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ManorCare Resident Evictions a Real Possibility

An update was just announced about the outcome of a lawsuit between Quality Care Properties (QCP) and HCR ManorCare over $300 million in unpaid rent. ManorCare nursing homes with unpaid rent account for 30,000 elderly residents whom would be turned out on the street should ManorCare fail to agree to the terms of the lawsuit.

QCP gave the nursing home chain until yesterday, October 18, to respond to the lawsuit. Specifically, QCP has asked that ManorCare allow a court-appointed person to handle day-to-day operations for the chain, a relationship referred to as a receivership.

Late this afternoon, Quality Care Properties announced that they have agreed to allow ManorCare to extend the deadline to respond to the lawsuit to November 1.

Nursing Homes Struggling Financially
According to Reuters, receiverships are a viable alternative to eviction or filing for bankruptcy. With many nursing homes in financial distress, receiverships have become more commonplace than ever before. The receiver is said to act in the best interests of both the residents/patients and the investment firm and is there to bridge the gap until a new owner can come in and take over operations.  Nursing home industry experts also speculate that QCP could personally take over operation of ManorCare nursing homes, which would change its designation from a real estate investment trust (REIT), a classification that allows them to pay lower taxes than they would as a nursing home owner. This situation seems less likely, with the more probable scenarios involving QCP fully selling off ManorCare to another investor or finding a new management group or chain to run the properties while still maintaining ownership of the land.

Industry experts also tell Reuters that nursing home chains and investment groups that finance them are facing increasing financial burdens. Nursing homes have been under a microscope lately, as much for the quality of care they provide as for their Medicaid billings. Medicaid accounts for the majority of reimbursements to nursing homes and the news has been inundated with cases of fraudulent billing and rampant greed.

After the 14 heat-related preventable deaths at a nursing home in Hollywood Hills, Florida, the media seized on information that the owner had previously paid millions in restitution to the federal government for a multimillion dollar Medicaid scheme at his other facilities. In light of what seems to be constant unfavorable coverage surrounding nursing homes, REITS and investment firms are spinning off nursing home chains in order to reduce their losses.