A judge on Tuesday signed an order allowing Suzanne Roski to continue as receiver in an effort to keep open the financially struggling Blue Ridge Rehab Center skilled nursing facility and Blue Ridge Manor assisted living facility in Martinsville.
Martinsville Circuit Judge G. Carter Greer had issued an emergency order June 20 appointing Roski as receiver, which is someone who acts as a custodian of a company’s assets or business operations in hopes of returning the company to a profitable state and avoid bankruptcy.
The order that Greer signed on Tuesday says that the tenant business - BRVA - breached the terms of the master lease, that the landlords lawfully terminated the master lease (on Feb. 25) , and that “the amount of rent due, owing and accruing as of March 26, 2019 was $6,460,277.10, plus interest at the rate of $24,642.96 per day.”
The order also noted that the Virginia Department of Health’s Office of Licensure and Certification and the Virginia Department of Social Services had written letters supporting appointment of a special receiver, and that the Martinsville city attorney, without taking a position on the merits of the allegations contained in the lawsuit, in general supports the appointment of the receiver to help keep Blue Ridge Rehab Center and Blue Ridge Manor operating.
No one representing the defendants appeared at Tuesday’s hearing.
Blue Ridge Rehab Center is a 300-bed facility that as of July 3 had 231 residents, and Blue Ridge Manor, which has a capacity of 60, had 38 residents in care as of May 16, according to state agencies.
Greer had appointed a special receiver at the request of landlords OHI Asset Martinsville SNF LLC and OHI Asset Martinsville ALF LLC in a lawsuit they filed against tenant BRVA Properties LLC, and its operators, BRNURSCO LLC and BRALFCO LLC. The 26-acre property at the heart of the lawsuit is located 300 and 400 Blue Ridge St. in Martinsville.
The lawsuit alleged various problems the facilities had with state licensure regulations, Medicare compliance, maintaining its business license, and that it could not meet its financial obligations.
A report by Roski (the receiver) for the period that ended June 30 was introduced into evidence at the court hearing Tuesday.
It indicates the following:
Upon Roski’s appointment as receiver on June 20, she hired Protiviti Inc. as her financial adviser and accountants Hall, Render. Killian, Heath, Lyman, PC as legal counsel.
“My advisors and I have worked to fulfill the duties detailed in the receiver order including but not limited to taking possession of and safeguarding the assets of the properties. As per the receiver order, the receiver has entered a management agreement with Kissito Healthcare … for the management of the day-to-day operations of the properties,” Roski stated in her report.
Roski and Kissito “have become aware of or managed certain preexisting operational issues as detailed below:”
“The properties reflect significant deferred maintenance which have had a negative impact on the patient experience, survey results and reimbursement rates. During the first weeks of the receivership, [new day-to-day management Kissito Healthcare] prepared a priority list of items to address life safety and patient experience issues. The most critical, which are currently being remediated, include air conditioning and other HVAC repairs and replacement of the walk-in refrigeration unit. The properties require many other repair and capital expenditure items which the receiver and new operator [Kissito] are addressing on a priority basis.”
Roski’s report said that due to lack of cooperation from Sovran Management LLC, an affiliate of the defendants in the receiver matter, Roski did not gain access to the cash accounts until June 25. “Accordingly … several disbursements initiated prior to the receiver order cleared the bank after the appointment of the receiver. The receiver is currently researching the identities of the payees for the applicable transactions.”
“Sovran was delinquent with many vendors, including but not limited to rent, pharmacy supplies, food service, therapy services, contract nursing, contract dietician, credit card processor, utilities, HVAC contractor, repairs and maintenance vendors. As a result, the receiver and Kissito have managed vendors on an emergency basis daily to ensure the ongoing operation of the properties and the welfare of the patients,” Roski’s report stated.
Payroll and benefits
“Due to significant arrearages Sovran created with the payroll processor ... receiver has had significant challenges obtaining assurance that processor would release employee pay (as funded by the receivership) instead of applying current funding to overdue balances. The receiver and her counsel negotiated with processor to release each payroll covered during the period of this report, even though funded by the receivership,” Roski’s report stated.
In addition, Roski had been unable to process payroll without the involvement of a Sovran employee because the employee has not provided, despite repeated requests, access to the payroll systems. Roski requires payroll to process fully independent of all Sovran personnel for internal control and operational purposes.
Access to records and financial systems
“Defendants had not prepared financial statements since March 2018, making it difficult to budget and discern the financial status of properties. The lack of financial statements, records and significant delinquent trade payables have also made it extremely difficult to project cashflows,” Roski’s report stated.
Roski has had difficulty getting access to the properties’ accounting or financial reporting systems, including access to security systems and other information technology infrastructure. “Without financial and accounting records, the receiver lacks documents required for the day-to-day operations of the business such as executory contracts, historical cost and reimbursement data, banking information, profit and loss results, etc.,” Roski’s report stated.
The order signed by Judge Greer on Tuesday details the many powers Roski has as receiver, one of which is to “effectuate a change of ownership” to a new operator of the facilities. Kissito Healthcare is seeking licensure from state agencies to be the new operator.
Lawyer Leighton Aiken said in an interview Tuesday that he anticipates the receivership will continue until Kissito Healthcare obtains those licenses, which he expects to be 30 to 60 days.
Paul Collins is a reporter for the Martinsville Bulletin. Contact him at 276-638-8801, ext. 236.
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