Nursing homes, senior living facilities driving healthcare bankruptcies

Healthcare bankruptcies are on the rise, led by the long-term care sector, research by the consluting firm Gibbins Advisors shows. 

From 2021 through June 2022, 30 senior care providers declared bankruptcy, representing more than half of bankrupticies among large healthcare companies with more than $10 million in liabilities during that time, according to Gibbins Advisors research. 

“This year is really where the financial pinch is hitting,” said Clare Moylan, principal at Gibbins Advisors. 

During earlier phases of the COVID-19 pandemic, government funding and waivers and extensions from lenders buoyed struggling healthcare providers. But many of those resources and flexibilities are gone and there is more pressure on cash flow, Moylan said. For now, that pressure is on skilled nursing and senior living facilities, but Gibbins Advisors expects it to shift to hospitals soon as expenses climb. 

Many nursing home providers operate on thin margins and have been squeezed tighter as they’ve struggled with occupancy, 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 because of staffing concerns. AHCA/NCAL declined to comment for this story. 

“In order to kind of weather the storm of this, they need cash reserves or access to capital,” Moylan said. “A mom-and-pop business…is really facing 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 would close hasn’t been realized, said David Grabowski, a professor of healthcare policy at Harvard Medical School.

“That hasn’t happened and isn’t going to happen unless there are big policy shifts,” Grabowski said. “I would say the sky is not falling, but this could be an early warning sign 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 differentiate between those that were poor performers and fell to superior competition and those that are safety net faciltities in rural areas that face worsening financial challenges.

Gulf Coast Health Care, a Pensacola, Florida-based chain of 28 skilled nursing facilities in Florida, Mississippi and Georgia, declared bankruptcy in October 2021 over COVID-19 related reductions in volumes and staffing challenges. In April, the company dissolved and its facilities transferred to other operators, according to bankruptcy filings and information from Gibbins Advisors. Lawyers for Gulf Coast Health Care did not respond to a request for comment.  

Paying attention to who is filing for bankruptcy also is important because the ownership structures of nursing homes are complicated, said Dr. Mike Wasserman, a geriatrician and past president of the California Association of Long Term Care Medicine. “In a lot of cases, the day-to-day operation of the nursing home is literally set up not to make a lot of money. The money is made by the [real estate investment trusts], by the real estate owners, by the services outside of the facility provided to the facility,” he said. 

The Health and Human Services Department on Monday published a database providing 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 transparency and quality of care in nursing homes. 

For example, the Ensign Group, a nursing home chain headquartered in San Juan Capistrano, California, had 430 companies managing 228 nursing homes and senior living sites from 2007 to 2021, according to research published in the International Journal of Health Services. The Ensign Group could not be reached for comment. 

“That’s what all of these nursing homes are doing,” said Charlene Harrington, a registered nurse and professor emerita at the University of California, San Francisco, who authored the study. “It’s a good way to hide their profits.” 

For-profit nursing home owners will take assets out of a facility, leave it with liabilities, then declare 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 the liabilities, then they just restructure. It’s legal. It’s unfortunate.”