Village of Laurel Run operator files for bankruptcy

FAYETTEVILLE – The Village of Laurel Run has been operating at a loss for the past six months, and its employees have sometimes waited to get paid.

The operator of the senior living community owes back rent and is wrestling with the owner of the property in federal courts.

“Residents report that there has been staff turnover as a result of the bankruptcy proceedings and payroll delays,” according to Margaret Barajas, Pennsylvania State Long-term Care Ombudsman. “The local ombudsmen confirm that all sections of the home continue to be clean and odor-free.

Barajas reported on Oct. 17 to the U.S. Bankruptcy Court, Southern District of West Virginia.

Passage Healthcare, the operator of Laurel Run, sought bankruptcy protection after property owner Welltower Inc. asked a federal court in Ohio to appoint a receiver to run Laurel Run and two other Passage properties.

Passage Healthcare, based in Puerto Rico, filed in March for Chapter 11 bankruptcy. Chapter 11 protects a company from creditors while allowing it to reorganize.

Welltower, a real estate investment trust based in Ohio, responded to the bankruptcy case by filing to recover $69 million from Passage Healthcare principals Andrew L. Turner and William F. Lasky.

According to Lasky’s testimony, Passage Healthcare needed additional capital, but Turner protected his ownership stake and refused to let Lasky contribute. Passage Healthcare’s management office in Puerto Rico “was an unjustifiable expense maintained to confer a special tax benefit on Mr. Turner,” Lasky said.

Lasky is a past chairman of the Board of Assisted Living Federation of America, now known as Argentum. He founded Alterra Healthcare Corp. in 1981. Alterra became a leading provider of assisted living and dementia services in the U.S.

Turner in 1989 founded Sun Healthcare, which grew to a $3 billion company by 1999 – the year it filed for bankruptcy protection. A change in Medicare reimbursement was blamed. Turner then joined Ballantrae Healthcare. Genesis Healthcare acquired Sun in 2012.

A ruling from Judge Frank W. Volk of the federal bankruptcy court in West Virginia earlier this month cleared the way for the U.S. District Court, Northern District of Ohio, to proceed with Welltower’s effort to repossess Laurel Run and to lease it to someone else.

The impact of the legal maneuvering has been mixed, according to court documents:

• Laurel Run lost $17,000 from March to October, instead of earning an anticipated $142,000 profit.
• Laurel Run in October employed 189 people, five more than worked there in March.
• The occupancy rate has remained consistent.
• A resident in August met with the administrator to express her concerns about the quality of care on weekends. Another resident said activities for residents have been reduced.
• The personal care home administrator at the end of August said she was no longer hearing concerns about staff paychecks. They had been told to cash them at PNC Bank, which holds Laurel Run’s business accounts.
• Laurel  Run is paying its bills on time.

Medicare’s Nursing Home Compare has no overall rating for Laurel Run, although its health inspections are below average (two of five stars) . The most recent health inspection was in January. The company has not reported staffing levels.

Laurel Run’s 40-acre campus at 6375 Chambersburg Road has a skilled nursing home, a dementia care center, two assisted living centers, patio homes and senior apartments.

Passage Healthcare, trading as Passage Healthcare Property LLC, owns two other health care facilities impacted by the proceedings – Longwood Manor in Maytown and Midland Meadows in Ona, West Virginia. Together the three Passage holdings cared for more than 430 patients in March and employed nearly 370 people.

Welltower bought the three properties in 2015 for $66.5 million, plus $2.7 million that would be spent on improvements at Laurel Run. Passage Healthcare in August 2015 failed to pay rent to Welltower, and Welltower in June 2016 gave Passage the opportunity to avoid default. Welltower finally gave notice that the back rent of $2.4 million was due by the end of January. Passage did not comply. Welltower terminated the lease in February and went to court.

Lasky told the court that $400,000 in Medicare and Medicaid reimbursements for Laurel Run were deferred in December and several apartments were vacant because of the improvements. He predicted a profitable Passage Healthcare in 2017 and 2018.

Jim Hook,  717-262-4759