Healthcare bankruptcies are on the rise, led by the long-term care sector, according to research by consulting firm Gibbins Advisors.
From 2021 to June 2022, 30 senior care providers filed for bankruptcy, accounting for more than half of bankruptcies among large healthcare companies with more than $10 million in liabilities during that time, research shows. from Gibbins Advisors.
“This year is really where the financial pinch hits,” said Clare Moylan, principal at Gibbins Advisors.
During the early phases of the COVID-19 pandemic, government funding, waivers and lender extensions supported struggling healthcare providers. But many of those resources and flexibilities are gone, and there’s more pressure on cash flow, Moylan said. For now, that pressure is on skilled nursing facilities and seniors’ residences, but Gibbins Advisors expects it to shift to hospitals as spending rises.
Many nursing home providers are operating on thin margins and have been tightened as they have struggled to be busy, Moylan said. The American Health Care Association/National Center for Assisted Living, which represents more than 14,000 long-term care facilities, reported in a May survey that 61% of its members were capping admissions due to staffing issues. AHCA/NCAL declined to comment for this story.
“In order to weather the storm, they need cash reserves or access to capital,” Moylan said. “A family business… really faces an uphill battle going forward.”
While the long-term care industry has faced challenges during the pandemic and many facilities have struggled, the fear that thousands of people will close has not materialized, said David Grabowski, professor of health policy at Harvard Medical School.
“That hasn’t happened and won’t happen unless there are big policy changes,” Grabowski said. “I would say the sky is not falling, but that could be a harbinger that things are starting to change.”
Grabowski said it will be important to determine what types of long-term care facilities file for bankruptcy and to distinguish between those that were underperforming and fell to higher competition and those that are trickle facilities. security in rural areas facing increasingly serious financial difficulties.
Gulf Coast Health Care, a chain of 28 skilled nursing facilities based in Pensacola, Florida, Florida, Mississippi and Georgia, filed for bankruptcy in October 2021 due to COVID-19-related volume cuts and issues of staff. In April, the company was dissolved and its facilities transferred to other operators, according to bankruptcy filings and information from Gibbins Advisors. Gulf Coast Health Care attorneys did not respond to a request for comment.
It’s also important to pay attention to who files for bankruptcy, because nursing home ownership structures are complicated, said Dr. Mike Wasserman, a geriatrician and former president of the California Association of Long Term Care Medicine. “In many cases, the day-to-day running of the nursing home is literally designed not to bring in a lot of money. The money is earned by the [real estate investment trusts]by the property owners, by the off-site services provided to the facility,” he said.
The Department of Health and Human Services on Monday released a database that provides insight into the ownership structures of the 15,000 skilled nursing facilities that receive Medicare reimbursements. The database is part of a larger federal effort to improve the transparency and quality of care in nursing homes.
For example, the Ensign Group, a chain of nursing homes headquartered in San Juan Capistrano, Calif., had 430 companies operating 228 nursing homes and senior living sites from 2007 to 2021, according to a study. published in the International Journal of Health Services. Ensign Group could not be reached for comment.
“That’s what all these nursing homes are doing,” said Charlene Harrington, a registered nurse and professor emeritus at the University of California, San Francisco, author of the study. “It’s a good way to hide their profits.”
Owners of for-profit retirement homes will take assets out of a facility, leave it with liabilities, and then file for bankruptcy, Harrington said. “Bankruptcies are kind of a way of doing business in the nursing home industry,” she said. “The bankruptcy court allows them to get rid of liabilities and then they just restructure. It is legal. It’s unfortunate.”