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The Office of the State Comptroller (OSC)  won a legal victory this week in its ongoing efforts to protect the integrity of New Jersey’s Medicaid program. On June 23, 2025, the Appellate Division of the Superior Court of New Jersey upheld OSC’s authority—exercised through OSC's Medicaid Fraud Division (MFD)—to temporarily suspend Medicaid providers based on "good cause," including suspected criminal or civil violations or evidence of lack of responsibility.

In January 2024, OSC’s Medicaid Fraud Division notified Centers Agency, LLC and Centers Lab NJ LLC that they would be temporarily suspended, effective in 120 days. The suspension was prompted by serious concerns stemming from the New York Attorney General’s Medicaid Fraud Control Unit’s investigation into nursing homes owned and operated by Kenneth Rozenberg and Daryl Hagler. The New York Attorney General alleged Rozenberg and others siphoned $83 million in public funds to enrich themselves and caused harm to nursing home residents in New York. Rozenberg owned 95 percent of the labs in New Jersey, and his wife owned 5 percent. OSC had previously moved to suspend Rozenberg and Hagler and their two New Jersey nursing homes from Medicaid, due to the New York allegations.

Two days before the suspension of the labs was to go into effect, attorneys for the Rozenbergs claimed ownership of the labs had been transferred to Uri Lerner, and therefore, the suspension should be lifted. 

The Appellate Division found MFD acted within its discretion, citing “substantial credible evidence” and OSC’s mandate to protect public funds and the Medicaid program.  MFD had found that documents cast doubt on whether this transfer had actually occurred. Further, the purported new owner, Lerner, co-owned another business with the Rozenbergs in New York, raising questions about whether this transfer would be truly arms-length.  

The Court explicitly upheld MFD’s ability to suspend providers, noting that such authority is critical to ensuring accountability in a multi-billion dollar program.  The labs continued to provide services to New Jersey Medicaid beneficiaries, claiming they could offer “free services” even while suspended from New Jersey Medicaid. But the Court supported MFD’s position that suspended providers are prohibited from engaging in any Medicaid-related activity, including providing free services to beneficiaries, as part of the state’s broad regulatory protections.

“This ruling should serve as a clear message: providers and their affiliates who seek to participate in New Jersey’s Medicaid program must meet standards of transparency, responsibility, and compliance,” said Acting State Comptroller Kevin Walsh. “We are grateful to the court for affirming OSC’s legal and regulatory framework that allows us to fulfill that mission.”

MFD’s temporary suspension remains in effect, but the labs are entitled to a hearing in which they can present additional evidence to the Office of Administrative Law.  

Last year, a Superior Court judge appointed an independent receiver to run the Deptford Center for Rehabilitation and Healthcare and Hammonton Center for Rehabilitation and Healthcare, two nursing homes owned by the Rozenbergs and Daryl Hagler, following MFD’s move to suspend the owners and facilities from New Jersey Medicaid.

Due to the receivership, OSC temporarily held the suspensions in abeyance, pending the outcome of the New York fraud case, OSC’s investigation, or until and if the receiver determines the facilities should be closed, according to a letter OSC sent to Hagler and the Rozenbergs.