One of the largest nursing home operators in the U.S., Petersen Health Care, on Wednesday filed for bankruptcy, following cyberattacks and defaults on government-backed loans.
The Illinois-based operator filed for Chapter 11 protection in Delaware bankruptcy court with more than $295 million in debt, according to a report from Reuters. About $45 million of that debt is owed under health care facility loans insured by the Department of Housing and Urban Development (HUD).
Petersen secured a $45 million bankruptcy loan to pay operating expenses during its Chapter 11 case, Reuters reported. Filings showed a list of creditors with the 40 largest unsecured claims, with RehabCare being top of the list with an $11.87 million unsecured claim.
The team sought to restructure its debt but was derailed by a ransomware attack in October 2023. Petersen lost a significant amount of its business records and caused “incredible difficulty and delay” in its attempts to bill customers and insurers, according to court filings. The company was forced to replace its servers, email addresses and software.
The ransomware attack on Change Healthcare – a major payor for Petersen – came later. Payments to providers were slowed or suspended as a result, as the attack is being investigated.
The loan defaults caused 19 Petersen facilities to enter receivership, Reuters found. It was a further disruption of day-to-day operations, according to court filings.
Still, company officials said they plan to continue operations normally while in bankruptcy, seeking to restructure debts.
“We will emerge from restructuring as a stronger company with a more flexible capital structure,” chief restructuring officer David Campbell said in a statement. “This will enable us to continue as a first-choice care provider and a reliable employer for our staff.”
Prior to the loan defaults and cyberattacks, Petersen was facing a long-term decline in demand for nursing homes in rural areas as residents increasingly opt to receive care at home if possible, and increased competition for nurses after the height of the pandemic, Reuters reported.
Campbell told Skilled Nursing News in late February around the time news broke of its possible bankruptcy that Petersen’s troubles are hardly unique to it, especially given its leverage in rural nursing homes. He cited low reimbursement rates, pressures from managed care and staffing shortages amid a generally tough economic environment as being factors behind its financial problems.
“The challenges that Petersen as a company is facing are indicative of many operators across the country,” he said. “The industry is under severe pressures, both cost and reimbursement pressures.”
Moreover, Campbell said Petersen relies heavily on expensive agency labor.
Petersen operates 90 facilities in Missouri and Iowa, along with Illinois; the company employs nearly 4,000 staff, and its properties have the capacity to house 6,796 residents. Its revenue in 2023 was more than $339.7 million.
Petersen offers skilled nursing care, as well as assisted living, respite care, memory care, hospice, local medical transportation, radiology and pharmacy services. At two of its facilities, the company provides care to those with intellectual and developmental disabilities.
“We predominantly rely on Medicaid and managed Medicaid funding from the state of Illinois … lay on top of that, just all of the macro economic factors, from hyperinflation for food as well as medical supplies and [cost of] drugs, the demographics around staffing,” Campbell told SNN.
Coupled with these factors is the ever present challenge of inadequate reimbursement. There was a backlog of unreimbursed Medicaid costs stemming from a 2015-2017 budget impasse in Illinois. In 2022, the state approved a $700 million funding increase for nursing homes.
Zahida Siddiqi contributed to the reporting.
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