Research by Gibbins Advisors shows that bankruptcies in the healthcare sector are on the rise, led by the long-term care sector.
According to research by Gibbins Advisors, between 2021 and June 2022, 30 senior care providers declared bankruptcy, accounting for more than half of all bankruptcies among major healthcare companies. with more than $10 million in debt during that time, according to research by Gibbins Advisors.
Clare Moylan, principal at Gibbins Advisors, said: “This year is really where the financial troubles are hitting.
In the earlier stages of the COVID-19 pandemic, government funding and waivers and extensions from lenders boosted struggling healthcare providers. But many of those resources and flexibility are gone, and there’s more pressure on cash flow, Moylan said. For now, that pressure is on the shoulders of skilled nursing and senior living facilities, but Gibbins Advisors is expected to shift to hospitals soon as costs soar.
Many nursing home providers operate on low profit margins and have been squeezed harder as they struggle to fill, Moylan said. The American Healthcare Association/National Center for Life Support, which represents more than 14,000 long-term care facilities, reported in a May survey that 61% of its members limited admission because of concerns about staffing. AHCA/NCAL declined to comment for this story.
“To weather a storm like this, they need cash reserves or access to capital,” said Moylan. “A parent business and a pop business… are really facing an uphill battle going forward.”
David Grabowski, a professor of healthcare policy at Harvard Medical School, said that while the long-term care industry is facing challenges during the pandemic and many facilities are struggling, The fear of thousands of people shutting down has yet to materialize.
“That didn’t happen and won’t happen unless there are major policy changes,” Grabowski said. “I can say that the sky is not falling, but this could be an early warning sign that things are starting to change.”
Grabowski said it’s important to identify which types of long-term care facilities file for bankruptcy and distinguish between those that perform poorly and fall into the spotlight of competition and those that facilitate safety net advantages in rural areas that are facing increasingly serious financial challenges.
Gulf Coast Health Care, a chain of 28 skilled nursing facilities based in Pensacola, Florida, USA, declared bankruptcy in October 2021 due to COVID-19 reduction in volume and staffing challenges. In April, the company dissolved and its facilities were transferred to other operators, according to bankruptcy filings and information from Gibbins Advisors. Attorneys for the Gulf Coast Health Care Division did not respond to a request for comment.
Pay attention to who is going to file for bankruptcy because the ownership structure of nursing homes is so complex, said Dr. Mike Wasserman, geriatrician and past president of the California Association of Long-Term Care Medicine. complex. “In a lot of cases, the day-to-day operations of nursing homes are not set up to make a lot of money. Money created by [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 details on the ownership structure of the 15,000 skilled nursing facilities that receive Medicare reimbursement. 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 with headquarters in San Juan Capistrano, California, has 430 companies that manage 228 nursing homes and senior living sites from 2007 to 2021 , according to research published in the International Journal of Health Services. The Ensign Team 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, and author of the study. “It’s a good way to hide their profits.”
For-profit nursing home owners would take the property off the premises, leave it with liabilities, then declare bankruptcy, Harrington said. Bankruptcy is a way of doing business in the nursing home industry, she said. “The bankruptcy court allows them to get out of debt, then they restructure. It’s legal. Unfortunately “.
