Takeaways
- The owners of two New Jersey nursing homes were accused of diverting tens of millions of dollars in Medicaid funds through related-party companies, leading to severe understaffing, neglect, and inhumane conditions for residents.
- For-profit nursing home ownership, particularly by private equity or investors, often prioritizes profit by siphoning off public funds intended for care, enabled by weak financial oversight and a lack of transparency.
- Advocates are calling for stronger reforms, including mandatory financial disclosures, greater transparency in ownership structures, and enforcement of stricter staff-to-resident ratios to hold owners accountable and ensure quality care.
When you think of a nursing home, you may picture smiling seniors sitting around a table in a sunlit room or walking in a park-like setting. Though this may be true for some nursing home residents, for others the reality is very different. As more private equity firms and individual investors have gotten involved in the nursing home business, conditions in some facilities have worsened as the investors have siphoned funds away from the businesses.
The New York Times recently published a damning report revealing that owners of two privately held nursing homes in New Jersey siphoned off tens of millions of dollars in Medicaid funding while residents endured unsafe and inhumane conditions.
According to an investigation by the New Jersey Office of the State Comptroller, the operators of the Hammonton Center for Rehabilitation and Healthcare and the Deptford Center for Rehabilitation and Healthcare diverted substantial public funds into their own pockets and those of related companies, all while chronically understaffing their facilities and jeopardizing the health and dignity of vulnerable residents.
A Devasting Picture of Neglect
The state comptroller’s report found that owners Daryl Hagler and Kenneth Rozenberg, long-time business partners, diverted tens of millions of Medicaid dollars through a web of private companies they also controlled. These “related party” arrangements channeled funds away from resident care into inflated rents, management fees, and other charges that ultimately enriched the owners. The New Jersey Comptroller is seeking up to $124 million from the owners and is planning to seek other penalties as well.
Families and advocates were appalled by accounts of chronic understaffing — staffing levels that routinely fell below what state law requires. With too few nurses and aides to assist them, residents spent hours unattended, sometimes in soiled diapers. Some residents experiencing severe pain would cry out for help for hours. Maintenance of basic dignity and safety became impossible; thousands of emergency 911 calls were placed from inside the homes because caregivers were unavailable.
The Medicaid Funding Disconnect
Medicaid is the largest payer for long-term care in the United States, providing taxpayer dollars to help cover the cost of care for older adults and people with disabilities who cannot afford it. While Medicaid reimbursements are intended to go directly toward resident care, such as staffing, medical needs, food, and safe living conditions, investigators and advocates argue that too often they do not. Instead, for-profit ownership structures frequently divert large sums into the owners’ pockets.
A 2025 AARP New Jersey report found that between 2021 and 2023 nursing home owners in New Jersey paid nearly $2 billion to private companies they also owned, with hundreds of millions in payments that appear to far exceed what is allowable under federal cost standards. This kind of diversion is made easier by a lack of financial transparency and lax enforcement of reporting rules.
Why This Happens
Weak Oversight of Nursing Home Finances
Federal and state regulators often lack the authority, resources, or systems to audit complicated ownership structures and financial flows. Unlike public companies, privately held nursing homes are not subject to the same transparency requirements, enabling profit shifting with little scrutiny.
For-Profit Incentives
In for-profit models, especially highly leveraged or investor-driven ones, there is inherent pressure to reduce costs, such as staffing, to protect margins. This can lead to understaffing, reliance on lower-paid contract workers, and minimal investment in resident support services.
The Human Cost Behind the Numbers
Ultimately, the statistics and financial schemes translate into real harm for residents, such as neglect, injury, loss of dignity, and mental and emotional strain. Insufficient staffing increases fall risk, leads to untreated conditions, and delays emergency response. Basic needs, such as help with eating, toileting, and bathing, may go unmet. Constant distress from unmet needs and lack of personal care can worsen cognitive decline and psychological well-being.
Calls for Reform
Advocates and some lawmakers are pushing for reforms to stop the diversion of Medicaid funds and ensure residents receive the care they deserve. Suggested reforms include:
- Mandatory annual financial reports disclosing such information as revenues, expenses, taxes, credits, and charges
- Mandatory audited financial disclosures for all nursing home owners and related entities
- Enforcement of longstanding standards for quality care and life with dignity
- Improvement of staff-to-resident ratios in nursing homes
Holding nursing home owners accountable for the taxpayer funds they receive and making sure they prioritize the health, safety, and comfort of their residents may help ensure those residents can live out their days in comfort and dignity.
For additional reading related to nursing homes, check out the following articles:
Subscribe to the Knowledge Bank.
