How troubled Syracuse nursing home fed $60 million into its owner’s corporate web

Van Duyn nursing home illustration

This photo illustration shows how Van Duyn nursing home paid about $60 million between 2016 and 2020 for goods and services to four outside companies controlled by one of the nursing home’s owners.photo illustration, Christa Lemczak/Getty Images

Syracuse, N.Y. – A web of companies controlled by one of the owners of Van Duyn nursing home charged the troubled facility about $60 million to provide food, management and other services from 2016 through 2020.

Efraim Steif, a part-owner of Van Duyn, has a financial interest in the four companies the nursing home farms out services to.

It’s legal — and even an industry norm — for many private nursing homes like Van Duyn to take government money intended to care for the elderly and funnel it into private companies with little oversight and auditing, experts say.

New York’s Attorney General is investigating to see if that practice at Van Duyn has undermined resident care. That’s part of a larger state investigation into several deaths and accusations of neglect at the nursing home in recent years, according to court papers.

Van Duyn says it is doing nothing wrong and is simply contracting with outside companies for goods and services residents need, as many other nursing homes do. Two-thirds of Onondaga County’s private nursing homes pay outside companies, which are also connected to their owners, public records show.

Critics say that coziness among nursing home owners and the companies they control can hide problems. That’s because residents and the public can’t easily see where all the money goes.

“When you own the business entities you are contracting with, it’s a little bit suspicious,” said Lindsay Heckler, an attorney with the Elder Justice Center of Buffalo, a group that advocates for nursing home residents.

The state attorney general’s office has accused Van Duyn of using this practice to siphon money out of the nursing home to profit its owners.

The AG’s office said in court papers an investigation by its Medicaid Fraud Control Unit found Van Duyn transferred “significant amounts of funds” to owners and related parties through several limited liability corporations.

The transfers “drastically reduced the amount of money Van Duyn had to invest in direct care staffing to provide care for its residents,” the AG’s office said.

Van Duyn denies the AG’s allegations.

“Any allegation that Van Duyn’s ownership diverted funds that were intended to be used to hire staff is entirely false,” the nursing home said in a prepared statement.

Van Duyn also defended its practice of buying goods and services from vendors controlled by one of its owners. It said the arrangement saves money.

“It is common industry practice for nursing homes to share support services such as information technology, billing, quality assurance, payroll and financial management that are often contracted from companies that may share ownership,” Van Duyn said.

Syracuse.com | The Post-Standard has reported extensively over the past year about suspicious deaths, inadequate staffing and numerous complaints of neglect and abuse at the 513-bed nursing home at 5075 West Seneca Turnpike.

The AG’s office is investigating more than two dozen complaints of abuse and neglect — including seven deaths — at Van Duyn.

How the money flows

Nursing homes get most of their money from the government Medicaid and Medicare insurance programs.

And it’s this money that ends up paying most of the bills at Van Duyn – including the bills from Steif’s four businesses.

Van Duyn received $26.18 million in Medicaid and Medicare funding in 2020, state records show. That government money accounted for about 64% of the nursing home’s patient revenue.

The AG’s court filing did not say how much money Van Duyn may have inappropriately transferred or identify the individuals who may have benefited.

A syracuse.com | The Post-Standard review of data Van Duyn reported to the federal government shows about $25 of every $100 the nursing home spent on operating expenses over the five-year period went to limited liability companies — or LLCs — controlled by Steif. That information is reported by SNFdata, a company that reports financial data gleaned from nursing homes’ annual Medicare cost reports.

Steif, a nursing home administrator from Rockland County, is a part owner of Van Duyn and 16 other nursing homes in New York state.

Steif declined through a spokeswoman to be interviewed for this story.

He and two partners, Uri Koenig an accountant, and Dave Camerota, a nursing home administrator, bought Van Duyn from Onondaga County in 2013.

Here’s a breakdown of Van Duyn’s $60 million in payments to Steif’s LLCs:

  • $39.2 million to 5075 West Seneca for rent of the nursing home’s building on Onondaga Hill.
  • $14.8 million to Cfare Foods for food and dietary personnel.
  • $4.6 million to Upstate Services for management services.
  • $2.09 million to Fiscal Care for billing and collection services.

A 2017 Kaiser Health News analysis found more than 11,000 U.S. nursing homes, or about three-quarters of all facilities, engage in this practice.

Six of Onondaga County’s 13 nursing homes are for-profits. Of the six, Van Duyn and these three other for-profits reported payments to outside companies controlled by their owners: Bishop Rehabilitation in Syracuse; Elderwood in Liverpool and Central Park in Syracuse.

Steif also is a part owner of Central Park.

Van Duyn said the practice reduces the cost of billing, financial management, food, insurance and other goods and services.

“These savings free up money for staffing and direct patient care,” the nursing home said.

A national nursing home lobbying group also defended the practice. It said many nursing homes have diversified their services because they don’t get enough money from Medicaid, the main government health insurer that pays for nursing home care.

“It’s those other lines of business that often keep nursing home doors open for vulnerable individuals,” the American Health Care Association said in a prepared statement.

‘The profits get hidden’

But critics say nursing homes sometimes use related party transactions to obscure profits and enrich owners.

“The profits get hidden and it certainly makes the facilities look poor,” said Toby Edelman, a lawyer with Citizens for Medicare Advocacy, a national nonprofit group. “Related party transactions can be profit centers. They rent properties to themselves and can raise the rent.”

Van Duyn reported a net loss of $1 million in 2020.

For-profit nursing home owners often set up webs of LLCs to own and operate their facilities.

They do this in part to shield themselves from lawsuits, according to Heckler of the Elder Justice Law Center.

“If something horrible happens to my mom in a nursing home and I sue and get a $1 million judgment, the nursing home can claim it doesn’t have the money to pay because they have shifted the money to these other companies,” Heckler said.

Some nursing homes also use these auxiliary businesses to inflate costs, according to a new study out in recent weeks.

Companies controlled by nursing home owners sometimes provide services to their facilities “... at prices that are well over the market rates in order to accrue higher profits that nursing homes do not record in their financial accounts,” says the report by the National Academies of Sciences Engineering Medicine.

A case study from Cooperstown

A 2018 investigation by the state AG’s office discovered the owner and manager of Focus Rehabilitation and Nursing Center in Cooperstown cut staffing in order to siphon more profits out of the facility through related party transactions.

The AG’s office revealed details of that investigation in a 2021 report on nursing homes.

Joseph Zupnik bought the 174-bed nursing home in 2014 from Otsego County, then cut staff. That resulted in resident neglect.

The place was so short-staffed one weekend a 94-year-old resident was left in a recliner in a common living area of the nursing home for 41 hours without appropriate care or treatment.

Zupnik and his manager, Daniel Herman, refused to increase the facility’s budget so it could hire more staff.

Meanwhile, Zupnik, Herman and their relatives pulled more than $14 million out of the nursing home between 2014 and 2017 through related party transactions with companies they controlled, the investigation found.

Zupnik and Herman pleaded guilty in 2018 to endangering the welfare of an incompetent or physically disabled person, a misdemeanor. They also agreed to repay $1 million to the state’s Medicaid program and stay out of the health care businesses in New York for five years.

The AG’s report says for-profit nursing homes, which account for about 61% of the homes in New York, often complain government Medicare and Medicaid reimbursement rates are too low. It said the use of related transactions as illustrated by the Cooperstown case can obscure a nursing home’s true financial condition.

“Such transactions create a balance sheet that may suggest the facility is running even or at a loss, when in fact the owners are taking out profits as ‘fees,’ salaries for low-activity positions or revenue to affiliated businesses,” the report says.

Similar accusations at James Square

The owners of the former James Square nursing home in Syracuse, now known as Bishop Rehabilitation, also were accused of secretly draining money out of the facility through a web of related companies.

A class-action lawsuit said the nursing home’s former owners conspired to pocket money that should have been spent to hire staff to care for residents.

The owners told the state in a 2015 application seeking permission to buy James Square they would eliminate 27 jobs to save nearly $696,000.

By early 2017 James Square had so few nurse aids working, residents had to eat their meals in bed and not get up until late in the day, according to a state health department inspection.

The suit said a related company overcharged the operator of James Square to lease the nursing home’s building. It also accused another related physical therapy company controlled by one of the owners of stripping money from the nursing home by charging for some services it did not provide and for services that were not justified.

Abraham Gutnicki of Illinois, Judy Kushner of New Jersey and Eliezer Friedman of New Jersey, the former owners, denied the allegations.

They settled the lawsuit last year for $5.5 million.

‘You only get caught if someone blows the whistle’

Experts say nursing home related party transactions reported in Medicare cost reports get little scrutiny from state and federal regulators.

David Kingsley, a retired University of Kansas professor and health care statistics expert, frequently reviews Medicare cost reports for research he does on nursing homes.

“I’ve looked at cost reports for hours and see a lot of mistakes and lies,” Kingsley said. “I have real doubts the states regularly audit them.”

Valerie Gray, a forensic accountant from Austin, Texas, who specializes in analyzing Medicare cost reports, agrees.

“I am not aware of a single case where a skilled nursing facility suffered consequences for filing an inaccurate cost report with the federal government, even though cost reports are signed and submitted under the penalty of perjury,” Gray said.

The Biden administration recently pledged to beef up oversight of the nursing home industry and make the ownership and finances of the facilities more transparent.

Concern over nursing home related party transactions was a factor that prompted the state Legislature to pass a law requiring nursing homes to spend 70% of their revenue on direct patient care and at least 40% of revenue on resident staffing. That law went into effect on April 1.

The law also limits nursing home profits to 5% of revenue.

More than 200 nursing homes statewide sued the state in federal court in December to block the regulations on nursing home spending. That lawsuit is pending.

John Dalli, a New York City lawyer who represents nursing home residents and their families, said he’s seen many questionable related party transactions listed in nursing home cost reports.

He said it’s easy for nursing homes to get away with reporting sham transactions.

“It’s like cheating on your federal taxes,” Dalli said. “You only get caught if someone blows the whistle on you or the IRS conducts an independent audit.”

James T. Mulder covers health and higher education. Have a news tip? Contact him at (315) 470-2245 or jmulder@syracuse.com

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