Haven Healthcare Deal Falls Through - St. Albans 120 Beds Involved

HARTFORD, Conn. -- A deal to sell the bankrupt Haven Healthcare nursing homes has collapsed two weeks after it was announced, forcing state officials to devise a new plan to operate the chain.

Formation Capital LLC of Alpharetta, Ga., notified the state late Wednesday that it was pulling out of the $85 million deal to take over 15 of Haven's homes in Connecticut and 10 in other New England states, state Attorney General Richard Blumenthal said.

A reason was not given, he said.

Haven Healthcare operates a 127-bed nursing home and rehabilitation center in Rutland, Vt. and a 120-bed nursing home in St. Albans, Vt.

"We're obviously disappointed," Blumenthal said. "We're optimistic that we have an alternative plan to keep the homes open and preserve and enhance the quality of care."

A message seeking comment was left Thursday with Arnold Whitman, chief executive of Formation Capital. The private equity firm announced the deal June 12.

Genesis HealthCare, which is owned by Formation Capital, would have managed and operated the facilities on behalf of Formation Capital and Senior Care Development LLC. A message seeking comment was left with Genesis.

Haven Healthcare filed for federal bankruptcy protection in November as Connecticut officials investigated whether the company misused millions of dollars in Medicaid funds. The company denied the allegations.

A back-up plan is to turn over the homes to three secured creditors who provide financing for Haven, Blumenthal said. CapitalSource, Nationwide and Omega Healthcare Investors would oversee the homes using operators approved by the state.

He said he hopes the plan is successful so the state can avoid placing Haven Healthcare into state receivership that would break it up and perhaps lead to the closing of some homes. The new plan would allow for an "orderly transition" for the Haven homes, Blumenthal said.

Haven's top management would be replaced, Blumenthal said.

The state Department of Social Services had offered Genesis Medicaid rate increases and other incentives to take over the chain. The state also required Genesis to provide financial reports and meet certain staffing standards once it took over operations.

Besides Connecticut and Vermont, Haven has health care facilities in Massachusetts, Rhode Island and New Hampshire.