Skilled nursing chain HCR ManorCare’s struggles were the direct result of its former private equity ownership, a Sunday report in The Washington Post alleged.

The paper analyzed inspection records as part of the wide-ranging story, finding that the number of health code violations found at ManorCare rose from 1,584 in 2013 to nearly 2,000 in 2017 — a gain of about 26%. When counting only the serious violations, or those categorized as “potential for more than minimal harm,” “immediate jeopardy” and “actual harm,” the Post analysis found a rise of 29% in the years prior to ManorCare’s filing for bankruptcy in March.

The increases in health code violations at ManorCare started after 2011, when the Carlyle Group — the private equity firm that had owned the nursing chain since 2007 — and its investors executed a sale-leaseback agreement with HCP Inc. (NYSE: HCP). While the deal let Carlyle and its investors recover the $1.3 billion in equity they put into the purchase of ManorCare in 2007, it also constrained the company financially, according to the article.

It’s an argument similar to the one made by Welltower Inc. (NYSE: WELL) CEO Tom DeRosa after the real estate investment trust (REIT) announced a deal with the non-profit health system ProMedica to take over ManorCare.

“Because of the leverage that private equity firms who owned these businesses put on these businesses, the operations became unsustainable,” DeRosa said during a presentation earlier this year.

He echoed those comments in remarks to the Post, telling the publication that ManorCare was “over-levered, and it couldn’t work under the capital structure that had been crafted.”

HCP Inc. spun off its ManorCare portfolio in 2016, forming the “pure play” skilled nursing REIT Quality Care Properties — in part due to issues with the struggling nursing home operator. QCP faced a series of setbacks during 2017, eventually filing for bankruptcy protection this past spring. Welltower and ProMedica now own the real estate associated with ManorCare’s facilities in an 80-20 joint venture, with the hospital system owning the nursing home operations outright.

ManorCare’s long-term financial obligations rose from less than $1 billion to over $5 billion during the buyout by Carlyle, the Post reported, citing financial statements, and though the real estate deal helped pay down some of the debt, it led to major payments: ManorCare’s rent to occupy the nursing homes was $472 million annually, according to legal filings, and was set to increase at 3.5% a year. ManorCare also had to pay for property taxes, insurance, and upkeep.

Officials at Carlyle told the Post that a 2011 decision by the Centers for Medicare & Medicaid Services (CMS) to cut its payment to nursing homes by 11% in as a reason for the bankruptcy.

ManorCare, for its part, pushed back on the story.

“We feel the Post’s story was not an accurate reflection of our care or standards,” ManorCare assistant vice president of marketing communications Julie Beckert told Skilled Nursing News in an email.

According to Beckert, HCR ManorCare’s total staffing, hands-on caregiving staff and nursing staff increased from 2007 to 2017.

“At the time that Carlyle transferred ownership of HCR ManorCare, CMS rated our quality and regulatory compliance above industry average,” she said in the statement. “In addition, CMS rated HCR ManorCare’s patient quality metrics and nurse staffing as outstanding. Finally, from 2013 to 2017, HCR’s serious safety incident rate was better than the national average in each and every year.”

Beckert also said in a different statement that the ManorCare Health Services – Pottsville facility, which featured prominently in the Post’s story, is currently in compliance with federal regulations.

“Any issues that were made by the Washington Post happened prior to this year and have been addressed and corrected,” she said in the statement.

Written by Maggie Flynn