Why a Small Operator Took a Chance on Seven Former Dycora Nursing Homes in Receivership

Formed only last year, a small skilled nursing operator with a presence in the South recently made a significant push into Wisconsin, taking over seven properties out of receivership.

When Bedrock Healthcare LLC, founded in part by former nursing home administrator Kenny Nichols, assumed operations of the facilities early last month, the move substantially expanded its footprint — which had previously only consisted of two facilities in Kentucky and Tennessee — overnight.

“We’re excited to be in Wisconsin, for sure,” Nichols, now Bedrock’s chief operating officer, told SNN late last month. “It’s cold — can’t imagine what the next few months are going to be like.”

The facilities had been in court-mandated receivership since April, when previous operator Dycora Transitional Health and Living ran into problems meeting payroll, compensating vendors, and paying rent; three more Dycora facilities subsequently entered receivership in the company’s home state of California.

Menominee River LLC — an affiliate of the buildings’ owners, Golden Living — had operated the facilities on a temporary basis during the receivership proceedings; Golden Living had also previously been in charge of the SNFs before leasing them to Dycora back in 2017, and continues to own the facilities with Bedrock as the new tenants.

“Golden Living is one of the best in the business, and I am pleased that they have agreed to take on this important assignment,” Michael Polsky, the court-appointed receiver for the properties, said at the start of the receivership process.

Nichols and Bedrock had been on the lookout for expansion opportunities across the country, in particular focusing on buildings with strong occupancy figures, positive survey and compliance histories, and decent financial performance. Despite Dycora’s struggles with the facilities, Nichols saw potential in the properties, and worked closely with Golden Living to plot a path forward — nailing down the appropriate licensure and court approval in a “fast and furious” nine-day process.

“We feel like it’s a good state to operate in,” Nichols said. “The buildings need some support.”

To start, Bedrock focused on stabilizing staffing across the portfolio. Under prior leadership, senior positions were frequently filled by temporary or agency employees, which Nichols said had a significant impact on the facilities’ performance.

“It just wasn’t working, and it has a watered-down, negative effect on the building morale when there’s not somebody [there] full time,” he said.

Within 10 days of taking over on October 1, Bedrock had installed permanent, full-time senior management employees at six of the seven buildings, with a plan to have full coverage by the end of November. The company has also relied on former Golden Living leaders to help bolster its clinical and operational staff, Nichols said, and expects to see a boost both from the new Medicare Patient-Driven Payment Model (PDPM) and state-level Medicaid changes.

“That part is going to be ongoing,” he said. “The state Medicaid reimbursement has had some changes as well, which have been positive to the whole industry here.”

It’s been a busy few weeks for operators snapping up properties out of receivership in the Midwest: Just last week, North Shore Healthcare announced a deal to buy both the real estate and operations of 22 skilled nursing and assisted living facilities formerly run by Atrium Health & Senior Living in Wisconsin and Michigan.

Polsky, an attorney at the Milwaukee-based law firm of Beck, Chaet, Bamberger & Polsky, also led the receivership team in that action, as well as several others in the state — including the 2017 receivership of Fortis Management Group, which saw some of its properties taken over by North Shore later that year.

The receivership process offers a kind of alternative to bankruptcy proceedings for troubled skilled nursing facilities, with a neutral third party maintaining a baseline level of care until new, permanent operators can be found. In some cases, receivership is merely a prelude to closures, as was the case with a handful of former Atrium facilities in Wisconsin, and multiple former Skyline Healthcare properties in Massachusetts.

But the skilled nursing industry has also seen its share of receivership success stories over the last year, including a 15-building portfolio of Skyline properties in Kansas that emerged from receivership last month without a single closure. And in a mergers-and-acquisitions marketplace defined by persistently high per-bed prices for skilled nursing properties, distressed assets continue to attract interest from buyers and operators who think they can turn them around.

As for Bedrock, Nichols plans to soon establish a central office in Nashville, Tenn., close to its existing facilities in the South but an easy flight away from its growing footprint in Wisconsin. The company also still has its eye out on other opportunities in the Badger State and beyond, though Nichols emphasized that any expansion will be slow and calculated.

“Bedrock has a presence here every week until everyone is comfortable with the transitions,” he said. “It’s a lot of work, but it’s worth it.”