11/25/07

SEIU blames local bankruptcy on state politics

Amid accusations that it shortchanged patients while it was diverting millions of dollars to a country music label in Nashville, Connecticut’s second-largest operator of nursing homes filed for bankruptcy protection this week along with dozens of its affiliates.

The bankruptcy filings, which will be heard in federal bankruptcy court in New Haven, began arriving late Tuesday and continued into Wednesday. Officials and lawyers for Haven Healthcare, the Middletown company that is the public face for the various corporations, did not return phone calls seeking comment.

The privately owned chain, which manages 15 nursing homes in Connecticut and several others in New England, operates roughly 1,900 of Connecticut’s beds, nearly 7 percent of the total licensed by the state. The company is seeking the protection of the bankruptcy code to continue operating while it seeks to satisfy its creditors.

In recent days, The Hartford Courant has published several articles detailing the company’s business practices, its history of providing care that state officials said undermined the health of its patients, and its battles with vendors who had cut off supplies for lack of payment. In one instance, the newspaper reported, patients at its nursing home in Jewett City were huddled under blankets one night in December 2005 because the building ran out of heating oil after the supplier had not been paid.

Reacting swiftly, Attorney General Richard Blumenthal charged on Wednesday that the company lent nearly $9 million to Category 5 Records, the label for the country music star Travis Tritt, at the same time that it was failing to pay bills accumulated by the nursing homes. Category 5 was founded by Ray Termini, the chief executive officer of Haven Healthcare.

Gov. M. Jodi Rell said that her focus was on the residents of the homes, and that she had placed state monitors at seven homes operated by Haven. “The company is concerned about its creditors, but I am concerned about the patients,” she said in a statement.

Mr. Termini denied in The Courant this week that his company had done anything wrong by using corporate funds to invest in businesses unrelated to health care, and said he was working to correct the problems at the nursing homes.

Chapter 11 of the federal bankruptcy code generally provides a cooling-off period for debtors who are seeking time to work out their problems with creditors. Under the code, certain legal actions lodged against a company can be temporarily frozen.

Mr. Blumenthal said he would urge the bankruptcy court to appoint an independent trustee to run Haven’s business while it is operating under bankruptcy.

In a petition filed with the court on Wednesday, Mr. Blumenthal criticized the company for failing to pay vendors with funds that the state allots participants in the Medicaid program and for diverting “considerable portions of these funds for other items and investments that inured to the benefit of insiders.”

“Entities that so grossly mismanaged their affairs should not be permitted to continue as debtors in possession,” he wrote.

Lawyers with expertise in bankruptcy said that it was not unusual for a nursing home or chain to seek bankruptcy protection. If loved ones were residing at one of Haven’s homes, “I’d be concerned but I wouldn’t be panicked, at this point,” said Stephen Wright, of Harlow, Adams and Friedman in Milford, which is not involved in the case.

Generally, Mr. Wright and other bankruptcy lawyers said, vendors who make deliveries after a bankruptcy petition have some priority if the debtor’s assets turn out to be insufficient to satisfy all liabilities.

They also said that, as a rule, courts leave managements in place on the theory that they can best protect a company’s assets, but added that when there are allegations of fraud, the court sometimes agrees to install an independent trustee.

Deborah Chernoff, a spokeswoman for S.E.I.U. Healthcare, a union that represents 1,200 workers at Haven’s homes in Connecticut and Rhode Island, said that “whatever needs to be done to stabilize these homes and guarantee good care for these residents should be done.”

But Ms. Chernoff added that the larger systemic problems, including inadequate state financing for Medicaid patients and state regulations on staffing that have not been revised in two decades, should not be overlooked.

“These kinds of stories, as awful as they are, are really symptomatic of a much larger problem that is not confined to one particular nursing home chain,” she said.

Nancy Shaffer, a state ombudsman who oversees operators of long-term care facilities, said, “There have been some concerns with this particular nursing home chain, and I think there are a lot of eyes and ears right now, and that’s a good thing.”

Company officials asked a reporter seeking comment to leave several Haven Healthcare facilities on Wednesday. Outside the company’s home in Cromwell, Charles Camp, 38, who works in the kitchen, said patients were concerned by the recent allegations and by the prospect of a change in control. “That’s the big talk around here at the bridge table,” Mr. Camp said.

As Mr. Camp put it: “It’s shocking, man. I thought I’d get here and there would be some job security, and now it doesn’t seem like that.”

(nytimes.com)

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