Four years ago, news organizations including Arkansas Business reported on accusations that out-of-state nursing home operators were pulling millions of dollars out of their facilities as unpaid bills piled up.
Those operators still face the reverberations of that publicity, although the wrongdoing allegations were dismissed.
“I was wiped out defending these different claims … to try and salvage my name,” said the CEO of Aria Health Group LLC, R. Denny Barnett of Sarasota, Florida. Barnett joined the company’s former CFO, Blaine Brint of Birmingham, Alabama, on a recent conference call with Arkansas Business to discuss the allegations, which were detailed in a lawsuit filed in U.S. Bankruptcy Court, and how their careers in the nursing home industry were damaged.
Brint said the allegations hurt him. “As a financial person, there is no way to overcome that … when a CFO is being accused of being unethical with money. And for that reason I’m glad my name was finally cleared of wrongdoing.”
Barnett and Brint were sued along with Aria in an bid to claw back $4.3 million received through their management company, which operated eight skilled nursing homes and an assisted living facility for 11 months in 2015 and 2016, according to the bankruptcy suit filed by a trustee in 2018.
Barnett and Brint operated two separate companies: Aria, which managed nursing homes, and Highlands Arkansas Holdings LLC, a parent company that leased the assets of the nine facilities, with each facility having its own LLC.
Highlands Arkansas Holdings filed for bankruptcy in 2016. The trustee’s suit alleged that before and after the bankruptcy filing, the Highlands properties were making a number of repayments of working capital advances and management fees to Aria. That lawsuit settled earlier this year, with the allegations of wrongdoing dismissed.
Barnett said he was using funds from his other companies to keep the struggling nursing homes afloat. “Was it the smart thing to do? It absolutely was not,” he said. “I mean to lose more money on top of money that I’d already lost. But it was the right thing to do for the residents.”
The case also illustrates a regrettable reality in journalism: widely reported charges aren’t always followed by widely reported updates detailing outcomes.
Barnett said he was operating long-care facilities in Tennessee and Nevada when, in 2014, his banker told him about six nursing homes in Arkansas that needed to be managed and asked if he would do it. He agreed.
But the road to bankruptcy for Highlands started when AdCare Health Systems Inc. of Atlanta asked Barnett to manage its nine facilities in Arkansas. Those nursing homes were in need of a turnaround, Brint said. Barnett said he would do it if AdCare would provide money for the facilities.
On May 1, 2015, Aria Health Group began managing the buildings, and AdCare was supposed to provide between $5 million and $6 million in working capital. AdCare “reneged on that commitment, literally within a week of us taking over and leasing the buildings, and instead agreed to provide $1.7 million,” Brint said.
AdCare changed its name to Regional Health Properties Inc. in 2017. A managing partner for Regional Health said it was his guess that AdCare didn’t have the funding that it thought it had at the time it made the deal with the operators.
To make up the missing money, Barnett began lending money from his other companies and facilities “to try to help the buildings along,” Brint said. “That was not part of the story that anyone got to hear.”
Barnett, who had been in the nursing home industry for more than 40 years, said that if he had walked away from the nursing facilities, employees would have been left without jobs and residents would have had to move to other facilities. Still, the infusion of money wasn’t enough, and in February 2016, the operators were $100,000 short on their lease payment to AdCare, Brint said.
“And that is where they terminated our lease, based on that shortage,” Brint said. “We had to file bankruptcy.”
Since leaving the nursing home industry, Barnett and Brint have done consulting work with startups that are involved in treatment for opioid addiction and hospice care.
Barnett said he’s open to returning to Arkansas to operate nursing homes. He said he’s been in talks with people to open facilities in other states. “It’s just that we haven’t pulled anything together at this time,” he said.