Kansas Cracks Down on Nursing Home Owners’ Finances in Wake of Skyline Collapse

The state of Kansas is set to implement stricter vetting standards for nursing home owners and investors in the wake of several high-profile receivership cases over the past year.

Passed with near-unanimous support from the Republican-controlled legislature and the approval of the Democratic governor, the new law will require potential nursing home owners to submit detailed financial and historical ownership information before receiving approval.

The Kansas City Star first reported the news Tuesday morning.

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Anyone seeking to buy a skilled nursing facility — or any other type of “adult care home” — will need to provide a list of every other licensed property that he or she owns or has ever owned, either within Kansas or elsewhere in the United States.

In addition, the disclosure rule applies to ownership stakes in either the operations or the real estate associated with a nursing facility. Prospective buyers must further provide a 12-month operating budget for the facility, along with proof that he or she has sufficient funds to make that plan a reality.

The law will also make it easier for the state to revoke, suspend, or deny a license. Moving forward, anyone with any amount of ownership interest in a nursing home can find themselves on the blacklist; previously, such bans or suspensions only applied to people with direct or indirect ownership of 25% or more.

“It gives us a better opportunity to maybe know in advance if somebody coming in is maybe in financial difficulties,” Republican lawmaker Brenda Landwehr told the Star. “It’s never going to solve it [completely], but there should be fewer we have to take over in the future.”

The Kansas long-term care landscape has been reeling since the sudden implosion of Skyline Healthcare last year left 15 SNFs in receivership, accounting for the vast majority of the 22 statewide under third-party control due to financial pressures. Scrutiny has particularly fallen on Skyline owner Joseph Schwartz, who ran the company of more than 100 facilities with a group of related investors from an office above a New Jersey pizzeria.

When Kansas officials approved Skyline’s plan to take over the facilities back in 2016, the company was already in millions of dollars of debt to various vendors, according to the Star; Skyline properties have faced similar problems in Pennsylvania, South Dakota, and Nebraska.

In turn, the company’s collapse has raised pointed questions among lawmakers about properly vetting buyers, particularly those from out of state with few connections to local vendors and partners. But industry watchdogs in Kansas aren’t confident that the new restrictions will completely fix the problem: Dave Kingsley, a retired professor from the University of Kansas Medical Center, told the Star that small groups of private owners have been cutting costs in order to re-sell the properties for profits for several years.

“Schwartz was the vulture who came in after the damage was done,” Kingsley said. “The damage was done by private equity firms.”

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