Bronx, New York – A 490-bed nursing home in the Bronx is taking the federal government to court over a $31 million Medicare clawback demand, accusing the Office of Inspector General of applying rules that didn’t exist when the care was delivered and threatening to put the facility out of business before it gets a fair hearing.
Pinnacle Multicare filed suit on February 26 in the US District Court for the Southern District of New York, asking a judge to toss the OIG audit report, block the Centers for Medicare and Medicaid Services from collecting the repayment, and declare the demand unconstitutional.
The case stems from an OIG audit that found a 99% error rate in Pinnacle’s Patient Driven Payment Model claims from 2020 and 2021. CMS followed with a demand letter warning that unpaid balances after February 27, 2026 would accrue interest at 11.625% — nearly $10,000 per day.
“A Breathtaking Attempt to Rewrite History”
Pinnacle’s attorney, Alyssa Friedman, didn’t mince words in the filing. She called the audit “a breathtaking attempt to rewrite history,” arguing that OIG auditors applied a 2023 revision to the Medicare Claims Processing Manual to claims submitted years before that revision existed.
“The regulatory framework that CMS, NGS, and OIG ultimately applied in their audit of Pinnacle simply did not exist at the time the services were rendered,” the lawsuit states.
The facility argues that auditors confused payment and medical coding requirements and ignored COVID-era waivers that were in effect during the audit period. Pinnacle was operating at the height of the pandemic in a borough that became one of the earliest US epicenters of the outbreak — and was credited with just two COVID-attributed deaths between early 2020 and February 2023.
Pandemic Care, Pandemic Rules
The lawsuit details how Pinnacle adopted “charting by exception” during the pandemic — an emergency documentation method that reduced paperwork redundancy and freed nurses to spend more time with critically ill patients. The OIG counted that documentation shortfall against the facility without accounting for the state and federal directives that encouraged it.
“Consistent with state and federal directives to put patients over paperwork, charting by exception allowed Pinnacle to save lives, at the extremely modest expense of some of the documentation that might have been produced under normal circumstances,” the suit reads.
The facility was also flagged partly because it billed more Medicare claims than any other nursing home in the country during the pandemic period — not because of any suspicion of wrongdoing, according to an OIG auditor’s own admission cited in the filing.
Stakes Beyond One Facility
The outcome could matter for the broader industry. Three additional PDPM audits are currently underway as part of the same OIG project, with reports expected later this year. How courts treat Pinnacle’s due process arguments may shape how far federal auditors can reach in future recoupment actions against nursing homes that operated under emergency conditions during COVID.
Friedman warned the court that an immediate $31 million repayment “would immediately paralyze Pinnacle” and force the facility to close — leaving vulnerable patients without care, eliminating hundreds of jobs, and removing a critical resource from New York City’s healthcare landscape.
