Sunnycrest Nursing Center located in Dysart pictured on Sunday, July 24. The Iowa Department of Inspections and Appeals recently approved plans to close the facility. –Photo by Soren M. Peterson

The planned sale of an Iowa nursing home chain is in doubt again as the owner moves to close three of the 10 facilities and the federal government seeks payment of $2.1 million owed to taxpayers.

The sale involves eight nursing homes and two assisted living facilities owned by QHC Facilities, an Iowa company that filed for bankruptcy late last year.

Recently, QHC found a potential buyer for the 10 facilities: Blue Diamond Equities. But there’s now a dispute over whether the sale can proceed with QHC still owing hundreds of thousands of dollars in fines for poor quality resident care.

In addition, court records indicate Blue Diamond has notified the federal government it will not assume Medicare certification for several of the homes. That has prompted the U.S. Department of Justice to seek a delay in the bankruptcy proceedings, noting that the planned sale may not go through since the deadline for finalizing the deal passed on July 12.

It’s only the latest snag in a long-running struggle to sell the facilities that are home to hundreds of elderly Iowans.

Sunnycrest Nursing Center located in Dysart pictured on Sunday, July 24. The Iowa Department of Inspections and Appeals recently approved plans to close the facility. PHOTO BY SOREN M. PETERSON

The eight skilled-nursing facilities owned by QHC are the Crestridge Care Center in Maquoketa; Crestview Acres in Marion; Sunnycrest Care Center in Dysart; QHC Fort Dodge Villa; QHC Humboldt North; QHC Humboldt South; QHC Mitchellville; and QHC Winterset North. The two assisted living centers are QHC Madison Square in Winterset and QHC Villa Cottages of Fort Dodge.

Collectively, the facilities have a maximum capacity of more than 700 residents. QHC employs roughly 300 full-time and part-time workers.

First buyer backs out of deal

QHC’s legal odyssey began on December 29 of last year when the company filed for bankruptcy.

The previous owner of the company, Jerry Voyna, had died several months before. His wife, Nancy, took over the company, began looking for a buyer and then filed for bankruptcy. She died in January, leaving the company to her son, who continued to pursue a sale of the company and all of its assets.

In March, QHC notified the court it had found a buyer called Cedar Healthgroup, which had agreed to pay $12.1 million for the chain.

The sale was approved by the court with the understanding that as part of any sale QHC would have to pay all the fines and penalties for each home that had its Medicare certification transferred to Cedar.

Within a few weeks, however, the sale to Cedar fell apart, with a lawyer for the company raising questions about some of the facilities being “in imminent danger” of losing Medicare funding due to quality-of-care issues. QHC asked the court to recognize Blue Diamond as the new, prevailing bidder. The court agreed, but then, four weeks ago, QHC notified the court it intended to close the Sunnycrest, Humboldt South and Mitchellville homes.

Emergency closure sought for three homes

In seeing the court’s emergency authorization to shutter the three facilities, QHC’s management company said “a flooring issue” existed at Humboldt South that could put the home’s eight residents at risk.

As for the Mitchellville facility, which had 20 residents, and Sunnycrest which had 25 residents, QHC told the court the two homes were each operating at “a seriously diminished census level making it uneconomic to continue operations.”

Attorneys for the federal government intervened, notifying the court that the homes were required to have provided 60 days’ written notice of closure to state inspectors, the Iowa Long Term Care Ombudsman’s Office and the residents of each facility.

In addition, the lawyers argued, a facility must have a written, state-approved plan for the transfer and relocation of all residents before they can close.

“Protecting the life, health, and safety of the approximately 53 residents still living at the three facilities is the United States’ utmost concern,” Department of Justice lawyers argued to the court.

They noted that Sunnycrest is in a remote area of Iowa and that due to the lack of other nursing homes nearby, some families “may have to drive multiple hours to visit a loved one.”

The court then ordered QHC to comply with “any applicable regulations and rules” that govern the process of closing a Medicare-certified nursing home.

The Iowa Department of Inspections and Appeals says it has approved plans to close both Humboldt South and Sunnycrest, but has not yet received a plan from QHC to close the Mitchellville home.

Taxpayers still owed $2.1 million

The court also ordered that any Medicare decertification would not be effective until the residents were safely transferred out of the facilities.

Lawyers for the federal government then argued that QHC still must pay back the COVID-19 Accelerated and Advanced Payments it has collected and pay the fines and penalties for regulatory violations, all of which adds up to $2,108,910.

Lawyers for Blue Diamond informed the Department of Justice that if it decides to move forward with the purchase, it will only accept the transfer of the Medicare certification agreements for Humboldt North, Crestridge and possibly the Mitchellville home, and that it would definitely reject any transfer Medicare certification for the homes in Fort Dodge and Winterset – the two homes that, by far, owe the most in unpaid fines.

According to the federal government, the amounts owed to taxpayers by each QHC facility are:

Crestridge Care Center: $32,182

Crestview Acres: $93,863

Sunnycrest Care Center: $3,250

Fort Dodge Villa: $865,775

Humboldt North: $32,500

Humboldt South: $67,226

QHC Mitchellville: $385,708

Winterset North: $628,407

A hearing on the matter is now planned for August 1, but attorneys with the U.S. Department of Justice are asking the court to delay that proceeding due to scheduling conflicts.

Lawyers for the government note that QHC and Blue Diamond are still negotiating which nursing homes Blue Diamond will actually purchase and operate, and which Medicare-certification agreements will be assumed by Blue Diamond.

In the meantime, QHC is waging a separate legal battle with Cedar Healthgroup over the $600,000 deposit put down when it agreed to buy the chain. The court has yet to issue a ruling in that dispute.