The COVID-19 pandemic left many businesses at risk of bankruptcy and closure, including care homes.
So much so that one major healthcare company, responsible for nursing homes and senior living facilities, has recently filed for Chapter 11 bankruptcy, despite taking out $50 million in loans.
Infection Rates Were at 75% in Nursing Homes
Numerous nursing homes and senior living facilities were significantly impacted by the COVID-19 pandemic.
In fact, at one point, 1300 nursing homes had an infection rate of 75% or higher, according to the US Department of Health and Human Services, which caused significant financial strain on these facilities.
Nursing Homes Are Struggling With Staff Shortages
With the increasing number of elderly people and many of these people requiring round-the-clock care, staff shortages in nursing homes are a struggle, according to The Nation’s Health.
Due to the rise in inflation, nursing home companies are struggling to find the money to pay their staff, which is part of the reason why staff shortages are so low.
Inflation Has Led to Chapter 11 Bankruptcy Filings
The Street has reported that inflation has caused a rise in wages, products, supplies, and interest rates, leading to many nursing care home companies struggling to find the funds.
This has led some companies to take out loans, but left unable to pay the loans back, which has resulted in Chapter 11 bankruptcy filings.
Dozens of Chapter 11 Bankruptcies Have Been Filed Since 2021
With the COVID-19 pandemic being one of the main causes behind these Chapter 11 bankruptcies, many healthcare providers have filed for Chapter 11 since 2021.
13 companies filed in 2021, 12 in 2022, and 15 in 2023, with this number potentially going up in 2024.
The Chapter 11 Bankruptcy Process
The Chapter 11 bankruptcy filing occurs when a holder of debt claims and other liabilities happens before the date of the bankruptcy petition.
Filing for Chapter 11 bankruptcy enables breathing room to create a reorganization plan and give creditors greater recovery than if they had gone into liquidation.
Notable Chapter 11 Bankruptcies Have Occurred in the Last Few Years
Various nursing home companies have had to file for Chapter 11 bankruptcy in the last few years.
This includes the Evangelical Retirement Homes of Greater Chicago and Windsor Terrace Health, which listed between $1 million and $10 million in assets and liabilities.
Evangelical Retirement Homes Filed Chapter 11 Due to COVID-19
McKnights Senior Living reported that Evangelical Retirement Homes had to file for Chapter 11 bankruptcy due to COVID-19.
As they could not give people a tour of their facilities, place uptake was low. Low uptake meant a loss of fees, eventually leading to bankruptcy.
Evangelical Retirement Homes Has a Winning Bidder
Evangelical Retirement Homes was bought out after they filed for Chapter 11 bankruptcy.
According to McKnight Senior Living, Encore Healthcare Services of New York was revealed as the buyer of the senior living facilities. Encore Healthcare Services plans to spend $15 million on capital improvements.
Windsor Terrace Health Has 35 Senior Living Facilities
The Windsor Terrace Health company, which owns 35 nursing homes across California and Arizona, is another warning of senior living facility bankruptcies.
Due to the company’s size, McKnights has said that Windsor Terrace Health’s bankruptcy will warn many that there will be a further collapse in the senior living sector.
Magnolia Senior Living Has Also Filed Chapter 11
Magnolia Senior Living is another senior living facility filing for Chapter 11 bankruptcy.
McKnights Senior Living has said that Magnolia has included assets between $1 and $10 million with matching liabilities in their filing.
Peterson Health Care Filed for Chapter 11 Bankruptcy
Peterson Health Care is another nursing home company that has recently had to file for Chapter 11 bankruptcy.
The healthcare provider defaulted on loans up to $50 million, and according to WSJ, it comes just two months after it was hit with lawsuits that alleged these defaulted payments.
Peterson Health Care Had Launched a $50 Million Institute
Before the bankruptcy filing in 2023, Peterson Health Care launched a $50 million institute.
The Peterson Center on Healthcare website reported at the time that the $50 million was being used to evaluate digital health technologies to help improve health and lower the costs of healthcare.
Peterson Health Care Had $295 Million in Debt
Reuters reported that Peterson Health Care had around $295 million in debt.
This comes after the company had faced issues with cyberattacks and defaulting on government-backed loans.
Peterson Was in Trouble Before the Debt
Even before going into debt, Peterson Health Care already saw signs of trouble.
The number of people wanting to go into residential care in rural areas declined, with more opting for having carers come to their homes.
Peterson Health Care Owed $3 Million in Overtime
Before filing for Chapter 11, Peterson Health Care was found to owe $3 million in overtime to their carers.
Business Insider reported that a federal investigation had found that the company had violated wage laws for two decades, with these overtime wages being owed between 2018 and 2020.
Peterson Claims They Were Not in Violation of Wage Laws
Despite various investigations finding otherwise, Peterson claims they have never been in violation of wage laws.
HR Drive says a spokesman for the company said the company has always paid their employees fairly and that they are constantly reviewing their pay practices.
Peterson Owes Millions to Creditors
Much of the debt that Peterson Health Care owes is owed to creditors.
Skilled Nursing News reports that RehabCare is the top creditor, which has a total of $11.87 million in unsecured claims.
Peterson Health Care Has Faced Several Cyberattacks
Between October 2023 and February 2024, Peterson Health Care faced several cyberattacks.
This includes an attack from the Cactus ransomware group, which caused them to lose business records and struggle to bill customers and insurers. They also had an attack from Blackcat, a hacking group, stopping payments to providers.
Peterson Had To Replace Everything
After the attack, Peterson had no other choice but to replace everything that had been stolen.
This included their servers, email addresses, and software, which only cost them more money.
There Was a Ransomware Attack on One of Peterson’s Major Payors
Change Healthcare is one of Peterson’s major payors, so things only got worse when they were also the target of a ransomware attack.
Wired revealed that the people who had carried out the ransomware attack received $22 million, which many believe means Change Healthcare has paid them ransom.
The Payment Represents a Huge Problem
If Change Healthcare has paid the attackers $22 million, this poses a huge problem to the healthcare industry.
It gives more reason for other attackers to believe there are profits to be made from stealing healthcare data, which will cause worry among healthcare providers, patients, and their families.
Peterson Health Care Previously Had a Revenue of $340 Million
Despite filing for Chapter 11 bankruptcy and having debts of $295 million, Peterson Health Care had a revenue of $340 million.
They had around 90 nursing homes across various states, 4000 employees, and a capacity for 6796 residents.
Peterson Health Care Is Operating as Normal
Despite filing for Chapter 11 bankruptcy, Peterson Health Care plans to operate normally.
Business Wire reported that David Campbell, Peterson Health Care’s Chief Restructuring Officer, has said the company is committed to providing first-rate care to its residents and will return as a “stronger company.”
