Operator of 90 Nursing Homes Files for Bankruptcy

One of the nation’s largest nursing home operators has filed for bankruptcy protection after defaulting on government-backed loans and dealing with the impact of a crippling ransomware cyberattack.

Peoria-based Peterson Healthcare, which operates 90 facilities in Missouri, Iowa and Illinois, filed for Chapter 11 protection in a Delaware bankruptcy court last week.

Peterson reported $295M in debt, including $45M it owes under healthcare facility loans insured by the U.S. Department of Housing and Urban Development, according to a Reuters report.

Loan defaults caused 19 Petersen facilities to enter receivership, the report said. The company has secured a $45M bankruptcy loan to pay operating expenses during its Chapter 11 case, after disclosing a list of creditors with 40 large unsecured claims.

Petersen attempted to restructure its debt last year, but the effort was disrupted by an October 2023 ransomware attack on Change Healthcare, a major payor for Petersen.

According to court filings, Petersen lost a significant amount of its business records during the cyberattack, which caused “incredible difficulty and delay” in its attempts to bill customers and insurers. Petersen said it was forced to replace its servers, email addresses and software as a result of the ransomware attack.

The company has vowed to continue its normal operations as it restructures while in bankruptcy.

“We will emerge from restructuring as a stronger company with a more flexible capital structure. This will enable us to continue as a first-choice care provider and a reliable employer for our staff,” David Campbell, Petersen’s chief restructuring office, said in a statement.

Prior to its loan defaults and the October cyberattack, Petersen was facing financial stress due to its position as a large operator of rural nursing homes, which are still struggling to recover from the pandemic, according to a report in Skilled Nursing News.

Rural nursing homes, which are facing a long-term decline in demand as residents increasingly opt to receive care at home, also are dealing with staffing shortages, the report said.

Petersen’s facilities employ nearly 4,000 and its properties have to capacity to house nearly 7,000 residents.

Ransomware attacks targeting patients’ medical data nearly double last year. In 2023, 46 hospital systems, encompassing a total of 141 hospitals in the U.S., were hit with cyberattacks, up from 25 hospital system attacks in 2022, according to a report from Emsisoft.

A February 21 attack on Change Healthcare, the nation’s largest billing and payment clearinghouse, effectively shut down UnitedHealth Group’s ability to funnel hundreds of millions of dollars in insurance payments to doctors, hospitals and medical providers.

Some experts are calling for governments to impose a coordinated ban on ransomware payments.

Net Lease Spring:

Held April 16-17 in NYC, Net Lease Spring will bring together hundreds of dealmakers from the nation’s top firms. This year’s program will feature 5.5 hours of face-to-face networking and over 5 hours of content focused on micro and macro trends for 2024, being resilient through market volatility, how to serve your corporate tenant clients and much more! Learn more or register here.