Evergreen, Birch Hill owner files for Chapter 11

bankruptcy

By Kent Tempus

Managing editor

The parent company of two Shawano nursing homes has filed for protection under Chapter 11 bankruptcy law.

HMU Inc., based in Edina, Minn., is seeking to reorganize its finances so it can continue to operate Birch Hill Healthcare Center and Evergreen Health-care Center in Shawano, as well as four other nursing homes in western Wisconsin and North Dakota.

"It's our objective to continue to provide the good services we have in the past," HMU president and owner Glen Urquhart said Saturday. "This gives us the chance to reorganize and allows the business to operate."

HMU employs 209 at Birch Hill and Evergreen, and 277 others at Barron Healthcare in Barron, Dallas Healthcare in Dallas, Ellsworth Healthcare in Ellsworth and Sergeant Manor in Forman, N.D.

The facilities have a capacity of 391 residents, including 181 at the two centers in Shawano.

The company filed for Chapter 11 on Tuesday in U.S. Bankruptcy Court in Minne-apolis. The action frees a company from the threat of creditors' lawsuits while it reorganizes its finances.

On Friday, a U.S. Bankruptcy Court judge signed several orders relating to HMU's petition. The orders permit HMU to use cash and cash collateral subject to the liens of the lenders to continue paying employees and purchase supplies.

"The homes aren't going to close," Urquhart said. "We're working with our lenders to reorganize some of the debt."

According to documents filed by HMU with the court, the company revenues last year were more than $10.5 million. The documents list $8.3 million in loans, including $6.1 million from M&I Bank.

"I want to emphasize (that) our primary concern is to continue to provide good care," Urquhart told the Leader.

"We have good nursing homes; we have not scrimped or cut back on anything," he added. "We have good managers, good employees. It's a shame … they're all doing everything they can."

Urquhart attributed HMU's financial difficulties to several factors, and noted they are the same factors that have caused a "crisis" in the nursing home industry.

Those factors, he said, are:

n A change in how Medicare reimburses nursing homes. In January 1999, the company began receiving federal government payments for residents under a flat rate system. Before that, HMU received payments under a system that more closely reimbursed it's actually cost to provide care, he said.

"That is a major factor in the crisis," Urquhart said.

n A very tight labor market in an industry that is very labor intensive. More than 70 percent of the company's costs are labor.

n An increasing number of nursing residents are not as healthy as residents in the past. Elderly with fewer health problems whose only option late in life was a nursing home now have other alternatives, such as assisted living facilities. That means the nursing homes have a greater proportion of residents with a higher level of health problems, which increases the cost of providing care, he said.

Urquhart provided a copy of an article published in this month's issue of Provider, an industry trade journal, which says one out of 10 nursing homes in 21 states is operating in bankruptcy. Wisconsin is not one of the 21 states, but the article states that 5 percent of facilities in the Midwest are in bankruptcy.

Provider also quoted American Health Care Association vice president Linda Keegan as saying the bankruptcies will continue unless the administration addresses inadequacies in the Medicare program. The government needs to increase the payments so they reflect the true cost of providing skilled nursing care, she said.

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