Manzanita Manor Files For Chapter 11


According to nursing care leaders, the crippling effect that Medicare cuts have had on America's nursing homes has sounded "a wake-up call" for lawmakers and communities across the nation.

And now Payson has been roused from its slumber.

Local senior health care facility Manzanita Manor has filed for Chapter 11 bankruptcy, putting the 15-year-old nursing care provider in the same fiscal circumstance as more than 1,600 national, regional and independent nursing homes across the country.

After years of profit-raking, much of the nursing home industry is now heavily in debt, understaffed and losing money, American Health Care Association officials said in a recent news release.

The industry's state and national leaders blame the problems on a reduction in Medicare payments required by the Balanced Budget Act of 1997, which they say cut closer to the bone than intended.

Medicare, administered by the Health Care Financing Administration, is the $200-billion-a-year federal health-care program for the elderly and the disabled.

Manzanita Manor's Executive Director Ross Monaco did not return numerous calls to his office.

Care likely to continue

But Payson Vice Mayor Ken Murphy, who was the facility's executive director from 1994 until last September, predicts that the effect of Manzanita's Chapter 11 bankruptcy will be invisible to the public eye.

In a typical nursing facility bankruptcy, Murphy said, the before and after pictures are nearly identical.

"Nothing will change in the building," said Murphy, who represents all of the state's rural nursing care facilities as vice-president of the Arizona Health Care Association. "All the same staff is there, all the vendors are getting paid. Basically, nobody knows about (the bankruptcy filing) except the people in senior management who have to go through the painful process of turning over the reins -- and that's about it.

"The regulating agencies are involved in these things, and they do scrutinize and assure, along with the management, that all of the services will continue as they should," he said. "And all the employees will see is a paycheck with maybe a different background design."

In this case, the old checks were being written by Manzanita Manor's management company, Trillium Payson Inc. of Canada, which operates two other facilities in Arizona and five in Texas.

Manzanita's new management company has not yet been announced.

The Manzanita Manor property, both dirt and building, is owned by the Payson Investment Group, based in Walnut Creek, Calif.

Nationwide crisis

This situation is not unique to Manzanita Manor, Murphy said. "Forty percent of the nursing homes in Arizona are currently in bankruptcy. It's rampant across the country."

And it's not just hitting the smaller nursing homes and regional chains. Many of the industry's largest for-profit chains also are struggling with financial difficulties.

Vencor, one of the nation's largest nursing home chains, with about 300 homes in 46 states, filed for federal bankruptcy protection Sept. 13, 1999.

Sun Healthcare Group, another megachain with 385 facilities in the U.S., is in default on $38.7 million in 1999 debt installment payments.

Beverly Enterprises, the nation's largest chain with more than 500 nursing homes in 30 states, posted a second-quarter 1999 loss of $115 million, due in part to a tentative $170 million agreement with the government to settle fraud charges.

Last June, Mariner Post-Acute Network, with 400 facilities, posted a third-quarter loss of $405 million and cut management by 50 percent.

Murphy said that Mariner -- once a very large, publicly traded company on the New York Stock Exchange -- used to have "stock values of $35 or $40 a share that are now 8 or 9 cents and are no longer being traded because of this mess."

The culprit, Murphy said, is "the terrible way the government has started to reimburse nursing homes for the care of the elderly in our country."

Budget Band-Aid

On March 29, the Senate Budget Committee echoed Murphy's view by adopting an amendment urging President Clinton and Vice President Al Gore to "make changes... (by) fixing the labor component of the skilled nursing facility market basket," which fails to reflect the high costs of providing nursing care.

The amendment also called on Congress to "maintain the continued viability of the current skilled nursing benefit" under Medicare, and to ensure that "providers have the resources to meet the expectation for high-quality care."

According to Dr. Charles H. Roadman, president and CEO of the American Health Care Association, Congress and President Clinton cut Medicare funding for patients needing skilled nursing care by $9.5 billion in 1997. Last year, cuts were almost twice as deep as projected, and Roadman has predicted that cuts will soon reach $15 billion -- nearly $6 billion more than planned.

Speaking of the 16,000-plus bankruptcies of nursing care providers nationwide, Dr. Roadman has said, "That's one out of every 10 skilled nursing facilities in America, and those facilities care for 175,000 frail and vulnerable elderly.

"While the $2.7 billion in Medicare funding restored by Congress last year provided some measure of relief, the problem has not been solved. Bankruptcies continue, and caregiving has become more difficult because the necessary Medicare funding resources are not available."

Financially troubled nursing homes have assured the American Health Care Association that service to residents will not be interrupted throughout their reorganizations, said the organization's vice president, Linda Keegan.

But unless legislation is passed to undo the Medicare cuts, many industry leaders think, more nursing facilities will have to seek the same bankruptcy protection now sought by Manzanita Manor.

'The insanity of Medicare'

But Medicare cuts aren't the only problem, Murphy said. Reimbursement policy changes also are inflicting deep wounds on the nursing home industry.

"Let me give you an example of the insanity of Medicare," Murphy said. "They've conjured this thing called consolidated billing. Say you've broken your hip and you come into my nursing home for rehab ... and we find that you have a wound infection for which you need to be sent to the hospital to have it cleaned out. We would have to send you by ambulance, and we would have to pay for that and the outpatient surgery.

"Now, we may only be getting $200 per day for your care -- and if you'd been there 10 days, that would be $2,000," Murphy said. "But then we just sent you to the hospital for a $12,000 patient surgery procedure. On top of that, I've got to pay for 24-hour nursing care, keep the lights on, pay the water bill, try to hire and retain good staff, deal with all the regulations and regulators and duplicate agencies. It goes on and on.

"It's a terrible thing. It's a much bigger picture than just Manzanita Manor."

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