Genesis Deal Shows Faltering Nursing Sector’s Complex Money Web

The tumultuous process of selling bankrupt Genesis Healthcare Inc.'s nursing-home empire offers a rare peek into the small, obscure world of nursing home ownership and lending.

The pending sale to an affiliate of health-care consulting firm New Generation Health LLC, or NewGen, is valued at nearly $1 billion, but came together only after offers from other private equity-backed bidders—some of whom had insider ties and were angling for liability releases—fell short.

While the sale, which could close by spring, marks a win for Genesis and a significant expansion for NewGen, it revealed an industry shaped by consolidation, distress, complexity, and a small circle of recurring players.

“There’s so many issues and so much fighting and it represents something that I’ve seen quite often—which is to say a small club, so to speak, that is involved in these types of situations,” said Schuyler G. Carroll, a bankruptcy partner at Manatt Phelps & Phillips LLP.

Genesis entered Chapter 11 last year with about $2.3 billion in debt from operational inefficiencies and legal liabilities, and it’s facing allegations of insider financial misconduct. It’s also fighting government lawyers’ call for a bankruptcy trustee.

The bankruptcy is emblematic of a broader trend of money flowing into the nursing home sector through private lenders backing consolidation, while standalone and family operators exit the market, said Scott N. Opincar, a restructuring attorney with McDonald Hopkins LLC.

Past Relationships

Nearly every serious bidder for Genesis had insider ties, past business relationships, or connections to controversial activities in the sector.

Industry newcomers rarely succeed in bidding on major assets, Carroll said. Sellers and lenders usually prioritize comfortable partnerships where parties trust each other to resolve issues without litigation.

NewGen emerged after Judge Stacey Jernigan of the US Bankruptcy Court for the Northern District of Texas halted a proposed sale to an entity linked to Joel Landau, the co-founder of private equity firm Pinta Capital Partners, which was an investor in Genesis.

Landau was criticized by creditors for slashing costs and quality of care to drive Genesis’ profits. Creditors said he used similar tactics in the bankruptcies of Corizon Health Inc. unit Tehum Care Services Inc. and LaVie Care Centers LLC, and was trying to regain control of Genesis from the shadows while shedding nearly $1 billion in debt.

Attorneys associated with Landau companies didn’t respond to a request for comment, but have previously rejected allegations of bias in the sale process.

Although NewGen wasn’t labeled an insider, it also had ties to Genesis. The companies were partners in a venture involving 29 nursing homes, and the sale includes $57.5 million to resolve issues from that enterprise.

Welltower, a major Genesis landlord and senior lender, said it had “virtually no information regarding the buyer, their capital structure, their projections, or their track record” related to NewGen’s ability to transition and run the homes.

A backup bidder drew scrutiny over the involvement of Ari Schwartz, who the company said was only involved as a consultant or minority investor. Schwartz is subject to a 10-year voluntary exclusion from participating in federal health programs following a settlement over allegations of misrepresentation to obtain an operating certificate.

NewGen’s chief financial officer testified this month that investor Daryl Hagler might loan $30 million for the deal. Hagler has faced several lawsuits from states over his involvement in other nursing facilities.

Hagler would hold no direct equity or operational role, but his involvement raised concerns and highlighted how players could become involved even after court approval.

Corporate Layers

Complex structures and LLCs are sometimes used to shield owners and lenders or avoid regulatory scrutiny, Carroll said.

The Genesis sale underscores how ownership can be layered through related companies that separate operations from real estate and management, adding complexity for creditors and regulators.

“We’ve consistently found how complex business structures and the opaque nature of the private equity industry obscured nursing home ownership, making it difficult for regulators to adequately track impacts and assess compliance,” said Matt Parr of advocacy group Private Equity Stakeholder Project.

Private equity money has become key as the sector has faced years of insolvency that’s expected to worsen with rising labor costs and the 2025 GOP tax law.

“The problem with most of the nursing homes that I have dealt with have a shortage of operating funds caused by a gap in the reimbursement rate for Medicaid and Medicare,” said Robert E. Chernicoff of Cunningham, Chernicoff & Warshawsky PC.

Industry Headwinds

The downfall of the once-dominant Genesis highlights systemic failures within the health-care and nursing-home industries, said Mike Schatzlein, a surgeon and Tennessee-based health administrator. Reimbursement models are insufficient for providing quality care, leading to a reliance on financial engineering by private equity firms, he said.

Schatzlein said he’s skeptical of investors who treat nursing facilities as short-term assets, arguing it can compromise patient safety. Investments in skilled nursing are often “squeeze and flip” plays rather than long-term operational improvements, he said.

NewGen expanded from six facilities in California in 2019 to about 65 properties across three states and is now set to become a major industry player.

Private equity acquisitions are typically financed with large debt facilities, Opincar said. Major cuts in public assistance come as the senior living bond sector has seen higher default rates than other industries, he said.

Secured debt often exceeds asset values, leaving many skilled nursing facilities unable to support their obligations, he said, pointing to NewGen’s winning bid of about $996 million.

“This purchase price represents less than half of the company’s $2+ billion debt load,” Opincar said in an email. “The current financial distress in the industry will continue to result in out-of-court sales and in-court bankruptcies and receiverships to effectuate assets sales in situations where refinancing is not a viable option.”