Across various states where Genesis operates, the fallout from the nursing home giant’s Chapter 11 bankruptcy has led state lawmakers to scrutinize involvement of private equity firms more closely.
In Pennsylvania, where Genesis is headquartered, it has the largest footprint, with 42 of its 175 facilities located in the state.
Governor Josh Shapiro, who has been critical of private equity’s role in health care, has proposed a plan that would prevent investors from removing money and resources from nursing facilities, community hospitals and other health facilities. Genesis HealthCare’s bankruptcy is another example of a bad outcome when private equity investors become involved in health care, officials from his administration told a local news outlet following the bankruptcy news.
“Governor Josh Shapiro strongly believes that private equity should get out of the nursing facility business in Pennsylvania,” Department of Human Services Press Secretary Brandon Cwalina said Thursday. “Genesis HealthCare … is another private equity-backed health care organization that has bled dry by greed and mismanagement.”
Genesis filed for Chapter 11 with $708.5 million in secured debt to be repaid through securing a “stalking horse” bid from ReGen Healthcare, a current private-equity investor, which has also emerged as the lead potential buyer of its troubled assets.
“The proposed transaction [with ReGen], the terms of which will be publicly disclosed shortly, is subject to higher bidding and court approval, and if approved, would result in the current affiliate acquiring the Company’s operations,” Genesis said in a statement to Skilled Nursing News earlier.
ReGen Healthcare and its affiliated investment firm, Pinta Capital Partners, were involved in the restructuring of Genesis in March 2021 when Genesis first narrowly escaped bankruptcy.
Genesis received a cash infusion from ReGen Healthcare, leading to a change in ownership and delisting from the New York Stock Exchange.
About $100 million in funding from ReGen Healthcare and a lease restructuring with Welltower helped Genesis avoid filing for Chapter 11 at the time, the company noted in its court filing from July 9. Genesis currently owes Welltower more than $112.6 million, according to the Chapter 11 documents.
This included funding of approximately $8 million per month in settlement and defense costs arising from alleged personal injury and wrongful death claims, most of which date back many years, the court filing said, referring to the funding received.
Genesis also owes nearly $800 million in unsecured debt to the Internal Revenue Service (IRS), vendors, and legal settlement recipients, and the Chapter 11 filing will allow it to restructure to pay debt while continuing to operate.
Pennsylvania is Genesis’ fourth largest unsecured creditor with a $58 million claim for taxes the state collects from some providers participating in Medicaid.
“Genesis owes the Commonwealth of Pennsylvania,” said Cwalina. “[A]nd like every taxpaying-resident of Pennsylvania, they should pay their fair share.”
At one time, Genesis Healthcare operated over 500 facilities but struggled to maintain profitability as it expanded. Its rapid growth led to management challenges and inefficiencies resulting from numerous mergers and acquisitions, the company stated in court filings Wednesday. In 2017, it began divesting unprofitable facilities, reducing its footprint to fewer than 400 by 2020, when the COVID-19 pandemic took a further toll.
“The after-effects of the pandemic on the skilled nursing industry generally, and Genesis Healthcare specifically, cannot be overstated,” co-Chief Restructuring Officer Louis E. Robichaux IV said in a court filing.
Genesis, which currently employs 27,000 people across facilities in 18 states, said that it owes between $1 billion and $10 billion to its creditors.
In Connecticut, its only nursing home, which had been in business since 1960, is scheduled to officially close on Aug. 9, while the company transferred residents to other facilities in March due to a Legionella bacteria discovery. At one point, Genesis operated up to 17 homes in Connecticut. Genesis blamed the closure on inadequate Medicaid funding and its inability to obtain waivers from the state and the federal Centers for Medicare and Medicaid Services (CMS).
Meanwhile, in New England, Genesis’ key debts include $12.3 million owed to the 1199 New England Health Care Employees Pension Fund, which is listed as the largest debtor in Genesis’s bankruptcy filings.
“To maintain our momentum, we must address our legacy debt structure,” Board Executive Chairman David Harrington said in a press release. “The goal of this filing is to emerge a stronger, healthier company poised to exceed our goals for clinical and operational excellence.”
SNN reached out to Genesis for further comment, but did not hear back by the time of publication.