One of the Nation’s Largest Operators of Senior Care Facilities Files For Bankruptcy, Defaults on Loans

The Covid-19 pandemic in 2020 had a devastating impact on nursing homes and senior living facilities, with approximately 40% of residents contracting or likely contracting the virus.

According to a report by the U.S. Department of Health and Human Services Office of the Inspector General, over 1,300 nursing homes experienced infection rates of 75% or higher during peak periods.

As a result, these facilities faced severe staffing challenges, including significant staff loss and difficulties in hiring, training, and retaining new employees.

The February 2024 report highlights the ongoing nature of these staffing issues, exacerbated by rising inflation, which has increased the cost of compensating essential workers. In addition to staffing problems, operators have encountered various economic hurdles that have driven some companies to file for bankruptcy or even close down facilities.

The combination of increasing inflation, affecting products, supplies, and employee wages, along with higher interest rates over the past few years, has severely impacted operators’ budgets. Furthermore, inadequate reimbursements from Medicare, Medicaid, and insurance companies have led to capital shortfalls.

Gibbins Advisors, an advisory firm, reports that dozens of senior facility operators have filed for bankruptcy in the past three years, with 13 companies filing in 2021, 12 in 2022, and 15 more in 2023.

Some notable Chapter 11 filings include Evangelical Retirement Homes of Greater Chicago, which sought to sell its assets at auction in June 2023, and Windsor Terrace Health, an operator of 35 nursing homes in California and Arizona, which filed its petition in August 2023 with assets and liabilities ranging from $1 million to $10 million.

Petersen Health Care, an operator of approximately 100 nursing homes, assisted-living, and long-term care facilities in Illinois, Iowa, and Missouri, also filed for Chapter 11 bankruptcy protection on March 20, 2024.

The company, which generated revenue of $340 million in 2023, faced financial distress due to increased overhead, low reimbursements, and a ransomware attack in October 2023 that disrupted its billing processes.

CEO David Campbell stated, “Petersen will operate as usual, and our team remains committed to continuing to provide first-rate care for our residents. We will emerge from restructuring as a stronger company with a more flexible capital structure. This will enable us to continue as a first-choice care provider and a reliable employer for our staff.”

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The challenges faced by nursing homes and senior living facilities during the pandemic have had far-reaching consequences, affecting not only the residents and their families but also the dedicated staff members who provide essential care.