Sen. Elizabeth Warren this week wrote another letter to executives at Genesis HealthCare (NYSE: GEN), elevating considerations in regards to the nursing residence large’s latest deal to considerably restructure its operations partially by means of a $50 million personal fairness funding.
Warren, a Massachusetts Democrat, made headlines in late January when she publicly questioned the operator’s determination to award former CEO George Hager a $5.2 million retention bonus in mild of COVID-19 deaths at Genesis services, in addition to its receipt of lots of of thousands and thousands in federal aid.
Since then, the Kennett Square, Pa.-based operator introduced that it’ll voluntarily remove itself from the New York Stock Exchange and restructure partially by means of the $50 million debt funding from ReGen Healthcare. The transaction will give ReGen a 25% possession stake in Genesis; the agency has the choice to extend that determine to 43% by means of an extra $25 million injection.
As a part of the restructuring, Genesis landlord Welltower Inc. (NYSE: WELL) will transition 51 of the provider’s nursing homes to new operators, largely ending the decade-long relationship between the true property funding belief (REIT) and Genesis.
Warren — whose criticism of personal fairness funding in nursing services stretches back before the pandemic — referenced the restructuring in asking for extra details about the corporate’s funds and decision-making relating to the Hager bonus in the latest letter.
“The unseemly determination to reward Mr. Hager for his ‘important and efficient management’ deserves extra scrutiny provided that, simply final week, the corporate introduced a serious restructuring that features the termination of dozens of leases (resulting in questions on whether or not residents can be pressured to maneuver, or who can be liable for their care); the sale of a big proportion of the corporate to personal fairness agency ReGen Healthcare, and the delisting of its Class A standard inventory from the New York Stock Exchange,” Warren wrote within the letter, addressed to CEO Robert Fish and board chairman David Harrington.
The March letter serves as a follow-up to Genesis, which initially responded to the January request by asserting that Warren’s criticisms of its efficiency through the coronavirus disaster had been primarily based on inaccurate media stories.
The senator launched Genesis’s February 10 reply to the first letter, by which the operator denied that government bonuses had any influence on its means to cowl COVID-related prices.
“Genesis is enormously appreciative of the federal government help its services have obtained, and has adopted and can comply with all relevant circumstances of these funds,” the corporate wrote in reply to Warren. “In specific, all CARES Act funds obtained by Genesis will likely be allotted to bills and misplaced income associated to the coronavirus in accordance with the dictates of the legislation, and such bills can not and won’t embody government compensation prices.”
The firm additionally argued that given its focus of buildings within the Northeast, which skilled the early peaks of the disaster, that its nursing properties had decrease dying charges relative to equally located services.
Warren this week responded by demanding extra details about Hager’s compensation construction, in addition to how the restructuring and Welltower exit will have an effect on residents and workers of its services — and its means to repay the $248 million in state and federal loans and deferred funds that Genesis obtained through the disaster.
“In brief, it seems that Mr. Hager walked away with a very wealthy compensation bundle, forsaking hundreds of lifeless and sick nursing residence residents and workers and an organization in monetary destroy regardless of being bailed out by lots of of thousands and thousands of {dollars} in taxpayer funds,” Warren wrote. “Your residents, your shareholders, and the American public deserve a proof for this greed and the tragedy that preceded it.”
The senator additionally questioned Hager’s monetary stewardship of the corporate within the months main as much as the restructuring.
“Your letter gives no indication that the corporate was holding its personal CEO liable for the near-bankruptcy it confronted below his management,” Warre wrote. “In truth, the data offered in your letter signifies that Mr. Hager was the beneficiary of lots of of thousands and thousands of {dollars} in taxpayer help that went to the corporate — which he was nonetheless unable to maintain out of dire monetary straits.”
In a lengthy Wednesday statement responding to the March letter, Genesis pointed to information from consulting agency Avalere Health indicating that the corporate’s services had decrease dying charges than its friends, and defended its efficiency given lack of early entry to testing and sky-high prices for private protecting tools (PPE).
With $100 million paid to workers and third-party contractors as a part of a “hero bonus” program, the corporate doled out considerably more cash to frontline caregivers than executives, in accordance with the assertion.
Genesis described the controversial retention bonus as regular and essential to retain key personnel through the restructuring course of, which started within the fall of 2020; Hager’s departure at the beginning of the yr was on account of Genesis’s rising reliance on third-party advisors amid “difficult negotiations with collectors,” the corporate asserted.
“As a end result, Mr. Hager and the Board mutually agreed that the time was proper for his departure, for what is called ‘good cause,’ and negotiated a separation settlement,” the corporate wrote within the assertion. “Mr. Hager’s departure for ‘good cause’ entitled him to a severance cost, per his employment settlement.”
Genesis additionally denied that the restructuring could have any impact on residents and workers.
“The new operators will likely be vetted by their respective state licensure companies. We stay dedicated to a seamless transition of those properties to new operators, making certain that the wellbeing of our present residents and sufferers are at the center of all of our efforts,” the corporate wrote. “We count on nearly all workers to be provided alternatives to transition to the brand new operators.”
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