Key healthcare firm files Chapter 11 bankruptcy after defaulting

Operators of nursing homes and senior living facilities were severely impacted during the Covid-19 pandemic in 2020 as about 40% of residents had or likely had Covid-19 that year. More than 1,300 nursing homes had infection rates of 75% or higher during surge periods, the U.S. Department of Health and Human Services Office of the Inspector General reported.

The high infection rates led to severe staffing challenges, including significant loss of staff and substantial difficulties in hiring, training and retraining new staff, according to a February 2024 report. 

Those staffing challenges, however, continue today, as rising inflation makes it more expensive to compensate these essential workers.

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In addition to staffing challenges, operators have also faced a number of economic issues that have driven some of these companies to file for bankruptcy or, in some cases, shut down facilities. Rising inflation, which affects products, supplies and employee wages, and higher interest rates over the past couple years have severely impacted operators' budgets. On top of those economic issues, operators are battling inadequate Medicare, Medicaid and insurance reimbursements that can lead to capital shortfalls.

Senior care facility bankruptcies rise

Financial hardship has led dozens of operators of senior facilities to file for bankruptcy over the past three years, with 13 companies filing petitions in 2021, 12 debtors filing in 2022 and 15 more in 2023, according to advisory firm Gibbins Advisors.

Notable Chapter 11 filings over the past year have included Evangelical Retirement Homes of Greater Chicago, which filed Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Illinois in June 2023 to sell its assets at auction. Also, Windsor Terrace Health, an operator of 32 nursing homes in California and three in Arizona, filed its petition in the U.S. Bankruptcy Court for the Central District of California in August 2023 listing $1 million to $10 million in assets and liabilities and unable to pay its debts.

More recently, Magnolia Senior Living, an operator of four facilities in Georgia, filed for Chapter 11 protection on March. 19 in the U.S. Bankruptcy Court for the Northern District of Georgia.

Loan defaults, ransomware attack force Petersen into bankruptcy 

Finally, Petersen Health Care, operator of about 100 nursing homes, assisted-living and long-term care facilities in Illinois, Iowa and Missouri, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Delaware on March 20. 

The company, which had revenue of $340 million in 2023, was suffering financial distress from increased overhead, low reimbursements and a ransomware attack in October 2023 that interrupted the company's efforts to bill patients and insurance companies.

The company's financial problems worsened as it defaulted on payments on more than $50 million in loans that led to 19 of the company's facilities being placed into receivership. 

Petersen asserted in a March 21 statement that it will continue to operate its business as normal, as it is seeking court approval of a $45 million debtor-in-possession financing commitment from lenders to fund post-petition operating expenses and working capital.

“Petersen will operate as usual, and our team remains committed to continuing to provide first-rate care for our residents,” CEO David Campbell said in a statement. “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.”

The Peoria, Ill.,-based company, founded in 1974, operates skilled-nursing facilities, assisted/independent living communities, memory care services and homes for the developmentally disabled.