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Frosh reaches settlement in nursing-home residents dumping case

The state has reached a settlement with the former operator of five nursing facilities and their owner after a lawsuit alleged the company engaged in unlawful patient discharge practices and submitted false claims to the state Medicaid program, Attorney General Brian E. Frosh’s office announced Friday.

Under the settlement, Neiswanger Management Services, LLC and owner Matthew Neiswanger will pay $2.2 million to the state and are permanently precluded from engaging in managing or operating nursing facilities in Maryland and from participating in the state’s Medicaid program. NMS will also drop a lawsuit filed in March 2017 against the employees of the state Department of Health, according to a news release.

“NMS and its leadership compromised the health and safety of hundreds of vulnerable people who were in their care,” Frosh said. “Today’s settlement ensures that NMS and its owner will no longer operate nursing facilities in Maryland and sends the message that this conduct is unacceptable.”

Frosh alleged that Neiswanger Management Services discharged more than 1,000 residents for failure to pay or to arrange payment through a public or private insurer. The complaint alleged Neiswanger “strives to discharge each resident of its nursing homes at the precise point in time when the resident can be replaced by someone else with a more favorable public health insurance profile.”

The attorney general also claimed Neiswanger discharged residents to homeless shelters or “sham assisted living facilities” whose operators exploit the residents’ public benefits. Neiswanger denied the allegations.

An NMS spokesman characterized the settlement as the state agreeing “to walk away from its supposed blockbuster of a lawsuit against NMS, throwing in the towel for a tiny fraction of what it originally demanded.”

NMS claims it will not “pay a penny in new money” and that the state is keeping some Medicaid bonds NMS previously posted as part of the settlement, said spokesman Ian Prior in an emailed statement.

In February, the Court of Appeals unanimously ruled that the attorney general could seek a court order blocking the involuntary discharge of nursing home residents so long as the state could identify one resident whose statutory protection against such eviction had allegedly been violated.

That decision reversed a lower court ruling that Maryland law permits the attorney general to seek injunctive relief for a single, specified resident but not for a group of unnamed residents. The ruling allowed Frosh to seek relief against Hyattsville-based Neiswanger.

A month after the Court of Appeals ruling, a federal judge allowed a lawsuit filed by NMS alleging state officials targeted its nursing homes with enforcement procedures to move forward.

“What the state really gets is this: NMS will drop its retaliation lawsuit against top state officials, sparing them from the embarrassment of a trial,” Prior said Friday.

The company said it no longer owns or operates any nursing homes in Maryland as of February.

Patricia Nay, executive director of the Maryland Office of Health Care Quality, and Dennis Schrader, then-secretary of the Department of Health, were named defendants in the federal lawsuit filed last year. In that suit, Neiswanger claimed Schrader was urged by Nay, who oversees surveyors who report facilities’ violations, to implement and ultimately issue a ban on admissions for Neiswanger facilities in retaliation for the facilities’ appeal of citations.

The court granted leave for Neiswanger to file an amended complaint on Sept. 13, according to online court records.

The cases are Neiswanger Management Services LLC et al. v. Patricia T. Nay et al., 8:17cv00746 and State of Maryland v. Neiswanger Management Services LLC, No. 28, September Term 2017.

Legal affairs reporters Heather Cobun and Steve Lash contributed to this story.

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