New law could hinder the sale of struggling nursing homes

A court-appointed receiver says a new state law has the potential to make it more difficult to sell financially struggling care facilities in Iowa such as the Keosauqua Health Care Center, above. (Facility photo courtesy Van Buren County; bill image courtesy State of Iowa)

A court-appointed receiver for several Iowa nursing homes says a new state law has the potential to make it more difficult to sell financially struggling care facilities that are looking for buyers.

In August 2022, an Iowa judge placed eight Iowa care facilities in receivership, citing the inability of their Chicago-based management company to pay rent to the network of East Coast companies that own the buildings and act as their landlord.

Since then, three of the eight homes have been sold or closed, but the owners have been unable to find buyers for their five remaining facilities, which include the Keosauqua Health Care Center, Newton Health Care Center, Urbandale Health Care Center, Windsor Place in Sigourney, and Keota Health Care Center.

The receiver in the case, Michael Flanagan, has resisted legal efforts to terminate the receivership and said that one major problem in selling the homes is tied to legislation that Gov. Kim Reynolds signed into law on June 1, 2023.

According to Flanagan, House File 685 altered the process by which Iowa’s nursing homes can change ownership, in part by enabling the state to require that prospective buyers establish an escrow account with sufficient funds to sustain operations of their newly acquired nursing home for at least two months.

“This escrow requirement has created an issue for many potential buyers and has significantly slowed the market for the sale of nursing homes in Iowa,” Flanagan told the court several months ago. He noted that there were 10 sales in 2021, four in 2022 and only one in 2023, and the 2023 sale took place before the law went into effect.

“Sales have drastically decreased since the implementation of the new law,” Flanagan told the court.

Flanagan said Friday that the impact of the new law has yet to be fully tested, noting that it says regulators “may require” that prospective buyers have two months of operating cash on hand, but does actually require that level of liquid assets.

Last week, the Des Moines-based attorneys for the Chicago-area operators of five Iowa homes that are in receivership made a motion to withdraw from the case, citing nonpayment of their legal fees and their clients’ request that they stop providing any legal services.

That move comes as state regulators allege multiple quality-of-care violations at one of the five homes and a medical-staff provider pursues a court judgment against four of the facilities.

Keosauqua home cited for violations

In May, state inspectors cited the Keosauqua Health Care Center for 22 violations of federal regulations and five violations of state regulations. A total of $46,000 in state fines was proposed and then held in suspension. That total includes a $7,750 suspended fine for failing to provide a safe environment for residents — a serious, repeat violation that resulted in the proposed penalty being tripled to $23,250.

One of the citations was for failing to have adequate staff on hand to feed and bathe residents, or to prevent a resident being injured in a fall, or to answer call lights in a timely manner.

Residents complained it could take “a couple or hours” for the staff to answer call lights, inspectors reported. One resident said he waited five hours for a bed pan. A licensed practical nurse told an inspector the home, which has 58 residents, had only one nurse per shift and had no applicants for job openings.

The low-staffing allegations could be related to the fact that the home and some of its sisters facilities are being sued for failing to pay for temporary workers. In February, GrapeTree Medical Staffing sued the Keosauqua home for $32,000 in unpaid bills.

At the same time, GrapeTree sued the Keota, Sigourney and Newton facilities for a total of almost $75,000 in unpaid bills. All four of the lawsuits are pending.

The Keosauqua home was also cited in May for unsanitary conditions in the kitchen, with the dishwasher and handwashing sink unable to produce hot water. “Black stains and debris present on the floors,” an inspector reported. “Red food debris hung down from the underside of the shelf directly above the stove burners … Brown food debris hung down from the ceiling of the microwave with black buildup in the corners and the seams.”

Workers allegedly told inspectors there were no longer any snacks available to give residents at bedtime. One employee reported the company had “changed hands” recently – an apparent reference to CareSage Administrative Consulting taking over management duties late last year — and snacks were eliminated at about the same time.

The worker told inspectors the staff sometimes went to the store on their own initiative and bought residents snacks. The home’s dietary manager told inspectors the facility “had some trouble getting snacks” when the new company took over management “because they were trying to think about the budget.”

According to court records that Flanagan filed two weeks ago, he is unaware of any current offers to purchase or lease the five Iowa homes still in receivership.

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