Cold Spring Hills nursing home seeks Chapter 11 bankruptcy protection

Financially troubled Cold Spring Hills Center for Nursing & Rehabilitation filed for Chapter 11 bankruptcy protection from its creditors Thursday, a move that the nursing home says will provide it with "breathing space" to reorganize and pay down more than $50 million in debts, records show.

But the petition, filed Thursday in federal bankruptcy court in White Plains, leaves open the possibility that Cold Spring Hills — Long Island’s second-largest nursing home — could still close its doors and evacuate its 318 residents if the state Health Department does not approve an application by Eliezer Jay Zelman, who owns several other nursing homes, to become Cold Spring Hills’ temporary receiver.

Cold Spring Hills will use the bankruptcy filing "to obtain breathing space, unlock cash flow that is presently being restrained and evaluate its path moving forward," wrote Martin Cauz, the nursing home's newly appointed chief restructuring officer. "The debtor is hopeful that the DOH will promptly approve the appointment of a temporary receiver, but in the absence of prompt approval, the debtor will have no alternative but to begin to evacuate the facility in an orderly fashion."

Owing millions to creditors

The bankruptcy filing comes as nursing home magnate Bent Philipson, the facility’s primary owner, and his son, Avi Philipson, the business' managing member, have struggled to meet Cold Spring Hills’ $1.4 million weekly payroll and to pay its creditors.

Last month, Cold Spring Hills announced it would begin the "emergency evacuation" of its largely elderly and disabled residents only days before the Christmas and Hanukkah holidays, while simultaneously laying off its 500-person workforce.

On Dec. 20, State Supreme Court Justice Lisa Cairo in Nassau issued a temporary restraining order requested by state Attorney General Letitia James, blocking the nursing home from discharging or transferring its residents and ordering the facility to remain operational until the two sides return to court on Monday. The order required the facility to continue meeting its payroll obligations until at least Monday.

With the federal bankruptcy filing, it’s unclear if Monday’s court hearing in Mineola will occur.

An attorney familiar with the bankruptcy filing, but not authorized to speak publicly, told Newsday on Thursday that the nursing home is "evaluating" its options, including resuming the evacuation plans.

A hearing on the bankruptcy petition is scheduled for Friday at 1:30 p.m. before U.S. Bankruptcy Judge Sean H. Lane, who must approve the ultimate resolution of the case.

The Health Department declined to comment on the bankruptcy petition.

James' office did not respond to requests for comment.

The U.S. Justice Department, which is routinely a party to federal bankruptcy cases, meanwhile, filed a request with the court seeking the appointment of a "patient care ombudsman" who can review the nursing home's patient records.

The bankruptcy petition indicates that Cold Spring Hills has assets valued between $1 million and $10 million while its liabilities to more than 330 creditors are estimated at between $50 million and $100 million.

The filings state that Cold Spring Hills owes more than $20 million to vendors and suppliers; in excess of $15 million in benefits and pension contributions to its unionized employees represented by SEIU, Local 1199 — an amount the nursing home says in dispute; and another $3.7 million to American Health Benefit Trust, an insurance services provider.

In addition, the nursing home has not paid "full rent" since 2016 and owes nearly $22 million to its landlord, Cold Spring Realty Acquisition LLC, an entity owned by Bent Philipson, the petition states.

The nursing home has entered into a financing agreement with an entity that will allow it to borrow money against its assets of $1 million to $10 million, Cauz wrote.

Under a typical Chapter 11 bankruptcy, a business can reorganize and create a plan to repay its creditors over time. While the company can continue to operate, financial decisions, such as paying off creditors, must be approved by the bankruptcy court judge.

George Gresham, president of 1199SEIU, said on Thursday that the bankruptcy filing "has left 300 vulnerable nursing home residents, along with the dedicated staff who care for them, facing even more uncertainties as we start the new year. 1199SEIU will continue to do everything it takes to fight for the families impacted by this situation — a situation created by the owners who have repeatedly refused to take any responsibility despite their vast resources."

Nursing home hemorrhaging cash

The fate of Cold Spring Hills has been in limbo since December 2022, when James filed a lawsuit charging the nursing home neglected resident care and skirted state laws through a fraudulent business setup designed to enrich its owners.

As the case proceeded, the company began hemorrhaging cash as its resident population dropped precipitously, while a number of longtime staff members departed, records show.

In April, Cairo imposed a $2 million penalty as part of the lawsuit's resolution and appointed Lisa Wickens-Alteri as the nursing home’s independent health monitor.

Later that month, Cold Spring Hills proposed a plan for closing the facility — a move that prevented the nursing home from taking on new residents whose placements could have provided revenue for the struggling operation, records show. The nursing home failed to finalize the closure plan and the state Health Department told the facility in September that the document was "considered withdrawn."

The nursing home then filed an application with the Health Department for Zelman, who owns several nursing homes elsewhere in New York, to become the facility’s temporary receiver in advance of potentially taking over as the business’ new owner.

But when the state failed to take action on the application — agency officials said information was initially lacking in the 707-page document — Cold Spring Hills announced it would close its doors Dec. 31.

Last month, Cold Spring Hills administrator Edline Joseph announced plans to "evacuate" its residents to other long-term care facilities and to lay off its entire workforce.

The AG’s office filed the temporary restraining order to block the evacuation and layoffs, arguing the Philipsons had sufficient resources to keep the facility open and that the closure would jeopardize the health and safety of residents.