Related-Party Funding Rules Drive N.Y. SNF into Bankruptcy, with Centers Poised to Take Over

The Good Samaritan Lutheran Health Care Center — which operates a troubled senior living campus with a skilled nursing facility and assisted living property in Delmar, N.Y. — filed for Chapter 11 bankruptcy on December 12 as part of its effort to sell the properties to Centers Health Care.

The Times Union first reported the news.

Good Samaritan Lutheran, which is listed as a nonprofit corporation on its voluntary bankruptcy petition, operates the 120-bed skilled nursing facility Bethlehem Commons Care Center and the 66-bed assisted living facility Kenwood Manor in Delmar, a suburb of Albany.

The Bronx, N.Y.-based Centers Health Care is interested in buying the properties — but only if Good Samaritan Lutheran rejects the collective bargaining agreements (CBAs) negotiated with 1199SEIU United Healthcare Workers East, according to a declaration from Lutheran Care Network CEO Laraine Fellegara.

Lutheran Care Network is the parent company of Good Samaritan Lutheran Health Care Center, which does business as Bethlehem Commons Care Center, and Kenwood Manor, which are both the debtors in the case.

The bankruptcy was driven by a complaint filed by the New York Office of the Attorney General, which forced Lutheran Care Network to change its practices around related-party funding sources.

“Without such related-party loans, the Debtors have been suffering from a severe liquidity crisis, which ultimately resulted in their bankruptcy filings,” Fellegara wrote.

According to the declaration, Centers is interested in purchasing the sale assets, or the debtors’ real property and facilities, but will not assume the debtors’ obligations under the CBAs. Centers would pay an aggregate price of $7.5 million to acquire the sale assets, but only under certain conditions.

Those are:

• The bankruptcy court approving the sale and sale agreements
• The debtors rejecting the CBAs before the entry of the sale order
• The New York State Department of Health (DOH) and the Attorney General (AG) approving the transfer of ownership to Centers.

Though Centers wants to immediately buy the assets, and the debtors need to transfer them before running out of funds, the approval process for the DOH and AG “could take from several months to a couple years to complete,” Fellegara wrote. Because the debtors have no commitment from either the DOH or AG to a timeframe for the transfer, Centers has agreed to provide funding to the debtors through being appointed as a receiver by the DOH.

“While I understand it is an unusual request in a bankruptcy case to seek the appointment of a receiver that will have essentially all of the rights and obligations of an owner prior to paying the purchase price to acquire title to the debtors’ assets, it is essential in this case, given the dire financial conditions of the Debtors and the length of time the DOH and the AG could take to approve the transfer of title to the Purchaser,” Fellegara wrote in the declaration.

Centers Health Care spokesman Jeff Jacomowitz said the company cannot comment on potential transactions in a statement sent to Skilled Nursing News.

“Once the transactions are complete, Centers Health Care will have more to say,” Jacomowitz said in the statement.

The Good Samaritan nursing home was at 84% occupancy at the time of the petition, and employed 154 workers. Its payer mix for 2018 consisted of 82% Medicaid, 10% private pay, 5% Medicare, and 3% other, according to Fellegara’s declaration. For 2019, the payer mix was roughly 73% Medicaid, 14% private pay, 8% Medicare, 5% other.

Private-pay residents had significantly higher rates than any of the other payers for both 2018 and 2019, with payments of between $335 and $340 per day for both years. Medicaid residents, meanwhile, generated a daily rate between $193.60 and $204 in 2018, and a between $183.90 and $198, according to the declaration.

While Good Samaritan is current on its wage obligations as of December 12, it is in arrears for benefit obligations “in the approximate aggregate amount of $504,000,” Fellegara wrote. The assisted living facility is also current on wage obligations, but owes about $91,786 on certain benefit obligations.

According to Form 204 in Good Samaritan Lutheran’s bankruptcy declaration, the 1199SEIU Benefit Fund is the top unsecured claim in the bankruptcy at $257,065.14.

Greg Speller, 1199SEIU executive vice president for the Hudson Valley and Capital Region, told The Times Union that the CBAs in force now require any buyer to assume the terms of the agreements, noting that both labor and bankruptcy law mandate the parties to engage in good-faith negotiations to reach an agreement.

“We are ready to engage in serious negotiations immediately,” he told the publication.