Petersen Health Care Declares Bankruptcy in the Aftermath of Ransomware Attacks

by | Mar 25, 2024 | Healthcare Industry News

Petersen Health Care, a leading nursing home operator based in Illinois, has initiated bankruptcy proceedings following a series of cyberattacks and defaults on government-backed loans. The company sought protection under Chapter 11 in Delaware bankruptcy court, burdened with a debt exceeding $295 million, of which approximately $45 million is attributed to health care facility loans insured by the Department of Housing and Urban Development (HUD), according to a report from Reuters. Petersen Health Care operates a vast network of 90 facilities spanning Missouri, Iowa, and Illinois, employing nearly 4,000 personnel. Its facilities have a collective capacity to accommodate 6,796 residents, generating revenue surpassing $339.7 million in 2023. The company’s comprehensive suite of services includes skilled nursing care, assisted living, respite care, memory care, hospice, local medical transportation, radiology, and pharmacy services. Petersen also provides specialized care to individuals with intellectual and developmental disabilities in select facilities.  

Petersen secured a $45 million bankruptcy loan aimed at covering essential operating expenses to manage its financial challenges during the bankruptcy process. Court filings revealed a list of creditors with the 40 largest unsecured claims, with RehabCare topping the list with an $11.87 million unsecured claim. Petersen’s financial woes were compounded by a ransomware attack in October 2023, which inflicted severe damage by causing the loss of critical business records. This unfortunate event led to extensive disruptions in billing procedures, forcing the company to undertake extensive infrastructure replacements, including servers, email addresses, and software systems. Petersen subsequently experienced another blow following a ransomware attack targeting Change Healthcare, a prominent payor for the company. The attack resulted in payment delays to providers, further worsening Petersen’s financial strain amid ongoing investigations. 

The repercussions of loan defaults were severe, as 19 Petersen facilities entered receivership, increasing disruptions to the company’s day-to-day operations, as outlined in court filings. Despite these challenges, Petersen remains committed to maintaining business continuity throughout the bankruptcy process, with plans to restructure its debts and emerge as a stronger entity. David Campbell, the company’s chief restructuring officer, expressed optimism about Petersen’s future, emphasizing “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.” 

The nursing home industry has grappled with various long-standing challenges, including declining demand in rural areas, staffing shortages exacerbated by the pandemic, and reimbursement issues. Petersen’s financial struggles reflect broader industry trends, with Campbell highlighting the pressures faced by operators nationwide. “The challenges that Petersen as a company is facing are indicative of many operators across the country,” Campbell commented. “The industry is under severe pressures, both cost and reimbursement pressures.” The company’s reliance on Medicaid funding, particularly in Illinois, further highlights the complex economic situation confronting nursing home operators. Petersen maintains that their commitment to delivering quality care and managing changes to healthcare remains, driven by its dedication to serving residents and communities within its operations. 

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