SUN HEALTHCARE: Skilled Nursing Provider Files Chapter 11
After more than a year of steep losses, skilled nursing provider Sun Healthcare Group Inc. filed for bankruptcy yesterday. The company sought bankruptcy protection under Chapter 11 in the Delaware U.S. Bankruptcy Court, which will allow the organization to continue functioning as it restructures its debt. Company spokesperson Doug Cole reassured patients and employees that the filing will not hinder the firm's operations, saying, "We are not going out of business. Patients will receive care, and employees will be paid on time and continue to receive all their benefits" (West, Arizona Republic, 10/15). New Mexico-based Sun, which provides care to about 40,000 in its 369 facilities nationwide, reported debt totaling $2 billion.
Sun Healthcare is the second large national chain in a growing list of skilled nursing providers to file for bankruptcy, underscoring the severe impact recent Medicare cuts have had on skilled nursing facilities nationwide. In filing Chapter 11, Sun joins national chain Vencor Inc., and several regional chains including Frontier, Newcare and Iatros, as well as many independent providers, who have declared bankruptcy this year. Linda Keegan, vice president of the American Health Care Association, said, "It becomes clearer every day that the deep Medicare cuts in the 1997 [Balanced Budget Act] are devastating health providers, while at the same time creating severe patient access problems for certain types of care. Funding for this care must be restored by the administration and Congress. Our nation's Medicare beneficiaries deserve the skilled nursing care they are entitled to" (AHCA press release, 10/14).
Sun executives also blamed the government for the company's problems. CEO Andrew Turner explained, "Deep cuts in Medicare reimbursement exceeded all industry expectations, and severely impacted the company's ability to service its current capital structure." Another Sun spokesperson stated, "All the government's estimates were wrong. We were told that reimbursement reductions would average around 10% -- when in fact they averaged as high as 30%" (Brooks, Arizona Daily Star, 10/15). However, Congress is responding to the "crisis" by proposing legislation to address the BBA cuts, which both the Clinton administration and Congress admit were much deeper than intended. Sens. Orrin Hatch (R-UT), Pete Domenici (R-NM), Tom Daschle (D-SD) and Bob Kerrey (D-NE) have introduced the Medicare Beneficiary Access To Quality Nursing Home Care Act of 1999; the bill is slated for debate this fall (release, 10/14).