Five Connecticut Health Centers Commence Reorganization Proceedings to Create Sustainable Cost Structure

DANBURY, Conn., Feb. 25, 2013 /PRNewswire/ -- Five Connecticut health care centers (Centers) filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on Feb. 24 in order to implement a plan to create a competitive and durable cost structure.  The plan includes gaining relief from unsustainable union pension and medical benefits costs and other restrictive SEIU labor agreements that hamstring the Centers' flexibility and competitiveness.

The Centers, which provide skilled nursing care, are managed by HealthBridge Management LLC, but the Chapter 11 filing pertains only to the five unionized Connecticut Centers and does not apply to either HealthBridge Management itself or other health care centers it manages.  The burdensome pension and benefit costs and restrictive work rules are part of expired labor agreements that were negotiated in 2004 with the New England Health Care Employees Union, District 1199 (SEIU, District 1199).

The Chapter 11 proceeding will not affect patient care, relations with physicians or any other of the Centers' normal operations.  "The continued excellent care and safety of the Centers' residents remains paramount, and we wish to assure both the residents and their families that the five Centers will continue to operate as normal under bankruptcy protection, with no interruption of services," said Lisa Crutchfield, Senior Vice President, Labor Relations.  "It's business as usual at the Centers."

The Centers are in the process of negotiating debtor-in-possession financing and currently have sufficient cash to operate the facilities, including paying vendors for goods and services provided during the Chapter 11 process, without interruption.

Each of the five centers is a sub-acute and long-term nursing care facility for the elderly in Connecticut.  The facilities are: Long Ridge of Stamford, Newington Health Care Center, Westport Health Care Center, West River Health Care Center, and Danbury Health Care Center. 

The Chapter 11 filing was made in U.S. Bankruptcy Court for the District of New Jersey.

Along with the voluntary petitions, the Centers filed a variety of "first-day" motions requesting authority to continue routine operations, including post-petition payments to suppliers and uninterrupted employee wages and benefits.  The Centers expect to receive Court approval of the motions at the initial Court hearing.

The Centers also filed a motion under Section 1113(e) of the Bankruptcy Code. The 1113 process will allow the Centers to request Court authority to implement first temporary and then permanent modifications to their 2004 collective bargaining agreements if the Centers are unable to implement the modifications through good-faith collective bargaining with SEIU, District 1199.  Although the bargaining agreements have expired, the Centers are required to abide by their terms and conditions.

"The Centers have a bright future if they can operate under labor agreements that reflect today's financial realities, but the fact is the Centers will not survive unless we have relief from the crushing burden of unsustainable labor costs, especially the spiraling costs of pension and healthcare obligations," Ms. Crutchfield said.

Under the existing collective bargaining agreements, the Centers would resume losing approximately $1.3 million per month.  The primary, if not sole, reason for the losses are untenable economic provisions in the CBAs. For example, the Centers:

• spent over 225% more on pension benefits per resident-day than the statewide average;
• spent 17% more on pensions per day than seven facilities with Union contracts that went into bankruptcy or receivership during 2012;
• had total benefit costs per day 24% higher than other Union facilities in the state; and
• had daily benefit costs 48% higher than the average of all facilities, Union and non-union, statewide.

The Centers are only the latest victims of unsustainable union labor contracts. SEIU, District 1199 represents employees at only 28% of Connecticut's nursing homes.  Yet it represented employees at 69% of the state's nursing homes that have closed since 2007.

"There is no getting around the fact that SEIU, District 1199, labor agreements are the leading reason for nursing home closures in Connecticut.  That's bad for patients, employees, physicians and the communities they serve," Ms. Crutchfield said.  "In our case, the union's collective bargaining agreements hobble the Centers with labor costs that are well above state averages and which are simply unsustainable."

More information about the pension and other benefit cost figures cited above is available in a previous HealthBridge news release here; the full review upon which it is based is available here.

About the Centers

The five Centers provide long-term care and short-term rehabilitation services.  For long term care residents who have medical needs, the Centers provide 24-hour-a-day nursing care, nutritional monitoring and planning, medication management and personal care.  For individuals in need of nursing and/or rehabilitation services following a recent hospitalization for orthopedic surgery, stroke, oncology care, cardiac care, general surgery and other diagnoses, the Centers offer medical and physical rehabilitation including physical, occupational and speech therapy, rehabilitative nursing and physician directed rehabilitation plans, IV therapy, wound care and other services.

Website: http://healthbridgefacts.com

SOURCE HealthBridge Management