Probe: Medicaid Funds Still Go to Suspect Senior Care Homes

Earlier this fall, Medicaid funding went to at least 45 care homes previously cited for labor violations in California, Florida, Oregon and Wisconsin.

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Medicaid funding has continued to flow to dozens of senior care-home operators in four states cited for stealing workers’ wages or breaking other labor laws, an investigation by Reveal from The Center for Investigative Reporting has found.

Earlier this fall, Medicaid funding went to at least 45 care homes previously cited for labor violations in California, Florida, Oregon and Wisconsin. The bulk of those cases occurred in California, where at least 35 facilities continued to receive Medicaid reimbursements in October after being penalized by state or federal labor regulators. That number dropped to 18 facilities as of Nov. 21, when the state released the most recent data. Medicaid reimbursements can fluctuate month to month, depending on the number of Medicaid-eligible residents in a facility at any one time.

Government spending under the public health insurance program still was going to Agape Cottages, a chain of care homes in Southern California owned by Joseph Alvarez, who pleaded guilty last year to a criminal misdemeanor after he directed 17 workers to return $196,000 in back wages he had agreed to pay them and then lied to federal regulators to cover it up.

Also still receiving or eligible for Medicaid reimbursements were care homes in the West Hills neighborhood of Los Angeles that until recently operated under the name Adat Shalom. In 2017, state labor regulators cited Adat Shalom and its owner, Angelica Reingold, for more than $7 million for unpaid wages and penalties involving 149 workers in one of the nation’s largest cases of wage theft in the residential care industry. An appeal by the company is pending.

Neither Reingold nor Alvarez returned calls seeking comment.

The federal government and states share the cost of Medicaid to cover personal care services for low-income people, including seniors in assisted living facilities. States spent more than $10 billion in state and federal Medicaid funds on assisted living services for more than 330,000 people in 2014, or an average of about $30,000 per person, according to a 2018 Government Accountability Office report. Caregivers at these facilities provide vital services for the elderly, including changing adult diapers, preventing bedsores, and dressing and bathing residents.

Companies may be prohibited from collecting Medicaid if they have been convicted of Medicare or Medicaid fraud or patient abuse or neglect, among other offenses. However, the federal agency that administers Medicaid – the Centers for Medicare & Medicaid Services – does not police whether senior care-home operators comply with wage and hour laws.

“It’s appalling, but sadly a further sign of inadequacy of federal alongside state protections of vulnerable people who depend on Medicaid,” said Judy Feder, a public policy professor at Georgetown University’s McCourt School of Public Policy.

“Medicaid certification is a privilege, not a right, and payment should depend upon complying with relevant laws,” said Eric Carlson, a directing attorney at Justice in Aging, an advocacy group for low-income seniors. “Underpaying employees is a red flag for health care quality.”

In fact, Reveal reported that some operators of senior board-and-care homes that violated labor laws also were cited for endangering or neglecting their residents, sometimes with dire consequences. At Court Yard Estates in Rancho Palos Verdes, California, for example, rats gnawed on elderly residents in a home where workers were paid just over $3 an hour. Caregivers’ complaints about the rat infestation went unheeded for a year.

The federal government and states share responsibility for overseeing the Medicaid program. When asked about Medicaid disbursements to labor law violators, a spokeswoman for the Centers for Medicare & Medicaid Services said by email that the agency leaves it to each state to decide which licensed assisted living facilities are approved as Medicaid providers.

Asked about assisted living facilities cited for labor violations, state Medicaid agencies responded with varied approaches. A spokesperson for the California Department of Health Care Services, which oversees Medi-Cal, the state’s Medicaid program, told Reveal that the agency “does not necessarily exclude” senior care homes that have been cited for labor violations, though such violations could spur “other enforcement action” if, for example, they endangered residents.

Patrick Manderfield, a spokesman for the Florida Agency for Health Care Administration, which administers Medicaid in that state, said that while it is not required that federal labor violations be reported to his agency, “We take all instances of non-compliance very seriously, and we frequently penalize providers as appropriate for failure to meet licensure requirements as outlined in Florida law.”

Elisa A. Williams, a spokeswoman for the Oregon Department of Human Services’ Office of Aging and People with Disabilities, said her agency has not taken regulatory action that would prevent Medicaid from going to four facilities previously cited for labor violations.

Wisconsin officials did not immediately respond to a request for comment.

Reveal investigation published in May exposed widespread exploitation of caregivers in senior residential care homes, many of whom effectively earn as little as $2 an hour to work and be on call around the clock for operators that reap huge profits. Caregivers often were harassed and fired if they complained. Prosecutors liken these workplace conditions to indentured servitude. Many of these caregivers are immigrants, and evidence indicates that some were trafficked.

Subsequent articles in Reveal’s series found that companies cited for shorting worker pay continue to flout the law – operating despite having failed to pay wage theft judgments, leaving scores of workers unpaid. Officials from the California Department of Social Services told Reveal that they could not strip these companies of their licenses unless residents’ health and safety were jeopardized. Yet labor law experts say state regulators should not need to prove a connection between residents’ health and wage theft to act.

In response to Reveal’s findings, Vicky Waters, a spokeswoman for California Gov. Gavin Newsom, said two state agencies that oversee licensing and enforce labor laws – the Department of Social Services and Department of Industrial Relations – set to work in August on a new enforcement initiative to crack down on the abuse of workers in care homes and seniors – “up to and including license revocation.”

In the Agape Cottages case, federal investigators ordered Alvarez to pay 17 workers nearly $200,000 in back wages, but he found a way to cheat them again, court records show. Alvarez sent the U.S. Department of Labor letters certifying he’d paid the workers. But then he demanded that the workers write him checks to give all the money right back. He claimed they were not employees but “partner-owners” of the company.

“We had no choice, we wanted our jobs,” said Rohna Kasoff, who worked as a caregiver in Alvarez’s care homes from 2012 to 2016. Kasoff was paid $95 a day, the equivalent of about $4 an hour, to work around the clock, with no structured sleep break. While Alvarez didn’t say so explicitly, caregivers said they feared they would lose their jobs if they refused his demand.

Still, in 2016, Kasoff refused to go along when Alvarez demanded she sign a document classifying her as an independent contractor and a partner-owner, which she believed was designed to insulate him from liability should a resident sue. So he fired her.

“He tried to protect himself, but not the workers,” Kasoff said. “He used people to make money.”

Current employees say Alvarez still exploits caregivers. Last year, Alvarez again directed caregivers in several of his care homes to sign agreements making them partner-owners, according to one current and one former worker, each of whom declined to be named for fear of retribution. New hires, they said, earn a flat rate – $80 for 24 hours of work, or the equivalent of about $3.33 an hour.

Like many caregivers across the country, some of these employees were immigrants desperate for work to support their families. Others were promised a daily rate with little discussion beforehand about how many hours they actually would work. Some were unaware they were entitled to receive the minimum wage.

“We need to live, we need to feed our families,” one employee, who declined to be named for fear he would be fired, told Reveal. “Some of us don’t have proper documents to work here in America. We’re scared of being sent back to the Philippines.”

Under state licensing laws, care-home operators such as Alvarez who are convicted of a federal crime can be banned from the senior care-home industry in California. But at least six care homes are licensed to companies that Alvarez and or his wife partially control, according to state licensing records.

Within days of being contacted by Reveal about Alvarez’s care homes, the California Department of Social Services launched an inquiry.

“On October 4, 2019, CDSS became aware that a principal of the current licensee of many of the Agape Cottage facilities, Joseph Alvarez, pleaded guilty to a federal charge,” Adam Weintraub, an agency spokesman, said by email Oct. 29. “CDSS has no record of being notified of the conviction and is gathering additional information.”

The agency notified Alvarez in November that it is seeking to revoke the licenses of his six care homes and effectively ban him from the care-home business in California. Alvarez contested the action.

Nearly 150 caregivers at Adat Shalom Board and Care, a chain of six care homes in Los Angeles’ West Hills neighborhood, say they also were exploited, earning the equivalent of as little as $2.40 an hour to work around the clock. A former caregiver at Adat Shalom , who spoke on condition of anonymity because of concerns about reprisals, said she was paid the equivalent of $2.50 an hour.

She said she rarely was allowed to leave Adat Shalom (Hebrew for “community of peace”) and was required to sleep with her door open so she could help residents overnight who needed their diapers changed or had to be turned to avoid bedsores. The facility took in mentally ill patients, she said, who bit her on her arms.

“I wanted to quit, but I needed the job,” she said. “I needed to survive. I became numb after working so hard 24 hours a day, doing the same thing every day.”

Shortly after Angelica Reingold and her company were fined $7 million for wage theft in December 2017, Reingold told The Orange County Register that Medi-Cal covered roughly 70% of residents in her care homes.

Care-home operators eligible for Medicaid bill the state, which then reimburses them for certain residents’ care and other services. Medicaid typically does not cover room and board.

Over the last year, Reingold and her husband, Alexander Reingold, arranged a series of property transfers that shifted ownership of four of her care homes, worth more than $3 million, from a family trust to Alexander Reingold personally or to Boys Management Corp., where Alexander Reingold is chief executive. In documents filed in Los Angeles Superior Court, attorneys from the California labor commissioner’s office claimed that the Reingolds made these transfers fraudulently to dodge accountability and shield their assets from workers who are owed millions in restitution.

A company called Land of Peace, owned by Tigran Zakharyan, began operating the Adat Shalom care-home businesses over the summer under new licenses. But the Reingolds and Boys Management still own the properties.

“They are my landlords, that’s it. I am a separate business,” Zakharyan said before hanging up.

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