The recent Chapter 7 bankruptcy filing by Legacy North Royalton Operating Company, a subsidiary of Buckeye Chai, is drawing attention to the precarious financial state of some skilled nursing operators, even those that have recently sold their facilities. The filing comes months after the company transferred operations of 18 Ohio nursing homes to PACS Group, highlighting a common, yet complex, issue in the industry: corporate restructuring to alleviate financial burdens.
Legacy North Royalton’s decision to file for bankruptcy, while revealing a deal with PACS that had not been publicly disclosed, also sheds light on a broader trend of financial strain in the long-term care sector. The company’s motion to skip the appointment of a patient care ombudsman—claiming it’s “unnecessary” because operations were transferred—raises questions about accountability and the protection of residents during these transitions.
The move underscores the growing legal and financial complexities facing the industry. According to the bankruptcy filing, Buckeye Chai now holds “primarily” accounts receivable and bank accounts, and has access to patient records “only for the purpose of assisting in receivables collections.” This structure, where the previous owner retains financial interests while a new operator takes on patient care, is a model that has become increasingly common but has drawn scrutiny from regulators and patient advocates.
The bankruptcy filing is a stark reminder of the financial headwinds buffeting skilled nursing facilities nationwide. Even with a sharp slowdown in healthcare bankruptcies in the second quarter of 2025, senior care, along with pharmaceuticals, remains a top source for such filings since 2019. In fact, between 2019 and the first quarter of 2025, senior care bankruptcies made up nearly a quarter (24.1%) of all healthcare bankruptcy filings, according to a report from Gibbins Advisors.
The pressures are multifaceted, stemming from persistent workforce challenges, rising labor costs, and stagnant Medicaid reimbursement rates. “The financial strain tends to hit nursing homes harder and faster than other areas of the health-care industry,” said Adrienne Sabety, an assistant professor of Health Policy at the Stanford Institute for Economic Policy Research. “While the pandemic worsened the nursing shortage and led to an increase in medical malpractice litigation, it didn’t immediately lead to more health-care bankruptcies—but it was a factor in increased skilled nursing facility bankruptcies.”
For PACS Group, which is currently in a period of loan forbearance and prohibited from making new investments, the Buckeye Chai deal is a testament to its continued, albeit quiet, expansion. The company has not reported earnings since the second quarter of 2024, and faces a November 19 deadline to file overdue Securities and Exchange Commission reports or risk delisting.
The case of Buckeye Chai and PACS Group highlights the critical need for nursing home operators to maintain financial transparency and to plan for smooth ownership transitions. It also serves as a cautionary tale for the industry, as the financial distress of one entity can have ripple effects, impacting not only business operations but also the quality of care for residents.
