NEW JERSEY INVESTIGATION REVEALS HOW TWO NURSING HOMES LOST THEIR WAY
Every few years, a case comes along that makes the entire industry hold its breath. Not because the allegations are surprising - we've all heard the rumors, seen the structures, watched the shell companies multiply. But because someone finally wrote it all down. With numbers. And photographs. And bank records.
This week, New Jersey's Office of the State Comptroller released its investigation into Hammonton Center for Rehabilitation and Healthcare and Deptford Center for Rehabilitation and Healthcare. Two facilities in South Jersey. Both 240 beds. Both owned by Daryl Hagler and Kenneth Rozenberg through their company Centers for Care, LLC.
The numbers are staggering: $92 million moved through related-party companies. $27.8 million in "additional rent" that went directly to the owners. Cost reports that disclosed less than 1% of related-party transactions. And staffing levels that left residents with less than half the minimum required care.
Hagler and Rozenberg haven't had their day in court. They've declined to testify, citing the Fifth Amendment. Their lawyers dispute the findings. A receiver has been running both facilities since June.
But regardless of how the legal process plays out, this report is required reading for anyone in this industry. Because the structures it describes - the split between operating and property companies, the related-party management agreements, the layered LLCs - those aren't unique to these two facilities. They're everywhere.
THE HUMAN COST
Before we get into the business structures and the money flows, let's talk about what actually happened inside these buildings.
The investigation reviewed staffing records, survey findings, police call logs, and volunteer testimony. The picture that emerges is difficult to read.
At Hammonton, average daily staffing ran 52% below state minimums. At Deptford, 54% below. Both facilities are required to have a registered nurse on duty 24/7. Hammonton didn't have one for 46 of the 82 days sampled. Deptford missed 52 of 64 days.
What does that look like in practice?
In March 2021, a Hammonton resident called police because she'd been sitting in her own excrement for over 24 hours. When officers arrived, they were told there were two nurses for more than 100 residents.
In November 2022, a Deptford resident on a medically required pureed diet was given a sandwich and cookie. The resident asphyxiated. Staff didn't notice the death for hours.
A volunteer who visited Deptford weekly documented residents with toenails so overgrown they curled under, call bell cords that had been severed, dirty diapers left on the floor, and meals dumped and abandoned in resident rooms. She photographed a resident sitting in excrement in the middle of the day, dried feces on her hands.
Police logs show more than 2,400 calls to Deptford and 1,000 calls to Hammonton during the review period. Residents calling because no one would answer their call bells. Family members calling because staff wouldn't address chest pains. Reports of residents being fed dog food.
Both facilities were designated as Special Focus Facilities - CMS's category for the worst-performing nursing homes in the country. Their star ratings hovered around 1.5, against a state average of 3.4.
None of this is in dispute. The survey findings are public record. The photographs are in the report.
THE BUSINESS STRUCTURE
Hagler and Rozenberg are next-door neighbors in Rockland County, New York. They've been business partners for over 25 years. Together, they own or control 46 nursing homes across New Jersey, New York, Kansas, and Missouri.
The structure they used in New Jersey is common in the industry: separate the operating company from the property company. Hagler owns the operating companies (99% of Hammonton, majority of Deptford). Rozenberg and the Klein family own the property companies.
The operating company holds the license, employs the staff, bills Medicaid. The property company owns the building and land. The operating company pays rent to the property company.
In theory, this protects assets and limits liability. In practice, when both sides of the transaction are controlled by the same people, the potential for self-dealing is obvious.
THE MONEY TRAIL
In 2014, Hagler and Rozenberg bought Hammonton, Deptford, and a third facility (Mount Laurel) for $68.8 million total. The properties were worth about $20.6 million. The operating companies - the licenses, contracts, and businesses - were worth $48.2 million.
They financed nearly all of it with a $58.2 million mortgage and a $10 million seller note. Their down payment: approximately 1.5%.
Here's where it gets complicated - and where the allegations of fraud begin.
The mortgage was secured by the properties. But the mortgage amount ($58.2 million) far exceeded the property value ($20.6 million). The extra money paid for the operating company acquisitions.
Then the property companies charged rent to the operating companies based on that inflated mortgage. Which means Medicaid - through the operating companies - was effectively paying off the owners' business acquisition loans under the guise of "rent."
In 2017, after CMS terminated their Mount Laurel facility, they refinanced with HUD-backed loans. The new mortgages totaled $63.2 million for just two facilities. Base rent doubled.
And then came the "additional rent."
The leases required base rent payments calculated to cover mortgage principal, interest, taxes, insurance, and reserves. But on top of that, the property companies charged millions more in "additional rent" - supposedly for the same expenses already covered by base rent.
Where did that money go? OSC traced it through bank records.
During the review period, the property companies received $56.2 million in total rent. They paid $26.8 million to the bank for the actual mortgage. The remaining $27.8 million was distributed to Rozenberg personally and to Klein Family Enterprises.
That's not rent paying for property costs. That's profit extraction.
THE RELATED-PARTY NETWORK
The property companies weren't the only family-owned entities doing business with the nursing homes.
Centers for Care, LLC - jointly owned by Hagler and Rozenberg - provided management services. The contract explicitly stated services would be provided "at actual cost" with no intent to profit. The nursing homes paid Centers $27 million. Centers' tax returns show profits of $15.1 million (2019), $18.9 million (2020), and $41.5 million (2021).
BIS Funding Capital - owned by Hagler and his son Jonathan - provided IT services. No written contract. Invoices that just said "Software Rental" with no detail.
CFSC Downstate - owned by various family members and Centers' COO - provided staffing and housekeeping. No written contract.
Skilled Staffing - supposedly owned by Rozenberg's daughter and daughter-in-law - provided contract nursing staff. No written contract. Tax returns showed $5.5 million in distributions to the daughter and daughter-in-law. Bank records showed those payments actually went to Rozenberg's personal account and Centers' COO.
In total, the nursing homes paid $92 million to related parties during the review period.
The amount disclosed on federal cost reports: $882,666.
Less than 1%.
Federal law requires nursing homes to disclose all related-party transactions. The purpose is to prevent exactly this kind of self-dealing - to ensure that when you're paying your own companies, the prices are fair and the transactions are transparent.
Hagler signed the cost reports. He certified they were accurate. He's a licensed tax preparer who handles Centers' financial operations and prepares tax returns for many of these related entities.
When OSC asked Centers' accountant about related parties, the accountant testified that Centers denied having any.
THE LEGAL CONTEXT
It's important to note: allegations aren't convictions. Hagler and Rozenberg have not been found liable for anything. They've asserted their Fifth Amendment rights and declined to testify. Their lawyers have disputed OSC's findings on multiple grounds.
They argue the staffing sample wasn't statistically valid. (OSC says it was.) They argue the staffing law is unconstitutional and impossible to comply with. (Courts haven't ruled on this, and OSC notes both facilities self-reported staffing below state averages.) They argue that bundling operating costs into mortgages is common industry practice. (It may be common, but that doesn't make it legal to report business loans as rent on cost reports.)
OSC is seeking approximately $124 million in recoveries and penalties. That includes:
$86.3 million for staffing violations
$35.5 million related to real estate transactions
$2.1 million for unsupported related-party payments
$980,000 in RN violation penalties
A receiver has been operating both facilities since June 2024. The investigation is ongoing.
In June 2025, Centers Healthcare settled with the federal government over similar allegations at 44 nursing homes in four states, admitting to false statements on cost reports.
WHAT THIS MEANS FOR THE REST OF US
Here's the uncomfortable truth: most of the structures described in this report are legal. Separating operating and property companies is legal. Using related-party vendors is legal. Taking out mortgages that exceed property values is legal.
What's not legal - allegedly - is failing to disclose those related-party transactions. Reporting business acquisition costs as property rent. Charging "additional rent" that's really just profit distribution. Operating facilities so understaffed that residents don't receive half the legally required care.
The line between aggressive tax planning and fraud can be thin. The line between efficient operations and neglect can be thinner.
This report should prompt every operator to ask some hard questions:
On related parties: Are all your related-party transactions disclosed? Can you document that prices are at or below fair market value? If an auditor pulled your bank records tomorrow, would the money flows match your cost reports?
On rent structures: Is your rent based on actual property costs, or does it include acquisition financing that should be reported differently? Can you justify every dollar of "additional rent" with actual expenses?
On staffing: Are you meeting minimum requirements? Not on average, not most days - every shift, every day? Do you have documentation to prove it?
On documentation: If the state subpoenaed your records, could you produce contracts and invoices for every vendor payment? Or would you be scrambling to find paperwork that may not exist?
The investigators aren't stupid. They have access to bank records, tax returns, cost reports, and staffing data. They can trace money flows. They can compare what you told the government to what actually happened.
THE BIGGER PICTURE
OSC notes this is their second major nursing home fraud investigation in a year. In December 2024, they released findings on South Jersey Extended Care in Bridgeton.
A National Bureau of Economic Research study estimated that in 2019, 68% of nursing home profits were hidden through related-party transactions. Another study estimated $2.76 billion in ill-gotten gains from inflated related-party costs.
The regulatory environment is shifting. CMS has been pushing for more ownership transparency. Multiple states are considering legislation requiring audited financial statements for related entities. The scrutiny is increasing.
For operators doing things right, this is ultimately good news. The bad actors make everyone look suspicious. They're the reason legislators want to regulate everything. They're the reason families don't trust nursing homes. Getting them out of the industry benefits everyone who remains.
But for operators with aggressive structures, undisclosed related parties, or staffing that's been running on fumes - the window is closing. What was tolerated yesterday may not be tolerated tomorrow.
THE BOTTOM LINE
Two hundred forty beds at Hammonton. Two hundred forty at Deptford. That's 480 people - someone's mother, someone's father, someone's grandmother - living in facilities that allegedly provided half the required staffing while their owners extracted tens of millions of dollars.
Whatever happens in court, those residents can't get those years back. The woman who sat in her own waste for 24 hours can't unsit in it. The diabetic patients whose insulin was delayed for hours can't undo that damage. The resident who choked on a sandwich can't be unchoked.
The structures exist for legitimate reasons. Asset protection matters. Tax efficiency matters. Operational flexibility matters.
But at some point, the structure has to serve the mission. And the mission - the only mission that justifies the billions of dollars that flow into this industry - is taking care of people who can't fully take care of themselves.
When the structure becomes the mission, when maximizing extraction becomes the goal, when residents become cost centers to be minimized rather than people to be served - that's when the system breaks.
The investigation is ongoing. Hagler and Rozenberg have not been found liable for any wrongdoing. A receiver continues to operate both facilities.
