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Senior Housing > Blog > Skilled Nursing Homes File Chapter 11 Bankruptcy


THE GOOD NEWS is that QSAP (Quality supplemental Payment Program) incentive plan encouraged in the Affordable Care Act is working!  The intent was to encourage the formation of accountable care organizations in an effort to improve health care quality and slow the growth of health care spending. Accountable Care Organizations embody a set of healthcare providers, including primary care physicians, specialists, hospital and long term care facilities that work together collaboratively and accept collective accountability for the cost and quality of care delivered to patients.

In California Department of Public Health is partnering with California Department of Health care Services to implement this new program.  The department’s Center for Health Care Quality is assessing and scoring quality of care of skilled nursing facilities to determine scores that qualify skilled nursing facilities for supplemental payments.   Qualified participants can expect to receive payments from the $90 million dollar fund as determined April 23, 2015.  Electronic fund transfers will be received April 27, 2015.

Out of 1000 skilled nursing facilities, 363 received incentive awards for their performance.  The individual facility payments ranged from $4000 to $1.2 million, an average of $223,000.  185 facilities that qualified for improvement awards ranged from $800 to $213,000, averaging $49,000 per facility.

The scoring of the quality of care is intensive and extensive.  It covers every aspect of the operation as well as the condition of the physical plant.  The methodology of scoring is still pending.   Skilled Nursing Providers are adapting to the Culture change in long term care.  Therefore, scoring facilities for quality of care is not only based only on the physical condition of a patient or a reduction of hospital readmissions, but the “wellness” of the patient care is of prime importance.  The industry is becoming far more sophisticated and making quantum leaps.  Providers bottom line is increasing while patient care quality increases.  THE NEWS IS GOOD FOR BOTH SKILLED NURSING PROVIDERS AND FOR THE SENIOR POULATION REQUIRING LONG TERM CA

3 Main Reasons Why Skilled Nursing Homes File Chapter 11 Bankruptcy

When Nursing Homes File Chapter 11 Bankruptcy

There are three primary reasons a skilled nursing home ends up filing for Chapter 11 Bankruptcy. Although not the most ideal situation for the owners, the employees, and their patients, stringent federal and state requirements, fines, and lawsuits are hampering facilities’ ability to yield a profitable nursing home that can still afford skilled staffing needed for quality care.

Strict Federal and State Requirements

New guidelines enforced by the government are requiring skilled nursing homes to make mandatory regulation investments. These investments include updated training or new certifications for direct aides and staff. Direct aides are required to meet minimum educational hour regulations. Staff member requirements have been elevated as well. Failure to adhere to these regulations results in significant fines and fees.

Lawsuits and Claims

We recently reported on 19 skilled nursing facilities that filed Chapter 11 in California. Country Villa Service Corp’s claimed a need to file Chapter 11 on individual assets in order to seek protection from a number of class action lawsuits filed against them. The lawsuits range from poor quality care of their patients to medication misuse and missing wages and hours for employees.

Filing Chapter 11 on these specific locations freezes their assets, making them unavailable to the plaintiffs should they win their cases and staves off creditors temporarily. It does not, however, affect all of Country Villa Service Corp’s operational facilities. CEO Stephen Reissman claimed in his telephone interview that the bankruptcy won’t affect operations or treatment of patients at the company’s nursing homes in question, either.

Medicare Withholdings and Fines from CMS

Smaller nursing home corporations financially unable to separate their operational holdings from their business holdings are in a more precarious situation should lawsuits or fines arise. According to official reports, Medicare spent almost $32 billion on skilled nursing facilities in 2011 through their Nursing Home Quality Control Program. With the sequestration resulting from budget cuts in FY2013, many nursing homes are claiming they still haven’t received payments from the Centers for Medicare & Medicaid Services (CMS) as required. Coupling that with what some nursing home owners are claiming that they have received erroneous fines from CMS, and as a result they are forced to declare bankruptcy.

In Iowa, All-American Care owner, Jerry Rhoades, claims his locally-owned operation has to file bankruptcy in part because of all the fee injunctions CMS placed upon his business. CMS’s audits of the company yielded these results and fines nearing $100,000. Rhoades claims the fees have crippled their business and Chapter 11 was the only way out.

If you are considering filing Chapter 11 Bankruptcy, there may be other options available to you. Talk to a knowledgeable skilled nursing brokerage about these options. A reputable brokerage will have a large pool of qualified buyers and participants either in a 1031 Exchange, straight sale or sale and leaseback transaction. Check back frequently for more information on this, and related, subjects.