

Personal Touch settled by paying $50,000 without admitting wrongdoing. It now operates a managed long-term care company called Integra with Medicaid revenue of $43 million a year.

While high-needs cases were shed, the race was on for cheap ones. In large adult homes, where one low-paid aide can serve many people, some of the same players who exploited the old Medicaid system found the residents were still a valuable commodity. Home operators, happy for managed care to shoulder their service costs, joined with certain companies and providers to pressure residents to sign for an aide and attend a social day center — that is, to accept the minimum services that could justify enrollment in a plan that collected $3,800 monthly per member.

“They told me the aide could hand me a towel when I came out of the shower, and I should sign up with ElderServe,” said James Ramdaou, an able-bodied resident of Park Inn Home in Queens who takes psychiatric medication. “I told them, I’m 34 years old, I don’t need elder-anything.”

Mr. Ramdaou complained last fall to Jota Borgmann, a lawyer with MFY Legal Services who has protested such marketing for two years, fruitlessly calling for an audit of potential fraud, and reporting specific complaints directly to Mark Kissinger, the state’s chief of long-term care, at Mr. Kissinger’s request.

In April 2012, the state suspended ElderServe’s enrollment for 45 days for marketing improprieties in adult homes. But CenterLight was also aggressive, said advocates who wrote Mr. Kissinger on Sept. 26, 2012, weeks before the storm, citing complaints by the Belle Harbor Manor residents’ council.


Another adult home, Garden of Eden, in Brooklyn, has a complaint record. Credit Ruth Fremson/The New York Times

Complaints about both companies surfaced repeatedly at Garden of Eden, a rundown adult home in Bensonhurst, Brooklyn, with a history of resident intimidation. In a 2011 case still awaiting an administrative judge’s decision, the state sought removal of the operator, Martin J. Amsel, for threatening to evict mentally ill residents if they did not go to programs and doctors of his choosing, and get eyeglasses from his son-in-law’s store. Now, many residents have been pushed to sign up with ElderServe or CenterLight, be bused to Inspire, a crowded social day care program managed by Mr. Amsel’s relatives, and accept an aide from Edison home care, which is currently a defendant in a federal civil racketeering lawsuit over money allegedly siphoned from a hospital. (Edison has denied wrongdoing.)

“They’re all going to work together to enrich each other,” said Vincent Piazza, 67, a resident. “The government is still leaving us with the same people who have been abusing us.”

At Belle Harbor, which collected evacuees’ disability checks during the displacement, and received $1.5 million in hurricane grant money, residents say they were pushed between ElderServe and CenterLight, then into Aetna’s plan, depending on deals.

In a recent reshuffle, Howard Kucine, 62, a Navy war veteran with diabetes, suddenly could not get his daily insulin shot from the sole nurse on site: He and his plan had been inadvertently dropped from contracts covering her services. Finally Mr. Kucine, who is in ElderServe, persuaded his roommate, Mr. Rosenberg, who is in CenterLight, to give him the injections.

Enrollees, for a Price

The architects of the new system have been slow to understand the interlocking financial interests that exploit it, some experienced health care professionals say.

“They’re taking the price of a Mercedes and attaching it to each patient every single year, whereas before, with Medicaid fraud, you had to have all sorts of separate transactions,” said a doctor who insisted on anonymity, after describing a business deal he rejected that would have funneled aged patients in his house-call practice to a managed care company through a home care agency. “The idea is to give them as little care as necessary.”

On paper, consumer choice assures quality since members can switch plans every month. In reality, executives and consultants say, patients are being steered and switched daily.


 Belle Harbor Manor, in Queens. Credit Ruth Fremson/The New York Times

Providers, now unable to bill Medicaid directly, need cases from managed care companies, which also control hours and rates. But one hand washes another: The companies need enrollees, and providers with aides inside homes can deliver clients, or switch them from rival companies — for a price.

Managed care consultants say the trading extends from individual bribery to proposals like the anonymous email Mr. Irvin, the former CenterLight manager, received last fall when he was a full-time consultant for another managed care company, AlphaCare.

The email offered to sell AlphaCare a spreadsheet listing 20,000 members of the largest plan, VNSNY-Choice. No price was named, but in fixed monthly Medicaid payments, the list represented $1 billion, the message noted.

Although it was unclear if the sender actually had the data, Mr. Irvin alerted VNSNY and forwarded the message to government authorities. Three months ago, he also wrote Mr. Kissinger, the state’s long-term care director, about being offered a $50,000 bribe by the owner of a home care agency, to switch hundreds of cases. Mr. Kissinger replied that the office of the Medicaid inspector general would contact him. No one has.

Another manager, insisting on anonymity for fear of retaliation, said he had rejected $500 per case. That is the going rate for an enrollment nurse to steer a case to a particular agency, other managers said. On a larger scale, agencies steer patients to managed care companies in exchange for higher rates per hour.

With Medicaid money going to such deals, said Ms. Rubani, who now runs Hopeton Home Care, even less is left where it is most needed: for wet, bedridden patients, “waiting for four hours for the next aide.”

In contrast, robust adults with a psychiatric diagnosis are being drawn to centers like Alphabet Social Adult Day Care, which opened in February in the basement of a boutique condo building in the East Village, with pool tables, karaoke and casino trips. Such centers seek Medicaid enrollees for — and business from — managed care companies, but also suit real estate interests seeking commercial tenants.

Alphabet is owned by LicensePro, a health care start-up company whose broker, Olga Rice, assured a caller that Alphabet (asking price: $130,000) required no actual services. “Just occupy them,” she said. “Read poems, sing music, play some games.”

“It’s a money grab right now,” said Chris Barrey, the deputy director of a psychiatric program nearby, who saw patients as young as 20 lured to Alphabet and required to stay for four hours — the billable minimum. “You don’t have to have any licensed staff to run a program like that. You need a van and a basement.”

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Jeffrey Hark is a New Jersey Civil and Criminal Lawyer.

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