Bank tells judge residents of Iowa nursing homes are in a ‘precarious position’


A Nebraska bank has told a federal judge that the proposed new owner of a chain of Iowa retirement homes has left the elderly residents of those facilities in a “precarious position.”

Lincoln Savings Bank is asking the judge for permission to subpoena records related to the planned sale of Iowa’s QHC Facilities nursing home chain. The bank says it is ‘deeply troubled’ by the actions of the chain’s proposed new owner, who now wants to buy QHC for $4.5m – far less than the $12m it agreed to pay in the first round. an auction just six months ago.

The buyer’s refusal to meet its end of the bargain put the struggling retirement home chain in a difficult position, the bank said, with its cash reserves depleted and no other potential buyers on the horizon.

QHC Facilities, which owns eight nursing homes and two assisted living facilities in Iowa, has been cited for at least 184 regulatory violations in the past 21 months and owes state and government taxpayers $6 million. federal.

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The company filed for bankruptcy late last year as part of efforts to find a buyer for all of the chain’s assets. In late February, Blue Diamond Equities, also known as Blue Care Homes, submitted a letter to QHC agreeing to purchase QHC for $11.6 million.

At that time, the main owner of Blue Diamond was Shmuel Haikins. Howard Weiss, who has a financial stake in a group of Californian retirement homes, acted as financial backer for Blue Diamond. The two men reportedly provided QHC with documents showing they had the money on hand to make such a sale.

Their bid sparked an auction, in which Cedar Health Group, an East Coast development company, bid $12.1 million, or $100,000 more than Blue Diamond. This left Blue Diamond as a backup bidder in case the planned sale to Cedar Health went south, which is exactly what happened.

Court records show that shortly after the auction, a lawyer for Cedar Health wrote to QHC representatives, explaining that Cedar Health was trying to determine if any of the Iowa nursing homes were “at risk.” impending decertification” by Medicare due to quality-of-care issues. The attorney pointed out that two of the QHC homes had been designated special facilities by the federal government, indicating a long, uncorrected pattern of serious violations.

Cedar Health then backed out of the sale, leaving Blue Diamond as the winning bidder. Blue Diamond, however, quickly came to the conclusion that $12 million was too much to pay for QHC, and it sought court approval to strike a new deal that would allow it to buy QHC for just $4.5 million. dollars – with the three most troubled channels. healthcare establishments closed and excluded from the agreement.

The proposal immediately raised concerns at Lincoln Savings Bank, which had loaned QHC $2 million to keep the business afloat while the planned sale and bankruptcy worked its way through the court system. Blue Diamond saw the three nursing homes it wanted to close as “too unprofitable,” the bank alleged in court documents.

Bank ‘deeply troubled’ by Blue Diamond

Although the court recently refused to accept the proposed new terms of sale, the bank now says it fully expects QHC to file a new petition seeking court approval for the revised deal.

In court documents filed earlier this week, the bank informed the court that it “is deeply troubled by the actions of the Blue Diamond parties”, particularly given the nature of QHC’s business: care for people. elderly. The bank says the court-approved bidding procedures for the sale of the chain clearly and unequivocally stated that QHC’s assets were to be sold “as is” and that all due diligence by any potential buyer should be made before the current auction.

The bank told the court this week that it appears Blue Diamond now wants a significant reduction in the selling price “for apparently no other reason than that the Blue Diamond parties no longer like the deal they are legally compelled to conclude”.

The bank says that in recent discussions, Blue Diamond has refused to significantly increase the amount it will pay for QHC. The bank says Blue Diamond has put QHC in a “difficult position” because QHC does not have enough money to simply forego a sale and continue to operate the retirement homes on its own. QHC, the bank points out, is “months into auction and sale efforts, with no other buyers in sight.”

Because of this, failure to close a sale quickly will leave residents of QHC’s care facilities in a “precarious position”, the bank told the court. And because of QHC’s indebtedness, the bank says, an investigation into Blue Diamond is “economically prohibitive” for QHC and therefore the onus is on the bank to issue subpoenas and demand answers.

The bank acknowledges that while creditors do not have an absolute right to conduct examinations of debtors under federal bankruptcy rules, it is up to the court to order such examinations.

QHC owes taxpayers $6 million

The bank is asking the court for permission to subpoena Blue Diamond to obtain documents and take statements from its executives. The banks say these steps are “unfortunately necessary to try to understand” the real reasons for the newly negotiated purchase agreement.

Regardless of the planned sale, there remains the unresolved question of how many millions QHC owes taxpayers.

Court records show the chain owes the federal government a total of $2,108,910 for unpaid fines related to violations of quality of care regulations and COVID-19 expedited and advanced payments it collected amid of the pandemic.

Proposed settlement over millions Iowa retirement home chain owes taxpayers

Additionally, state records show that QHC owes the Iowa Department of Social Services $3,930,784 in unpaid fees. With more than 300 other creditors lined up and demanding payment from QHC, the company is now asking that its debt to the state be treated as a “lower priority”.

The eight skilled nursing facilities owned by QHC are Crestridge Care Center in Maquoketa; Crestview Acres in Marion; Sunnycrest Nursing Center in Dysart; QHC Fort Dodge Villa; QHC Humboldt North; QHC Humboldt South; QHC Mitchellville; and QHC Winterset North. The two assisted living centers are QHC Madison Square in Winterset and QHC Villa Cottages in Fort Dodge.

Collectively, these facilities have a maximum capacity of more than 700 residents, although the three facilities that Blue Diamond sought to exclude from sale – QHC Humboldt South, QHC Mitchellville and Sunnycrest Nursing Center – have closed in recent weeks.


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