Major Healthcare Company Files for Chapter 11 Bankruptcy

By: Beth Moreton | Published: Apr 05, 2024

The COVID-19 pandemic left many businesses at risk of bankruptcy and closure, including care homes.

So much so that one major healthcare company, responsible for nursing homes and senior living facilities, has recently filed for Chapter 11 bankruptcy, despite taking out $50 million in loans.

Infection Rates Were at 75% in Nursing Homes

Numerous nursing homes and senior living facilities were significantly impacted by the COVID-19 pandemic.

A molecule of COVID-19. It is grey with bits of red sticking out and orange and yellow dots. The word “COVID-19” goes across it in white writing.

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In fact, at one point, 1300 nursing homes had an infection rate of 75% or higher, according to the US Department of Health and Human Services, which caused significant financial strain on these facilities.

Nursing Homes Are Struggling With Staff Shortages

With the increasing number of elderly people and many of these people requiring round-the-clock care, staff shortages in nursing homes are a struggle, according to The Nation’s Health.

An empty reception area of a nursing home. There is a reception desk with a sign behind it that says “Health at home Care Center.”

Source: Dr. Kanapon Phumratprapin/Unsplash

Due to the rise in inflation, nursing home companies are struggling to find the money to pay their staff, which is part of the reason why staff shortages are so low.

Inflation Has Led to Chapter 11 Bankruptcy Filings

The Street has reported that inflation has caused a rise in wages, products, supplies, and interest rates, leading to many nursing care home companies struggling to find the funds.

A bankruptcy letter with a brown envelope and another letter next to it that says “DUE” in red letters in a red box.

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This has led some companies to take out loans, but left unable to pay the loans back, which has resulted in Chapter 11 bankruptcy filings.

Dozens of Chapter 11 Bankruptcies Have Been Filed Since 2021

With the COVID-19 pandemic being one of the main causes behind these Chapter 11 bankruptcies, many healthcare providers have filed for Chapter 11 since 2021.

"Debt" writing in black writing on a piece of white paper. A green highlighter pen is above it.


13 companies filed in 2021, 12 in 2022, and 15 in 2023, with this number potentially going up in 2024.

The Chapter 11 Bankruptcy Process

The Chapter 11 bankruptcy filing occurs when a holder of debt claims and other liabilities happens before the date of the bankruptcy petition.

A typewriter with a piece of paper inside. On the piece of paper, it says “Bankruptcy”.

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Filing for Chapter 11 bankruptcy enables breathing room to create a reorganization plan and give creditors greater recovery than if they had gone into liquidation.


Notable Chapter 11 Bankruptcies Have Occurred in the Last Few Years

Various nursing home companies have had to file for Chapter 11 bankruptcy in the last few years.

One of the Evangelical Retirement Homes. The home is on one level and curves around to follow the drive. There are some trees planted outside the home.

Source: evangelicalhomes/YouTube

This includes the Evangelical Retirement Homes of Greater Chicago and Windsor Terrace Health, which listed between $1 million and $10 million in assets and liabilities.


Evangelical Retirement Homes Filed Chapter 11 Due to COVID-19

McKnights Senior Living reported that Evangelical Retirement Homes had to file for Chapter 11 bankruptcy due to COVID-19.

The outside of one of the care homes under the Evangelical Retirement Homes group. The building is made of red bricks and grey roof tiles. Cars are parked outside it.

Evangelical Homes/YouTube

As they could not give people a tour of their facilities, place uptake was low. Low uptake meant a loss of fees, eventually leading to bankruptcy.


Evangelical Retirement Homes Has a Winning Bidder

Evangelical Retirement Homes was bought out after they filed for Chapter 11 bankruptcy.

One of the Evangelical Retirement homes. The building is made of beige panelling and grey roof tiles. It has a bench outside in a garden with plants and a footpath.

Evangelical Homes/YouTube

According to McKnight Senior Living, Encore Healthcare Services of New York was revealed as the buyer of the senior living facilities. Encore Healthcare Services plans to spend $15 million on capital improvements.


Windsor Terrace Health Has 35 Senior Living Facilities

The Windsor Terrace Health company, which owns 35 nursing homes across California and Arizona, is another warning of senior living facility bankruptcies.

An elderly man sitting down holding a walking stick. A care worker dressed in white has placed her hand on his shoulder.


Due to the company’s size, McKnights has said that Windsor Terrace Health’s bankruptcy will warn many that there will be a further collapse in the senior living sector.


Magnolia Senior Living Has Also Filed Chapter 11

Magnolia Senior Living is another senior living facility filing for Chapter 11 bankruptcy.

An aerial view of a Magnolia Senior Living facility. The walls are painted yellow and green and the roof has grey tiles. It has a long drive leading up to it and is surrounded by green grass and trees.

Diaz Fritz Group General Contractors/YouTube

McKnights Senior Living has said that Magnolia has included assets between $1 and $10 million with matching liabilities in their filing.


Peterson Health Care Filed for Chapter 11 Bankruptcy

Peterson Health Care is another nursing home company that has recently had to file for Chapter 11 bankruptcy.

A sign that says “Peterson Health Care” on a lawn. There are various cars parked up behind it and there is a building in the background.

Source: 25 News Week/YouTube

The healthcare provider defaulted on loans up to $50 million, and according to WSJ, it comes just two months after it was hit with lawsuits that alleged these defaulted payments.


Peterson Health Care Had Launched a $50 Million Institute

Before the bankruptcy filing in 2023, Peterson Health Care launched a $50 million institute.

An outside of one of the Peterson Health Care homes. The building is made of red brick and concrete. There is a sign outside that says “830”

Source: 25News Weeks/YouTube

The Peterson Center on Healthcare website reported at the time that the $50 million was being used to evaluate digital health technologies to help improve health and lower the costs of healthcare.


Peterson Health Care Had $295 Million in Debt

Reuters reported that Peterson Health Care had around $295 million in debt.

A pad of sticky notes with “pay debt” written on the top note in red writing. There is a red pen next to the sticky notes and a pair of glasses behind it.

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This comes after the company had faced issues with cyberattacks and defaulting on government-backed loans.


Peterson Was in Trouble Before the Debt

Even before going into debt, Peterson Health Care already saw signs of trouble.

An elderly man sitting in a chair. There is a woman in a yellow cardigan who is helping him out of the chair.

Kampus Production/Pexels

The number of people wanting to go into residential care in rural areas declined, with more opting for having carers come to their homes.


Peterson Health Care Owed $3 Million in Overtime

Before filing for Chapter 11, Peterson Health Care was found to owe $3 million in overtime to their carers.

A carer in a blue uniform and beige cardigan. She has brought over a tray of breakfast to an elderly man who is sitting in a chair. Her hand is on the shoulder of the man.


Business Insider reported that a federal investigation had found that the company had violated wage laws for two decades, with these overtime wages being owed between 2018 and 2020.


Peterson Claims They Were Not in Violation of Wage Laws

Despite various investigations finding otherwise, Peterson claims they have never been in violation of wage laws.

A person filling out a payment form with a pen.

Nataliyah Vaitkevich/Pexels

HR Drive says a spokesman for the company said the company has always paid their employees fairly and that they are constantly reviewing their pay practices.


Peterson Owes Millions to Creditors

Much of the debt that Peterson Health Care owes is owed to creditors.

A pile of money notes, with each note being worth $100.

Giorgio Trovato/Unsplash

Skilled Nursing News reports that RehabCare is the top creditor, which has a total of $11.87 million in unsecured claims.


Peterson Health Care Has Faced Several Cyberattacks

Between October 2023 and February 2024, Peterson Health Care faced several cyberattacks.

A person hacking into a cybersecurity system. There is an iPad in front of a computer. Both screens are on with lots of writing in various colors.

Source: Pressfoto/Freepik

This includes an attack from the Cactus ransomware group, which caused them to lose business records and struggle to bill customers and insurers. They also had an attack from Blackcat, a hacking group, stopping payments to providers.


Peterson Had To Replace Everything

After the attack, Peterson had no other choice but to replace everything that had been stolen.

A black and silver laptop on a white table with a yellow cup and green plant behind it. The laptop screen is on and has a software program on.

Clément Hélardot/Unsplash

This included their servers, email addresses, and software, which only cost them more money.


There Was a Ransomware Attack on One of Peterson’s Major Payors

Change Healthcare is one of Peterson’s major payors, so things only got worse when they were also the target of a ransomware attack.

A hacker in a black hood sitting at a desk with a computer. He is also holding a smartphone and both screens have lots of writing in green and red.

Sora Shimazaki/Pexels

Wired revealed that the people who had carried out the ransomware attack received $22 million, which many believe means Change Healthcare has paid them ransom.


The Payment Represents a Huge Problem

If Change Healthcare has paid the attackers $22 million, this poses a huge problem to the healthcare industry.

$100 notes fanned out in a circle.


It gives more reason for other attackers to believe there are profits to be made from stealing healthcare data, which will cause worry among healthcare providers, patients, and their families.


Peterson Health Care Previously Had a Revenue of $340 Million

Despite filing for Chapter 11 bankruptcy and having debts of $295 million, Peterson Health Care had a revenue of $340 million.

A large pile of $100 notes stacked on top of each other.

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They had around 90 nursing homes across various states, 4000 employees, and a capacity for 6796 residents.


Peterson Health Care Is Operating as Normal

Despite filing for Chapter 11 bankruptcy, Peterson Health Care plans to operate normally.

A carer assisting an elderly woman into a lift.

Source: 25News Week/YouTube

Business Wire reported that David Campbell, Peterson Health Care’s Chief Restructuring Officer, has said the company is committed to providing first-rate care to its residents and will return as a “stronger company.”