Creditors attempt to put nursing home into bankruptcy

New Castle HRC
Three creditors are trying to put New Castle Health & Rehabilitation Center into involuntary bankruptcy, a move that could affect a receivership that is under way in Montgomery County against New Castle and other facilities owned operated by Oak Health & Rehabilitation Centers Inc.

Three unsecured creditors have filed an involuntary bankruptcy petition against a New Castle, Del., nursing home that is part of a chain of 22 facilities, mostly in Pennsylvania, that were put into receivership in September by their landlord.

The creditors, Healthcare Services Group Inc., McKesson Medical-Surgical Minnesota Supply Inc., and Medline Industries, said in their Jan. 12 petition that New Castle Health and Rehabilitation Center owed them a total of $262,529.

The owner of the New Castle nursing home is Oak Health & Rehabilitation Centers Inc., a nonprofit headed by Bala Cynwyd lawyer Howard Jaffe. Oak was formed to take over 22 former Extendicare facilities, including 20 in Pennsylvania and one in West Virginia, in additional to the New Castle facility, in 2015.

The landlords of the Oak facilities, affiliates of Formation Capital, a major player nationally in nursing-home ownership, put all 22 Oak facilities in receivership, a state court alternative to bankruptcy that provides no protection for unsecured creditors, after Oak missed at least three rent payments totaling $10.5 million.

The goal of the receivership was to bring in a new operator for the nursing home with no guarantee of money for vendors’ unpaid bills. As of Friday, no applications had been made to transfer the nursing homes, a Pennsylvania Department of Health spokeswoman said.

Oak has six facilities in Southeastern Pennsylvania: Dresher Hill, in Fort Washington; Elkins Crest, in Elkins Park; Langhorne Gardens, in Langhorne; Statesman, in Levittown; Suburban Woods, in East Norriton; and Valley Manor, in Coopersburg.

If the bankruptcy petition succeeds, unsecured creditors could play a formal role in a reorganization or liquidation of the Oak facility in Delaware. It’s not clear what impact the forced bankruptcy of one facility could have on the receivership for the other 21 facilities. An attorney for the Delaware creditors declined to discuss the case. It’s also possible that the involuntary bankruptcy petition could give the creditors leverage in the receivership, which was filed in Montgomery County.

Officials at Health Care Services Group, of Bensalem, did not respond to a request for comment. Oak paid Health Care Services Group, which provides housekeeping, laundry, and dining services in hospitals and nursing homes nationwide, $13.6 million in 2016, according to Oak’s 990 tax return. The 990 said Oak had a profit of $4.4 million on total revenue of $277 million.

In the Montgomery County receivership case, Armstrong Nutrition Management Inc., of Kittanning, Pa., filed a petition to intervene, saying it was owed a total of $124,396 by Dresher Hill and Suburban Woods.

In particular, Armstrong Nutrition objected to the payment of $1.84 million to vendors for services provided before Sept. 25, when the receivership was approved. The payments of pre-receivership debts included $1.24 million that the receiver did not approve.

Armstrong Nutrition called those payments “unfair and inequitable” and said that means it should be able to intervene.