Vendor Objects to Skyline Receivership Transfer Plan in South Dakota

A few weeks after a lender attempted to hold up the transfer of nursing homes formerly operated by Skyline Healthcare in South Dakota to a new permanent provider, a new report reveals that another party has jumped into the fray.

Avera, a regional health system based in Sioux Falls, S.D., moved to stop a planned transfer of 17 facilities from a third-party receiver to Cascade Capital Group, according to a Saturday report in The American News of Aberdeen, S.D.

In court documents reviewed by the publication, Avera claims that Skyline still owes the health system money for use of its Avera eCare telehealth services — debts that the now-defunct Skyline “repeatedly promised” Avera that it would pay.

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But Black Hills Receiver, the company overseeing the Skyline buildings until a permanent buyer can take over, objected to Avera’s delay move, The American News reported.

“Black Hills Receiver said that once all necessary court-approved expenses are paid for at the facilities, such as employee payrolls and vendor services, it will seek court direction as to how to handle leftover funds,” the publication reported, noting that Black Hills asserted that “now is not the appropriate time” for Avera to seek financial relief.

The Avera motion marks the second hangup in the proposed transfer of facilities from Black Hills to Cascade, a Skokie, Ill.-based investment firm with its own operating affiliate, Legacy Healthcare. MidCap Financial, a lender seeking to recover funds from Skyline, made a similar delay move in mid-May, charging that it may never see the money it’s owed if the transfer goes through.

“Twelve months ago, plaintiffs told the court that if MidCap would simply show some ‘patience for the patients,’ plaintiffs’ use of MidCap’s collateral to fund the operations of the nursing homes would end, and MidCap would be made whole,” MidCap alleged in court filings cited by The American News. “Instead, money owed to MidCap has continued to be used to fund failing operations for the sole purpose of preserving the value of plaintiffs’ real property.”

Skyline continues to cause financial and regulatory headaches more than a year after it began collapsing amid stacks of unpaid bills and unsustainably rapid expansion. In South Dakota, the trouble came to a head in May 2018, when the company risked running out of basic food and medical supplies without the intervention of a third-party receiver.

Black Hills has since closed a pair of the facilities under its temporary watch, citing a lack of sufficient income to justify go-forward operations, with the remaining 17 still awaiting approval for transfer to Cascade.

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