A Cheshire-based chain of four nursing homes has filed for bankruptcy protection, five years and three months after exiting from its last bankruptcy restructuring.
Millions of dollars in unpaid state taxes were the immediate trigger for the filing by Affinity Health Care Management, because the Department of Social Services, which disburses Medicaid payments to nursing homes, held back $432,648 as a start toward the $6 million bill.
In all, the chain has $21.85 million in liabilities and $7.83 million in assets.
“If DRS continued to recoup such amounts on a monthly basis, then the debtor will not be able to continue to operate,” the court filing said.
Affinity Health Care Management runs Ellis Manor in Hartford, Alexandria Manor in Bloomfield, Blair Manor in Enfield and Douglas Manor in Windham. The chain has 413 beds and about 550 full- and part-time employees. About 250 of the employees are represented by the Service Employees International Union, District 1199.
The previous bankruptcy wiped out some back taxes, according to a summary of that case on the Pullman & Comley website, which represented the firm then and now.
“The firm worked closely with the Connecticut Department of Social Services, the Connecticut Department of Revenue Services, the U.S. Department of Housing and Urban Development and the Internal Revenue Service to modify the HUD-held mortgages, which led to substantial savings in annual rent for the homes,” Pullman and Comley wrote. “The reorganization resulted in the forgiveness of certain tax obligations; long-term repayment plans for the balance of past due taxes; and a settlement with the Connecticut Department of Social Services …”
Pullman & Comley bankruptcy attorney Elizabeth Austin said one factor that contributed to the inability to keep up with taxes since then was the financing that Affinity found when it exited bankruptcy in 2010.
She called it “unbelievably expensive,” and said the company kept finding reasons to raise the fees.
She said the fact that the nursing homes have too many empty beds also made it hard. She said some of the homes are only 80 percent full.
The filing said another contributing factor was that the chain has been paid at lower Medicaid rates, creating a shortage of $3.6 million over three years. It also said that DSS had been taking 13 months to process and pay Medicaid claims.
DSS spokesman David Dearborn responded by saying, “The notion that Affinity’s $6 million debt to state of Connecticut is the fault of Medicaid rates and pending claims is not taken seriously by our financial experts.”
He said determining eligibility is integral to claims payment. “Claims can be denied because of clear ineligibility or because the nursing facility documentation was incomplete or inaccurate. Documentation has been a problem with Affinity facilities, to the point where high-level DSS executives have been involved in working with Affinity to resolve.”
Medicaid pays for the majority of the patients in the homes. Private pay patients provide about $105,000 a week in revenue, according to the documents. The chain’s monthly payroll is $1.5 million, with $30,400 of that amount going to officers of the company.
Dearborn said the company’s previous bankruptcy exit was based in part on Affinity’s promising it would not ask for increases over what was legislated for all nursing homes.
Nursing homes pay a 6 percent of gross revenues provider tax in Connecticut. Austin said that of the $6 million bill, $1.5 million is interest, penalties and fees.