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The Dose - JK Wall

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Health Care & Life Sciences / Life Science & Biotech

Cash crunch forces large home health agency into bankruptcy protection

December 21, 2015

One of Indiana’s largest home health care providers is low on cash and trying to regroup via bankruptcy court.

Carmel-based Nightingale Home Healthcare Inc. filed for Chapter 11 bankruptcy protection on Dec. 10 and last week won court approval to borrow $350,000 from its owner to make payroll.

The company employs 214 people in Indiana and serves nearly 900 patients around the state. Most home health care agencies in Indiana serve fewer than 100 patients.

In its court filings, Nightingale called itself “one of the largest, if not the largest, home health care provider in Indiana.” Nightingale's parent company, Home Care Providers Inc., also operates home care businesses in Arizona, California, Florida, Illinois, Massachusetts, Minnesota, Nevada, Ohio, Pennsylvania and Texas, but those other entities are not part of the bankruptcy filing.

Nightingale’s Indiana operations appear to be generating nearly $15 million in annual revenue, based on court filings. Those filings project that Nightingale will receive more than $2 million in cash payments over a 51-day period. If extrapolated to a 365-day period, that pace of payments would bring in $14.8 million.

Nightingale faced a “potential disruption to its reimbursement rights,” according Indianapolis attorney Wendy Brewer, who is representing Nightingale in its bankruptcy case. That left it with more than $938,000 in accounts receivable, but less than $50,000 in actual assets.

With monthly payroll of more than $720,000—and another $308,000 on top of that for payroll taxes, benefits and workers comp costs—Nightingale faced a cash crunch.

“The bankruptcy was filed to maintain continuity for our employees and for our patients and to preserve the value of the business while these issues are resolved or an alternative solution is reached,” Brewer wrote in an e-mail. “Nightingale intends to continue operations uninterrupted and has the support of its lender and primary creditors in doing so.”

Nightingale has borrowed about $5 million from Wells Fargo Bank, and also has a $1.5 million line of credit with the bank, according to court documents. Those loans are backed personally by Dr. Dev Brar, the president of Nightingale, and in some cases secured by office building in which his businesses operate.

Last week Nightingale also borrowed $350,000 from Brar via Home Care Providers, of which Brar is the sole owner. Brar did not return a phone message left for him at Nightingale’s Carmel headquarters.

In addition to Wells Fargo, Nightingale’s other secured creditors are Texas-based Dell Financial Services and Utah-based Webbank. Its largest unsecured claims are owed to Chicago-based Allied for nearly $44,000 in health insurance and Cincinnati-based Independence Medical for more than $35,000 in medical supplies.

The home health care business pulls in revenue of about $58 billion nationally each, and has been growing rapidly in size over the past decade. However, reimbursement rates for home health care from state-run Medicaid agencies is typically fairly low.

State Medicaid officials are trying to shift more care of Hoosier seniors to home health care agencies, and away from more expensive nursing homes. Rep. Tim Brown, R-Crawfordsville, said in an interview that making that switch might require higher reimbursements to home health care providers.

"There aren’t enough providers for all the services that are out there," said Brown, who is chairman of the House Ways and Means Committee. "So definitely reimbursement rates are going to have to be looked at."

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