A provision in state law cited in a class action lawsuit against a continuing care retirement community only applies to food-related fraud and, therefore, cannot be used by residents and families to secure entrance fee refunds, a court ruled Wednesday.

The refund provision in New Jersey’s Consumer Fraud Act is limited in scope and does not entitle the plaintiffs to full refunds of their entrance fees, monthly fees or services provided during their residence in the life plan community, the New Jersey Supreme Court ruled.

Princeton, NJ-based Springpoint Senior Living is accused of consumer fraud over allegations that it misrepresented the return of entrance fees once residents leave a CCRC. The lawsuit, filed in 2014, alleged violations of the state’s Consumer Fraud Act and the Continuing Care Retirement Community Regulation and Financial Disclosure Act. Springpoint asserted that the right to a refund under the state CFA only applies to a portion of the statute involving food served at restaurants, hotels or lunch counters.

“Those allegations [in the class action suit] pertain entirely to misrepresentations about fees charged by a senior living facility,” Justice Douglas M. Fasciale wrote in a unanimous opinion. “None of the plaintiffs’ allegations are related to misrepresentations of food.”

A Middlesex County Superior Court Judge denied a motion for partial summary judgment in December 2022, rejecting Springpoint’s argument that only the state health department had the right to file a lawsuit to obtain a refund of community entry fees. Springpoint appealed the decision to the state’s high court with the hope of clarifying the limited scope of the refund provision.

The New Jersey Supreme Court’s decision reversed the lower court ruling and remanded the case back to the trial court. DeSimone’s attorney told Law.com that class members would continue to pursue entrance fee refunds under the Continuing Care Retirement Community Regulation and Financial Disclosure Act. 

A Springpoint Senior Living spokeswoman told McKnight’s Senior Living that it was pleased with the state high court’s unanimous decision.

“The opinion clarifies the narrow scope of the Consumer Fraud Act’s refund remedy in the way that the legislature intended when it passed the law in 1980,” the spokeswoman said. “The well-reasoned decision faithfully adheres to the language and legislative history of the statute and resolves inconsistent interpretations by the lower courts.”

Filed in 2014 

William DeSimone filed the lawsuit in 2014 on behalf of his mother’s estate against Springpoint’s New Jersey-based CCRCs at Monroe Village, Springpoint at Montgomery, Springpoint at Crestwood, Springpoint at Meadow Lakes and Springpoint at the Atrium. 

According to court documents, Evelyn DeSimone had paid a $159,000 entrance fee for an independent living unit at Monroe Village. Before moving into her unit, however, she fell and broke her hip and was unable to move in. Instead, she remained in the community’s skilled nursing facility, where she lived until she passed away in April 2010.

After her death, according to the lawsuit, her estate received a refund that amounted to 50% of her initial entrance fee, less than the 90% refund that had been anticipated. 

The lawsuit alleged that Springpoint orchestrated a “bait and switch” scheme through misleading and deceptive advertising, along with “intentional misrepresentations” by sales personnel and an incomplete and misleading disclosure statement. 

The lawsuit also claimed that Springpoint failed to alert prospective residents that it was authorized to offer discounts on the subsequent re-leasing of units or to offer different payment options that effectively could reduce refunds.

The case was dismissed in 2014 for failure to state a claim on which relief can be granted, but it was reinstated in 2015 by an appellate court. The case was certified as a class action in 2021.A bill was introduced in the New Jersey legislature in February 2022 to require CCRCs to return refundable entrance fees to former residents or their estates within a year of the unit being vacated. If passed, the bill also would require that all CCRC agreements “be written in plain English and in language understandable by a layperson.”

As more and more older adults turn to their smartphones, laptops or other devices for holiday shopping, scammers are coming up with new tricks to ruin Christmas.

Online scams against older adults are expected to increase this month, including offers from fake look-alike “stores” or missed delivery notifications, the US Attorney’s Office has warned.

“December is the month of giving, but it’s also the time of year when cybercriminals try to take advantage of consumers, quickly turning a joyous season into a living nightmare,” US Attorney Dena J. King said in a statement.

Although the most likely targets for such scams are older adults living at home, long-term care facilities and communities also should be making sure their residents and their families understand the current risks around online fraud.

Fraud aimed at older adults, even online, is nothing new, and many older adults are becoming more savvy about being targeted.

But the combination of increased online shopping and new digital tools that use artificial intelligence has created new potential threats. 

One concern is that many people, including older adults, more often are using payment apps such as Venmo or Zelle; they can make it easier to send money to more vendors than ever but also provide less consumer protection if payment is sent to the wrong person, or a scammer, the AARP warns.

AARP’s Fraud Network is a free resource that anyone can access, and the organization sends out a “fraud knowledge” survey every year. This year, less than 30% of survey respondents were able to score a 7 out of 10 or better when quizzed about fraud issues, the AARP reported. 

Over the past few months, Congress and the Senate Special Subcommittee on Aging have warned that AI tools have engendered more sophisticated scams, such as creating fake images or conversations that can credibly mimic family members or government agents.

An assisted living owner who allegedly threatened to fire employees who cooperated with a federal investigation into the community’s pay practices has been ordered to attend anti-retaliation training and pay $16,500 in back wages.

Monday, Judge Jane M. Beckering of the US District Court, Western District of Michigan, Southern Division, issued a consent judgment ordering Safe Haven Assisted living of Haslett LLC and owner Tamesha Porter to pay the back wages and liquidated damages to three former employees.

The action follows a February complaint filed by the US Department of Labor, where the Wage and Hour Division conducted an 18-month review of the company’s pay practices. Porter was accused of regularly threatening employment termination and trying to identify employees she believed had cooperated with the investigation. She also was accused of contacting a former employee’s prospective employer with claims of misconduct at the community.

“This case’s resolution restores back wages earned and compensates the workers harassed by Tamesha Porter for exercising their rights to cooperate with federal investigators, a clear violation of the workers’ protections under the Fair Labor Standards Act,” Mary O’Rourke, Wage and Hour Division director, Grand Rapids, MI, said in a statement. 

Safe Haven also must display a fact sheet about the FLSA’s anti-retaliation provisions and provide neutral job references for all former employees.

A review of payroll records from Aug. 16, 2020, through Dec. 12, 2021, alleged that the company and Porter failed to pay affected workers for breaks not taken due to work demands, a violation of FLSA overtime provisions. The DOL obtained a consent judgment in federal court on Jan. 17 requiring Porter and Safe Haven to pay $15,238 in back wages and damages to six employees, along with a $3,618 civil penalty. The DOL indicated that Porter has made those payments.

The agency alleged that Porter threatened employees in November 2021, when she learned of the investigation, and that she continued those threats through Feb. 7, 2022. 

Federal prosecutors will be able to retry Philip Esformes on six healthcare fraud charges after the US Supreme Court declined to hear an appeal on Monday from the former assisted living community and nursing home owner.

This is the second time this year that the high court denied appeals from Esformes. In April, Justice Clarence Thomas rejected an emergency appeal seeking to stay a decision from the 11th US Circuit Court of Appeals affirming his 2019 conviction on 20 charges. Esformes’ attorneys had argued that the case should be thrown out after the government improperly seized and used documents protected by attorney-client privilege.

Esformes had been convicted on charges including conspiracy to defraud the United States, money laundering, paying and receiving kickbacks, bribery, wire fraud and obstruction of justice. The federal government had called the $1.3 billion healthcare fraud case “the largest healthcare fraud scheme charged by the US Justice Department.” The jury, however, did not reach a verdict on six counts, which prosecutors said they intended to pursue.

Former President Donald Trump comminuted Esformes’ 20-year prison sentence in December 2020 but left intact the remaining parts of his sentence, including three years of supervised release, the payment of $5.5 million in restitution and the forfeiture of $38.7 million equivalent to property traced back to Esformes’ money laundering offenses.

Reality TV personality Kim Kardashian shined the spotlight on Esformes’ case last spring in a series of tweets a few days after federal prosecutors received the green light to retry Esformes on pending healthcare fraud charges.

A case history

Esformes first was charged in 2016. The federal government, in part, alleged that he would move skilled nursing residents to his assisted living facilities when they were at or near the end of Medicare’s 100-day post-hospital benefit period for skilled nursing. “After the required 60-day waiting period between consecutive admissions to an [sic] SNF, a physician or physician assistant would readmit the beneficiary to the hospital, re-initiating the cycle,” according to a federal motion in 2016.

Meanwhile, the government alleged, Esformes provided access to assisted living residents “for any healthcare provider willing to pay a kickback” — including pharmacies, home health agencies, physician groups, therapy companies, partial hospitalization programs, laboratories and diagnostic companies — even though many of the services for which they were paid were not medically necessary or were never provided.

A cybersecurity threat ominously titled the “Citrix bleed” requires immediate attention from healthcare organizations, federal agencies warned Friday.

The issue is a vulnerability in network systems that could allow hackers to access private healthcare information by bypassing passwords and multifactor authentication, the Department of Health and Human Services said.

The cloud computing company Citrix first warned users of the “bleed” threat in October and since then, reports showed that hackers were exploiting the software since August, according to HHS.

Two security systems, NetScaler ADC and Netscaler Gateway 12.1, are now considered “end-of-life,” the HHS warning stated. It recommended that they be replaced immediately.

The threat is exacerbated by the fact that Citrix boasts that all of the top 10 largest healthcare organizations in the United States use its IT solutions.

The warning from HHS requires those using the software to deploy Citrix patches and upgrade security systems, said John Riggi, cybersecurity risk advisor for the American Hospital Association.

“This situation demonstrates the aggressiveness by which foreign ransomware gangs continue to target hospitals and health systems,” Riggi said in a statement. “Ransomware attacks disrupt and delay healthcare delivery, placing patient lives in danger. We must remain vigilant and harden our cyber defenses, as there is no doubt that cyber criminals will continue to target the field, especially during the holiday season.”

New software technology has not yet abated cybersecurity threats. In fact, new artificial intelligence tools have allowed for sophisticated cyber scams that mimic voices or government agents, which prompted a recent Senate hearing on the threat.

In addition to any harm caused by leaking sensitive information, data breaches also could also cost healthcare providers via expensive lawsuits, such as a class-action case levied against PharMerica, which provides services to long-term care operators, earlier this year.

The US House of Representatives has joined the wave of federal politicians weighing in on artificial intelligence in healthcare. 

Rep. Brett Guthrie (R-KY) touted AI’s “limitless” potential in healthcare, including cancer screening tools, but also warned that leaders should not “let these technologies go without guardrails” during a congressional hearing Wednesday. 

Several healthcare leaders gave testimony, both on the new capabilities AI had afforded their organizations and also on the potential biases they can produce, during the hearing. 

Concerns addressed included worries about how transparent AI tools are and whether they are compromising patient privacy.

Although lawmakers broadly weighed potential legislation that could address concerns about AI, the hearing was not focused on any specific bill currently being taken up by Congress.

Several of the speakers insisted that federal regulation on AI would not be as productive as more localized limits and frameworks on how AI is used within organizations.

“While some would advocate for a centralized regulatory body, our experience suggests that local audits could be more effective in ensuring alignment with principles,” Christopher Longhurst, MD, and chief medical officer at UC San Diego Health, said during the hearing, “as these [AI] models must be evaluated within the context of the care they support.”

Speakers also echoed common hopes that AI be used to help aid clinicians and make healthcare workers’ jobs easier, as opposed to supplanting them outright.

The hearing, conducted by the House Energy and Commerce Health Subcommittee, comes several weeks after the Senate reviewed AI’s contribution to cyber scams that target seniors. The Senate Special Committee on Aging also released its eighth annual “fraud book” on the topic last month.

President Biden recently came out in support of both AI and potential regulation to ensure its responsible development in healthcare settings.

On the flipside, healthcare groups have begun to produce materials outlining the existing legal risks associated with AI tools, including how AI-enabled monitoring for health — something very common in the senior living and care industry — could create demand for updated privacy policies and procedures.

Last year, older Americans reported losing more than $1.6 billion to fraud. And increasingly, scammers are using artificial intelligence to make their schemes more effective.

During a Thursday hearing on modern scams held by the Senate Special Committee on Aging, US Sen. Bob Casey (D-PA), the committee’s chairman, released the group’s eighth annual “fraud book,” capturing the most common scams targeting older adults and resources to protect against fraud.

Casey said that senators from both parties are trying their best to understand artificial intelligence, especially generative AI. “Deepfakes,” or AI-developed images, and voice clones that can mimic the voice of a loved one, can trick people into relinquishing personal information or money, he said. In May, the committee sent a letter to the Federal Trade Commission requesting information on the rising prevalence of AI-powered technology in scams and how the agency is addressing it.

In 2022, the year covered by the latest fraud book, the committee’s fraud hotline received 659 new complaints, bringing the total number of complaints to 11,800 since 2013.

The top 10 scams against older adults identified for last year — many of which incorporated AI — were financial services personation and fraud (9%); healthcare and health insurance scams (8%); robocalls and unsolicited calls (7%); tech support and computer scams (6%); romance scams (4%); government imposter scams, identity theft, sweepstakes and lottery scams, and business impersonation and shopping scams (3% each); and person-in need and grandparents scams (2%).

Tahir Ekin, PhD, director of the Texas State Center for Analytics and Data Science, testified at Thursday’s hearing that AI amplifies the effects of scams, “enhancing their believability and emotional appeal” through personalization. 

“The interplay of AI and scams brings forth both challenges and opportunities,” Ekin said. “Prioritizing the enhancement of data and AI literacy among older Americans, and actively involving them in prevention and detection efforts, stands as a cornerstone.”

Health plays role in vulnerability to scams

Meanwhile, a new poll from the University of Michigan National Poll on Healthy Aging reveals a strong link between an older adult’s health and his or her vulnerability to scams — both being able to spot one and falling victim to one.

Across the board, adults aged 50 to 80 years who reported being in fair or poor physical or mental health, those with disabilities, and those who rated their memory as fair or poor were more likely than others their age to say they had experienced fraud.

“Our findings of a strong connection between scam vulnerability and health adds important new data to ongoing efforts to reduce the devastating toll of scams on older adults’ finances and wellbeing,” poll director Jeffrey Kullgren, MD, said in a press release. “We also found that no matter what their health status, older adults feel strongly that government and businesses should do more to educate and protect against scams.”

In general, 75% of respondents reported experiencing a scam attempt at least once in the past two years, and 39% said that scammers succeeded in one or more ways — 25% of scam victims had bank or credit card accounts compromised, 15% had an account hacked, 9% lost money and 3% had their identity stolen.

But researchers found “stark differences” in the health status of those who experienced a scam attempt and those who had not.

Approximately half of older adults who were targeted by a scam and who said they were in fair or poor health reported experiencing fraud, compared with 35% to 38% of those in better health. Older adults in fair or poor mental health (41%) said being victimized by a scam had a major effect on their financial, mental or physical well-being, compared with 10% who rated their mental health as good or excellent.

More than half (57%) of older adults expressed uncertainty about their ability to spot a scam, but health status also mattered in those cases as well  — 65% in poor or fair health, compared with 55% of those in better health, reported uncertainty. 

Overall, 83% of older-adult respondents said that they wanted to know more about how to protect themselves from scams. And 97% of respondents agreed with the statement that policymakers need to do more to protect people from scams, whereas 96% agreed with the statement that companies should do more.

“It stands to reason that older adults with health challenges experience fraud more than those without these challenges,” AARP Director of Fraud Prevention Programs Kathy Stokes said in a statement. “Fraud criminals are master manipulators of emotion, and anyone can experience a scam regardless of age, education or income. When it comes to fraud susceptibility, it’s less about who you are and more about how you are when you are targeted.”

The University of Michigan National Poll on Healthy Aging report was based on an online and phone survey conducted among 2,657 adults aged 50 to 80 in July and August by NORC at the University of Chicago for the U-M Institute for Healthcare Policy and Innovation.