The owners of investment led to the bankruptcy of Genesis Healthcare: Report

Diving brief:

• A new report from the investigation capital stakeholder project alleges the bankruptcy deposit of the nursing nursing nursing operator qualified last month can be awarded to poor financial management in the hands of its owners of investment.
• Capital training, which acquired Genesis almost two decades ago, used leverage redemptions, sales rental transactions and layer debt to extract the value of the operator, while Genesis had trouble staying viable, according to the report.
• Genesis’ bankruptcy is not an isolated event, supports the report. Companies supported by investment capital participated in more than half of the major health bankruptcies last year, according to the surveillance group.

Diving insight:

Genesis, which used to operate 175 nursing facilities qualified in 18 states, deposited bankruptcy protections in chapter 11 in July. He declared $ 708 million in guaranteed debt and more than $ 1.5 billion in unmarked debt, including money due to workers and sellers.

The company based in Pennsylvania blamed the file on the opposite winds of the industry, including the challenges of reimbursement of payers and inherited passives.

However, the project of investigating stakeholders said that the financial problems of Genesis came from the management decisions of its owners of investment.

Capital training, with Jer Partners, bought the operator for $ 1.7 billion in 2007 via a lever -effect repurchase. In 2011, the training carried out a sales rental transaction of 147 properties at Health Care Reit for $ 2.4 billion.

The agreement brought money for investors, but stripped the genesis of the property and did it with a long -term triple net Leases, in which the tenant is responsible not only for the rent, but also for the coverage of property taxes, insurance and maintenance costs.

Collectively, financial tactics have reduced the financial flexibility of Genesis and the resources necessary to respond to an evolving health landscape, according to the report.

Meanwhile, Genesis seemed to reduce the corners of care to patients because he reduced investments in staff and residents.

For example, in 2020, a subsidiary of Genesis Healthcare concluded a regulation with the Attorney General of Vermont after the State found that inadequate training led patients to suffer injuries and, in a case, to receive inappropriate care.

Another installation of Genesis, St. Joseph’s Center in Trumbull, Connecticut, was the closure this year after several failures of health and safety.

Nearly 200 residents were moved from the installation this spring after the Legionella bacteria were discovered in the establishment’s water system. Then, two months later, the patients were moved again due to fire safety problems.

“The bankruptcy of Genesis Healthcare was a predictable result of a financial strategy that has extracted the value through debt and real estate transactions while leaving the company with fewer resources to maintain care,” said Michael Fenne, principal research coordinator at PESP, in the report. “Unless these tactics are treated directly, more operators of nursing homes can follow the same path and leave more patients, workers and public programs to absorb costs.”

In health care, capital ownership is associated with an increased risk of bankruptcy. Last year, companies supported by investment capital were involved in seven of the eight largest health bankruptcies, such as monitoring by the project of the investigatives of investment capital. Steward Health Care and Wellpath Holdings, a health care provider in prison and prisons, were two of the largest deposits last year.