BRONX, NY — A 480-bed nursing facility has filed a federal lawsuit challenging a $31 million Medicare recoupment demand, arguing that federal auditors retroactively applied payment rules to claims submitted during the early months of the pandemic.
Pinnacle Multicare Nursing and Rehab Center asked the US District Court for Southern New York to invalidate an Office of Inspector General audit report and block the Centers for Medicare & Medicaid Services from collecting the disputed funds, according to court documents filed on February 26, 2026. The lawsuit states that CMS demanded full payment by February 27, 2026, warning that failure to comply would trigger interest charges of 11.625% annually, amounting to nearly $10,000 per day.
The dispute centers on a federal audit that examined 100 Medicare reimbursement submissions from 2020 and 2021, finding errors in 99 of them, as reported by McKnight's Long-Term Care News. The OIG issued its recoupment recommendation in November, with CMS following up 75 days later with a formal demand for repayment. According to the lawsuit filed by Pinnacle attorney Alyssa A. Friedman, the audit findings relied on guidance documents and manual revisions issued years after the claims were submitted, including a 2023 update to the Medicare Claims Processing Manual.
"The demand for immediate repayment of $31 million, with a threat of punitive interest accruing by the day, regardless of the status of any administrative appeal or judicial proceeding, deprives Pinnacle of a meaningful opportunity to be heard," the lawsuit states. The filing argues that forcing immediate payment would prevent the facility from meeting payroll obligations and could result in closure, leaving vulnerable patients without access to care.
The facility's legal team contends that auditors conflated payment coding requirements with medical coding standards and failed to account for COVID-19-era regulatory waivers that allowed nursing homes to provide higher levels of care in place rather than transferring patients to hospitals. According to the lawsuit, Pinnacle operated under emergency conditions during the period when the Bronx emerged as an early epicenter of the pandemic in the United States.
The audit period coincided with the implementation of the Patient Driven Payment Model, which launched in October 2019 just months before the pandemic began. According to court filings, CMS did not create a specific COVID-19 diagnosis code for PDPM billing until October 2020, leaving facilities to navigate the new payment system without clear guidance during the crisis. The lawsuit characterizes the rollout as premature, stating that "CMS rolled out the PDPM system before it was ready, then told SNFs it was their problem for the next eight months — all while an unprecedented global health crisis was taking shape."
Pinnacle provided intravenous fluids, respiratory therapy, antibiotics, blood thinners, nursing assessment and rehabilitation services to COVID-19 patients who remained at the facility under state and federal directives, according to the lawsuit. The facility reported only two deaths attributed to COVID-19 between early 2020 and the end of February 2023.
When asked about potential changes to audit methodology following criticism from providers, an OIG spokesperson told McKnight's that the agency "was not familiar with push back from SNF providers." The spokesperson declined to provide details on three additional audits currently underway as part of the same series, stating only that they remain "in the beginning stage of field work."
CMS Inspection History
Pinnacle Multicare Nursing and Rehab Center maintains a three-star overall rating from CMS, placing it in the average performance category for nursing homes nationally. The facility's quality measures rating of four stars exceeds its health inspection and staffing ratings, which both stand at three stars.
Federal inspection records show 40 documented deficiencies across 13 inspections since the facility began submitting data to CMS. The most recent inspection on January 6, 2025, identified two deficiencies related to reporting and responding to allegations of abuse, neglect or theft, with severity ratings of E and D respectively.
A June 2023 inspection found violations involving food procurement and storage standards, as well as garbage disposal procedures, with severity ratings ranging from E to F. An April 2023 inspection documented a deficiency for failing to protect residents from abuse, assigned a severity rating of D.
The facility operates as a for-profit partnership with a licensed capacity of 480 beds, making it one of the larger nursing homes in the Bronx.
Ownership & Operations
According to CMS records, Pinnacle Multicare operates under a for-profit partnership ownership structure. The facility's classification as a critical community resource became particularly significant during the pandemic, when the Bronx faced disproportionate COVID-19 impacts compared to other New York City boroughs.
The lawsuit emphasizes the facility's role in preserving hospital capacity during the public health emergency by caring for acutely ill COVID-19 patients who would have otherwise required hospital admission. This approach aligned with state and federal directives encouraging nursing homes to provide higher levels of medical care on-site when feasible.
Resources for Families
Families with concerns about care quality at nursing homes in New York can contact the New York Long-Term Care Ombudsman Program at 1-855-582-6769. The program provides free advocacy services for residents and families navigating complaints or quality concerns.
The National Long-Term Care Ombudsman Resource Center maintains a hotline at 1-800-677-1116 and offers additional resources at https://ltcombudsman.org. Families can also file complaints directly with the New York State Department of Health or review detailed inspection histories through the Medicare Care Compare website at medicare.gov/care-compare.
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