Nursing home co. Petersen files for bankruptcy after cyberattacks
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Petersen operates 90 facilities in Illinois, Missouri, and Iowa
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Company was hacked, also faces fallout from UnitedHealth hack
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Loan defaults caused foreclosures at 21 properties
By Dietrich Knauth
NEW YORK, March 21 (Reuters) - Petersen Health Care, one of the largest nursing home operators in the U.S., filed for bankruptcy on Wednesday after cyberattacks and defaults on government-backed loans worsened the company’s long-standing financial challenges.
The Peoria, Illinois-based company filed for Chapter 11 protection in Delaware bankruptcy court with over $295 million in debt, including $45 million owed under healthcare facility loans insured by the U.S. Department of Housing and Urban Development.
Petersen's failure to make payments under the HUD-insured loans caused its lenders to initiate foreclosure actions and place some of its properties into receivership, according to court documents, further disrupting the company’s day-to-day operations, according to Petersen’s court filings.
Petersen said it would continue operations normally while in bankruptcy, while seeking to restructure its debts.
"We will emerge from restructuring as a stronger company with a more flexible capital structure," chief restructuring officer David Campbell said in a statement. "This will enable us to continue as a first-choice care provider and a reliable employer for our staff."
Petersen operates over 90 nursing homes in Illinois, Missouri, and Iowa, with nearly 4,000 employees, capacity for 6,796 residents, and over $339.7 million in revenue in 2023.
The company's elderly care includes assisted living, skilled nursing care, respite care, memory care, hospice, local medical transportation, radiology, and pharmacy services. Petersen also provides care to people with intellectual and developmental disabilities in two of its facilities.
The company faced several long-term challenges before the cyberattacks and defaults on the HUD loans, including a long-term decline in demand for nursing homes in rural areas, increased competition for qualified nursing staff after the COVID-19 pandemic, and a backlog of unreimbursed Medicaid costs that stemmed from a 2015-2017 budget impasse in the state of Illinois.
Petersen had attempted to restructure its debt, but it was derailed by a ransomware attack in October 2023 that forced the company to replace its servers, email addresses, and software. The attack caused the company to lose a significant amount of its business records and caused "incredible difficulty and delay" in its attempts to bill customers and insurers, according to court filings.
A later ransomware attack on UnitedHealth Group's Change Healthcare, a major payor for Petersen, further exacerbated Petersen’s financial difficulties. Change Healthcare has slowed or suspended payments to providers, including Petersen, as it investigates the attack, Petersen said.
In part due to the cyberattacks, Petersen missed payments on its HUD loans, causing lenders to place 21 of its locations into receivership. Petersen has worked to transition those locations to the receiver’s control but has struggled to keep up with "demand-after-demand from the receiver" while also working to address its larger debt issues, according to Petersen.
Petersen has secured a $45 million bankruptcy loan, which it will use to pay operating expenses during its Chapter 11 case.
The case is In re: SC Healthcare Holding LLC, U.S. Bankruptcy Court for the District of Delaware, No. 24-10443.
For the debtor: Greg Gartland, Carrie Hardman and Joel McKnight Mudd of Winston & Strawn, among others.
Read more:
US health department opens probe into UnitedHealth hack (Reporting by Dietrich Knauth)
