Over the past couple of years, we have been watching as a company called Skyline Healthcare seemed to come out of nowhere to becoming a national operator of skilled nursing facilities with perhaps 120 or more facilities under management. This has occurred in a very short period of time, and many of their properties came from Golden Living, as that company, after some run-ins with various state regulatory agencies, switched from being an operator to a landlord. To do that, you need a lot of providers to step in and lease your buildings, or maybe a few to take over operations for a lot of them.

It looks like Skyline became a go-to provider for them. Two states, however, have taken over operations from Skyline after finding out the company couldn’t meet payroll, and maybe other financial obligations. In Nebraska, the state put into receivership 21 SNFs and additional assisted living communities operated by Skyline through an entity called Cottonwood Healthcare. They had taken over operations from Golden Living in 2016. According to local media reports, some employees had not been paid for three weeks. We have to wonder what food has been served the residents, and what kind of medical supplies are still on the shelves. The state has appointed Klaasmeyer & Associates to manage the facilities while a long-term plan is worked out.

This was followed by the same thing happening in Kansas, with the state asking the courts to put 15 SNFs into receivership. Wood-Ridge, New Jersey-based Skyline has been operating them since 2016. Again, the company was not able to make an upcoming payroll payment. Apparently, Mission Health Care, which operates in Kansas as well as four other states, will be stepping in to oversee the operations of these 15 facilities until a more permanent solution can be found.

The knee-jerk reaction from the industry will be that low Medicaid reimbursement was the cause. While Nebraska is not known for a generous Medicaid rate, we would argue that the corporate structure, rapid growth, little liquidity and large lease payments were the culprits, among others. We think more shoes will drop, and Pennsylvania could be the location of one of them where Skyline took over operations of nine Golden Living facilities. This mess could get even uglier, but it was so predictable.