Bankruptcy is a terrible thing for any senior living community. It is much scarier for entrance fee community residents.
Sears Methodist was founded as a faith based senior living not-for-profit in Abilene Texas. They operate 11 properties including 3 Texas State Veterans Homes. The other 8 properties include refundable-entrance-fee CCRC’s, with independent living, assisted living, memory care and skilled nursing. All 11 properties are located in Texas. Sears Methodist employee something fewer than 1,400 employees and serve around 1,500 residents. Last week they filed for Chapter 11 Bankruptcy.
What We Know or at Least Think We Know
- According to the company this is a “voluntary move to reorganize the company,one that will not impair the resident’s quality of care, nor impact workers’ pay.”
- Sears Methodist Retirement has won approval from the court to continue to operate their communities.
- They were granted permission to access secured cash collateral and to borrow $600,000 from a Wells Fargo Bank bondholder group. This was an urgent situation without which they apparently would have been unable to make their next two payrolls.
- There was little if any objection to the motion to grant access to the additional funds.
- The filing itself was directly related to $160 million of funded debt.
- In addition to approving the deb,t the judge also approved the payment of entrance fee refund requests for any residents who want to leave the communities or who pass away.
- One of the stories reports that, for a number of years they have struggled with declining revenues and rising costs.
Fallout/Resolution
It is way too early to know exactly what this will all mean for residents, staff and the industry. The obvious concerns include the following questions:
- What will happen to the refundable entrance fees?
- Which properties are the source of the problem?
- Can occupancy, revenue and cost issues be fixed?
- Will residents and, by extension, their families stick around to find out?
I have a bunch of feelers out for more information and I hope to publish a follow-up story with more details later in the week. Just before publication I spent an hour on the phone with a resident in one of the CCRC’s and will write about that conversation later this week.
Sources
http://lawprofessors.typepad.com/elder_law/
http://bankruptcynews.dowjones.com/Article?an=DJFDBR0020140612ea6ckwpt1 Registration Required
http://www.sears-methodist.org/
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It happens. A venerable not for profit A/L institution in San Francisco has announced that it is closing its doors after providing care for persons of modest means since 1884. Unfortunately, reorganization in bankruptcy was not a remedy. Perhaps it might have been if the Assisted Living providers reported their financial position quarterly, as do the multi-level CCRCs.