The COVID-19 pandemic, staffing challenges, inflation, high interest rates and low reimbursement rates led to bankruptcy filings recently by two senior living companies.
Magnolia Senior Living, which operates four communities in Georgia, filed for Chapter 11 protection on March 19 in US Bankruptcy Court for the Northern District of Georgia.
The next day, Petersen Health Care, which operates 100 independent living communities, assisted living communities and other facilities in Illinois, Iowa and Missouri, filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware, according to Reuters.
Magnolia, which provides assisted living and memory care at four Georgia locations, reported assets of $1 million to $10 million, with matching liabilities, in its bankruptcy filing. Magnolia did not respond to a request from McKnight’s Senior Living for comment on the filing.
Peoria, IL-based Petersen Health Care reported more than $295 million in debt, including $45 million owed under healthcare facility loans insured by the US Department of Housing and Urban Development. Failure to make payments on the HUD loans resulted in 19 facilities falling into receivership, according to the media outlet.
The company already was under financial distress from increased overhead, low reimbursements and a ransomware attack in October that derailed the company’s efforts to restructure its debts, according to Reuters. A more recent ransomware attack on UnitedHealth Group’s Change Healthcare further compounded Petersen’s financial woes.
Petersen operates independent living, assisted living and memory care communities; nursing facilities; and homes for the developmentally disabled. It also provides respite care, hospice, local medical transportation, radiology and pharmacy services.
In a March 21 statement to Reuters, a Petersen spokesperson said it would continue to operate its business as normal and was seeking court approval of a $45 million financing package from lenders to sustain day-to-day activities.
“Petersen will operate as usual, and our team remains committed to continuing to provide first-rate care for our residents,” CEO David Campbell said. “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.”
Petersen did not respond to a request from McKnight’s Senior Living for comment.
Healthcare restructuring advisory firm Gibbins Advisors released a report earlier this year finding that healthcare-related bankruptcies hit a record high last year, with long-term care second only to pharmaceutical companies in fillings.
