Lawsuits Drive 33 Preferred Care SNFs to Seek Bankruptcy Protection

Facing a slew of lawsuits, 33 skilled nursing facilities affiliated with one of the largest SNF operating companies in the nation have filed for Chapter 11 bankruptcy protection.

Twelve of the SNFs are located in New Mexico and 21 are in Kentucky. They are all affiliated with Plano, Texas-based Preferred Care Partners Management Group, which operated 107 SNFs in 12 states as of June 2016, according to American Health Care Association data.

Under Chapter 11, the SNFs will seek to stay in business and continue paying employees and vendors while restructuring, Preferred Care said Wednesday in a statement provided to Reuters.

“The health, safety and comfort of the residents will be the primary concern going forward,” the statement read.

The company had not responded to a request for comment from Skilled Nursing News as of press time.

The SNFs are facing 163 personal injury lawsuits, precipitating the move into bankruptcy protection, according to court documents. The largest judgment has been for $28 million; that came at the end of September and involved one of the facilities in Kentucky.

In New Mexico, the state attorney general has filed a lawsuit claiming Preferred Care facilities in five cities have defrauded Medicaid by having insufficient staffing. The trial in this case, scheduled for next year, could be delayed due to the bankruptcy filing, the New Mexican reported Tuesday.

Two Preferred Care SNFs in Santa Fe—Casa Real and Santa Fe Care Center—have been repeatedly cited for deficiencies over the last 15 years, according to the newspaper. Casa Real was designated a special focus facility by the Centers for Medicare & Medicaid Services (CMS) in May 2017 due to its poor record.

Preferred Care has defended itself against the claims brought by the New Mexico attorney general. The company’s lawyers said the case is “frivolous and one of greed and opportunism,” The Associated Press reported in May.

Similarly, Preferred Care had strong words following the recent judgment in Kentucky.

“We do not agree with the verdict and were disappointed in this wildly excessive $28 million judgment awarded by the jury,” Preferred Care attorneys told a local NBC affiliate in September.

A strategic bankruptcy

One of Preferred Care’s major landlords is LTC Properties Inc. (NYSE: LTC), a real estate investment trust (REIT) based in Westlake Village, California. The REIT owns 26 Preferred Care properties under two master leases. LTC’s master lessee did file bankruptcy; however, none of the sub-lessee entities holding the licenses and operating the properties is among those in the bankruptcy proceeding, and LTC does not expect its financial performance to be hurt by the situation.

Preferred Care has intentionally adopted a decentralized organizational structure, subleasing individual buildings to separate entities, LTC CEO Wendy Simpson told Skilled Nursing News. Preferred Care paid its November rent to LTC on schedule and the REIT has been informed by Preferred Care it is not facing immediate liquidity issues outside of litigation related matters, LTC’s Chief Investment Officer Clint Malin told SHN. He described Preferred Care’s bankruptcy as a “strategic” decision in light of the recent judgment rendered and other outstanding lawsuits, in order to protect the company.

None of the Preferred Care properties in the LTC portfolio currently have any red flags related to poor care quality, and their CMS Star Ratings all are within an acceptable range, the REIT executives said.

“Preferred Care has been an operator in the skilled nursing industry for a long time,” Malin said. “They’ve had an experienced and consistent management team for many years.”

Simpson and Malin also suggested that the legal climates in New Mexico and Kentucky have contributed to the provider’s predicament, particularly regarding the lack of tort reform in those states.

In Kentucky, effective July 1, 2017 a new law mandates that civil litigation related to health care providers first go through a review panel prior to being filed. Over the summer, there was a rush to file a large number of cases prior to this law being implemented, Simpson and Malin said.

Preferred Care has indicated that most of the cases brought against the company have been filed by Wilkes & McHugh, a law firm in Tampa, Florida. In filings submitted by Preferred Care in their bankruptcy case, they have characterized Wilkes & McHugh as a predatory law firm.

Wilkes & McHugh did not respond to a request for comment from Skilled Nursing News.

Written by Tim Mullaney

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Tim Mullaney on Email
Tim Mullaney
If he’s not in the newsroom, Tim likes to be on the tennis court or traveling to a new destination. Recent highlights include Sri Lanka and Iceland.

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