A Michigan company that operates 21 nursing homes and assisted-living facilities in California and the Midwest is the leading contender to buy the bankrupt Haven Healthcare nursing-home chain — a bid that would preserve all 15 Haven homes in Connecticut, but that is contingent on its ability to secure Medicaid rate increases from the state.
LifeHouse Retirement Properties Inc. has proposed buying Haven's 25 homes in New England for a base price of $105 million, court documents show. All of the proceeds would go to creditors. The company would partner with MatlinPatterson Global Advisors LLC, a private-equity firm that buys up distressed businesses, to finance the Haven purchase.
Under a plan submitted by Haven and its court-appointed restructuring officer, LifeHouse would act as a "stalking horse" bidder at an auction of Haven assets next month, meaning the firm would submit an opening bid designed to set a floor for other prospective buyers. Several other companies have expressed an interest in the chain and remain in contention, Attorney General Richard Blumenthal said.
"As with any auction process, it's difficult to predict, at this point, who will end up with these homes," Blumenthal said. But he said he was encouraged that "there are serious buyers that are making credible offers, and the process [for a sale] is on track."
Haven filed for bankruptcy in November, in the wake of a series in The Courant detailing the chain's financial troubles and repeated citations for patient-care deficiencies. The company defaulted on millions of dollars in bills for supplies and utilities while its chief executive officer, Raymond Termini, used corporate assets to launch a Nashville recording company and make other purchases. Federal authorities have seized corporate records in a continuing investigation into whether Medicare and Medicaid funds were misused.
Termini and some other senior Haven managers would be replaced under the chain's new ownership, but LifeHouse would retain home administrators, nursing staff and other employees, according to lawyers and other officials involved in the sale negotiations.
"I think it's the best possible outcome, under the circumstances," said Alan Kolod, an attorney representing Haven. "It's good for the patients, for the community and for the employees."
As part of a sale, which is expected in the early summer, Haven and a new owner would have to resolve claims by the state and federal governments for Medicaid or Medicare money that was received by Haven but later deemed a disallowed expense. In a court filing this week, the U.S. attorney's office said the state social services department already had determined that Haven should return more than $2.9 million in Medicaid funds, "not taking into account any civil fraud loss amount which may be determined in the future."
Blumenthal said he expected the state to be able to recoup some Medicaid money from the sale, but was also "vigorously and actively pursuing [other] possible remedies against individuals, including Ray Termini." Termini has staunchly denied any misuse of government funds.
Although 64 entities originally expressed interest in the Haven sale, only 10 submitted proposed purchase prices. Among the other firms that have expressed interest is Formation Capital, which bought out Genesis HealthCare Corp. last year.
LifeHouse's bid is contingent on its ability to secure state Medicaid rate increases, court documents show. David Dearborn, a spokesman for the state Department of Social Services, said agency officials already had begun reviewing Medicaid rate requests submitted by LifeHouse, and would work with the state health department on a close review of LifeHouse's regulatory record and finances.
LifeHouse Chief Operating Officer Lou Andriotti, formerly an executive of the Kindred Healthcare chain, which owns six nursing homes in Connecticut, could not be reached Wednesday for comment.
LifeHouse is a growing company that owns 13 assisted-living facilities and eight nursing homes — 11 in Michigan, two in Illinois and eight in California. Last July, the company bought five Southern California nursing homes, with more than 900 beds, in a bankruptcy auction.
Haven officials said they need to close on a sale by the end of June to comply with a financing arrangement that has allowed the chain to stay afloat. They said in court filings that the chain continues to lose more than $2 million a month. They said they expected the sale proceeds to be sufficient to pay off all of Haven's secured creditors.
The U.S. attorney's office filed an objection to a provision in the LifeHouse agreement that would allow the company to assume Haven's Medicare provider agreements and set aside an escrow fund of $2.5 million to pay off any claims by the government for the return of Medicaid or Medicare funds. The federal attorneys said the escrow fund was inadequate, citing the $2.9 million in Medicaid funds being sought by the state.
State lawmakers have proposed legislation that would require more detailed financial reporting by nursing-home owners, and more oversight by the state, to head off the kinds of problems that led to Haven's financial collapse.
Contact Lisa Chedekel at email@example.com.Copyright © 2015, The Baltimore Sun