Chautauqua County ponders $16.5M deal for nursing home

August 19, 2013 Updated Aug 19, 2013 at 9:36 AM EDT

By Tracey Drury, Buffalo Business First Reporter

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Chautauqua County ponders $16.5M deal for nursing home

August 19, 2013 Updated Aug 19, 2013 at 9:36 AM EDT

Chautauqua County legislators will consider a deal this week to sell the county nursing home to a downstate-based investment group for $16.5 million.

With losses this year expected to top $3.8 million, the nursing home has been on for sale for more than a year. Legislators turned down a previous offer from a Chicago buyer for the same amount. But County Executive Greg Edwards said the deal this time for the 216-bed Dunkirk facility is ideal.

"We have a signed offer of $16.5 million that matches and exceeds all of the terms of our RFP issued a little over a year ago," he said. "That includes guaranteeing every union employee a job as long as they pass a background check, and they're guaranteed the same pay with similar benefit packages."

The prospective buyer is Richard Platschek, part of an investment group that will purchase the 30-acre Temple Road property through 10836 Temple Realty LLC, with the facility to be operated by Chautauqua Restorative and Nursing Center LLC.

Platschek is also part of an investment group that has been working for the past year to take over operations at three nursing homes owned by the Zacher family and Legacy Health Care: Williamsville Suburban, Sheridan Manor and Ridge View Manor.

Platschek is represented in the deals by attorney Richard Sullivan, a partner at Harris Beach LLP in Buffalo. According to Sullivan, the group has been running the Erie County nursing homes for the past year, with a sale expected to close soon. The partners have been involved for several years at other nursing homes across the country, including downstate.

The group sees lots of potential in the Chautauqua County nursing home site, said Sullivan, who added that a $1.65 million deposit on the deal was expected to be delivered in the coming days.

"It's bleeding money while the county operates it, but we think we can turn it around," he said. "We did everything the county asked of us in the negotiation process, paid their price and agreed to retention of employees."

Several Chautauqua County legislators have toured the Erie County sites to get a feel for how Platschek's group operates. The full legislature will have an opportunity on Aug. 21 to ask more pointed questions during a special meeting with the prospective buyers.

Some legislators are already wary of the deal, saying Edwards' office simply hasn't given them enough time to do their own due diligence about the deal or the buyers.

"They say you've got two weeks, the offers good til the end of the month, take it or leave it," said Billy Coughlin, Chautauqua County legislator (D-Fredonia), who said the legislators only heard about the deal for the first time on Aug. 7.

But Coughlin, an attorney at Buffalo Legal Aid, is also not in favor of selling the nursing home at all, and thinks it could be solvent if it was run properly.

"I always believe that government has a duty to protect those who can't take care of themselves so I'm not in favor of selling the homes at all, unless it can be done to a very reputable group," he said.

Edwards said the financial difficulties at the nursing home stem primarily from reduced reimbursements, but also are related to pension benefits for the 250 employees working at the site, a number that's soared to $15 million annually. The standard cost for salary versus benefits in the industry is 20-25 percent, while public entities like the county pay closer to 65-80 percent because of the pension costs, he said.

Dozens of counties across the state have sold or are working to sell their nursing home operations, with deals completed or currently underway everywhere from Suffolk County on Long Island to the Westchester region and upstate to Ontario County.

The prospective owners of the Dunkirk site may also be able to reduce costs because of economies of scale related to existing management structure, billing and software at the three Erie County nursing homes, Edward said.

"Certainly that is a major opportunity for a non-government owner," Edwards said.

Pending approval by the county legislature, the ownership transition would also need approval by the State Department of Health through the certificate-of-need process, which requires the owners to prove their ability both financially and operationally to successfully operate the facility.

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