HCR ManorCare, one of the largest U.S. nursing home operators, has a deadline tomorrow in a dispute over unpaid rent, a growing problem in an industry where eviction would put thousands of elderly out on the street.  In a lawsuit filed in August, HCR ManorCare’s landlord, Quality Care Properties Inc, said the chain owes more than $300 million in rent at its 292 skilled nursing and assisted living locations.  Many nursing home chains spun off their properties to real estate companies over the last decade to siphon money and increase profits.  ManorCare is the largest senior housing chain in financial distress but other over leveraged chains are losing profits because of mismanagement, declining reimbursements, higher management costs, and increased federal scrutiny over improper billing.

ManorCare must respond tomorrow.  Generally, a landlord can evict a tenant who fails to pay rent.

“However, because the leased properties care for approximately 30,000 patients – many of whom are elderly, vulnerable and require specialized care – abrupt eviction could cause substantial harm,” Quality Care said in its lawsuit, filed in California state court on August 17.

With more skilled nursing facilities defaulting on leases, property owners are increasingly looking to receiverships as an alternative to evictions or bankruptcy, lawyers and advisers told Reuters.

A receiver can ensure continuity of care for patients and residents while preparing the facility for a transition to a new owner or operator. The process is cheaper and more stable than bankruptcy proceedings.

 

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