Firm’s Other Care Homes Won’t Close, Judge Told

An assembly of attorneys, accountants and trustees told a stern federal bankruptcy judge Wednesday that two nursing homes owned by the Phoenix Health Group are financially troubled but not in danger of suddenly closing down, as happened Friday night at a Reseda facility owned by the same company.

Judge Arthur M. Greenwald gave preliminary approval to a plan under which the former owner of an Alta Loma nursing home, who sold the facility in 1990 to the now-troubled PHG, would regain control of that home.

Greenwald put off making any decisions about the fate of a home in North Long Beach until he could hear testimony about physical conditions at the facility, even though a court-appointed receiver assured Greenwald that the finances of that home are relatively stable.

Clearly miffed that no one who had personally visited the Long Beach facility was available to tell him about conditions there, Greenwald scheduled another hearing for Monday.

“The court feels as strongly about these [homes] and the patients . . . in these [homes] as I did with the Reseda facility,” said Greenwald, referring to the Reseda Care Center, which a bankruptcy trustee shuttered without warning Friday night.

Sixty-three mostly elderly residents were forced out of the facility when trustee Alfred Siegel closed the home, and waited in the dark for family, friends and ambulances to take them to other facilities.

Siegel later defended his actions, saying 11th-hour attempts to sell the nursing home had fallen through and there was not enough money to safely run the home for even another day.

At a Monday hearing, though, and again Wednesday, Greenwald castigated Siegel, as well as other attorneys and state and county health officials, for the way the Reseda residents were evicted. And he made it clear that no such last-minute closures would be tolerated at the Alta Loma Care Center in San Bernardino County or Long Beach’s Bay Care Center, both of which filed for Chapter 11 bankruptcy protection shortly after the Reseda facility filed, on Sept. 5.

The patients at those homes “are relying on what we do here today,” Greenwald said.

Los Angeles accountant Todd Neilson, named Monday as the bankruptcy trustee for the two remaining facilities, confirmed that the Alta Loma home is “in dire financial condition,” with $70,000 in debts. Some employees have not been paid for six weeks, he said.

But, he said, a prospective buyer has been found.

Emil Lenkey, who owned the home for 27 years before selling it to Phoenix Health Group in 1993, told the judge he had agreed to assume responsibility for the facility--which has 40 residents and 50 employees--as of 12:01 a.m. Wednesday.

Los Angeles attorney David J. Pasternak, who has been acting as a court-appointed receiver for the Long Beach facility since Sept. 20, said that an offer has also been made to take over that home.

Pasternak also said the Bay Care Center was now insured, and that all reports indicated the home was functioning well--but he said he had not personally visited the home. Greenwald then scheduled the Monday hearing to find out more about conditions at the Long Beach home.

While all parties involved were promising Greenwald that no peremptory evictions would take place at the two facilities, more details have emerged of a financial morass at Phoenix Health Group and allegations of personal problems with owner Jon H. Robertson.

Although one of Reseda Care Center’s biggest creditors, HCR Medical Receivable Funding Corp., which has filed a claim for $936,000, sent representatives to the hearing, it is by no means alone in demanding money from Robertson’s companies.

Another creditor is the Internal Revenue Service, which is owed from $700,000 to $900,000 in unpaid payroll taxes, according to court documents.

Other creditors include: a Studio City concern called Medical Diagnosis Portable X-Ray with bills of $51,766; Anaheim General Hospital, which is owed $24,047; Pacewest Food Services in San Fernando, which is owed $16,942; West Valley Pharmacy in Encino, with claims of $15,488, and Dr. Suman Patel in Van Nuys, who is owed $6,000.

The Reseda nursing home’s landlord, Sidney A. Franklin, said in court documents that he was not paid the $24,000 monthly lease fee for July, August or September.

Phoenix Health Group was set up by Robertson in 1992, and by the first quarter of this year it had debts of $2.5 million and payroll tax liabilities of $600,000, according to the court records.

William F. Reed Jr., an official with HealthCare Capital Resources and HCR, said in court documents that in April HCR agreed to advance funds to PHG’s Reseda, Costa Mesa, Long Beach and Alta Loma convalescent centers.

Robertson “paid himself in excess of $900,000 in salary in 1996 even though his businesses were in downturn,” Reed alleged in court documents. HCR agreed to lend money only after Robertson agreed to cut his monthly pay from $75,000 to $52,500.

By June, however, Robertson’s California businesses “were substantially out of cash,” Reed alleged.

By then Robertson had given power of attorney to four people, including PHG’s chief financial officer, Don Hinckley, and PHG put up for sale four California nursing care centers with 346 beds.

The total asking price was $2.83 million, including $600,000 for its Reseda site, court documents show. Various offers for the businesses were “presented . . . to Mr. Robertson. None of the offers were satisfactory . . . , “ according to court records.

Cash flow in Robertson’s business began to look more troubled when the state Department of Health and Human Services threatened to cut off Medicare payments because PHG’s Port Bay Care Center in Costa Mesa failed three state inspections during the spring and summer.

Reed alleged in court documents that Robertson--who has addresses in Paradise Valley, Ariz. and Park City, Utah--was in a rehabilitation program because of his cocaine use.

An attorney for HCR alleged in a court document, that “Jon H. Robertson is admittedly incapacitated as a result of an apparent drug addiction. Previously, Robertson grossly mismanaged [his company’s] affairs . . . including looting Debtor’s operating funds and converting in excess of $600,000 . . . belonging to HCR.”

In addition to the Reseda home, the Port Bay facility in Costa Mesa has closed down, but with less trauma to its residents, state officials said.

In their first unannounced inspection at the Port Bay nursing home, state health officials of the state Department of Health found that patients suffered from bed sores and the problem had not been corrected by the time of two subsequent visits by health care workers, said Jacqueline Lincer, district administrator for the department’s Orange County District.

On Sept. 5, the federal Health Care Financing Administration, part of the Department of Health and Human Services, terminated Medicare and Medi-Cal contracts with Port Bay Care Center because of the continued substandard care, Lincer said.

Shortly afterward, PHG decided to evict the nursing home’s 70 patients because the federal health-care subsidies would no longer be coming in, Lincer said.

A state health department social worker began overseeing the move in September and for five days the patients were moved to 14 Orange County nursing homes. Some families chose to move patients to nursing homes outside of the county.

State health officials will continue to check on the patients for the next 30 days and again in the next six months.

Lincer said there were “early warning signals” that Port Bay Care Center was in trouble. The local utility provider called to tell them they were about to shut off power because it had not been paid. The state department also received complaints that employees weren’t being paid.

Times correspondent Claire Vitucci contributed to this story.