When Christian Horizons CEO Kate Bertram took the reins about a year ago, the nonprofit was still grappling with its pandemic recovery. Those challenges eventually culminated in the organization filing for Chapter 11 bankruptcy and planning to restructure.

The St. Louis-based organization lost as many as a third of its new residents and short-term rehabilitation patients in the early months of the Covid-19. At the same time, workforce woes ran up the cost for staffing.

“The pandemic was the impetus for exacerbating our use of cash,” Bertram told Senior Housing News.

When it declared bankruptcy, Christian Horizons had around $75 million in outstanding debt. The organization is now in the process of finding buyers for its 12 communities in Illinois, Indiana, Missouri and Iowa.

In the meantime, Bertram is committed to sticking in her role as CEO to aid the organization through its next and potentially difficult chapter.

“There’s going to come a time that, as we start to divest, that I’m no longer needed,” she said. “I think the important part is that, during the hardest times, I’m committed to stewarding this.”

‘The runway shortened’

Like many operators, the Covid pandemic was the start of some big problems for Christian Horizons.

Among the biggest hits to the organization’s budget was an unplanned but necessary 50% wage increase for staff, which led to the organization’s cash reserves to be drained at a faster than anticipated rate.

The majority of Christian Horizons’ communities are in rural markets, and staff were moved around regularly to maintain required minimum staffing levels. But that made life harder for staff and the operator alike.

Minimum staffing requirements were particularly tough in Illinois, where the majority of the organization’s communities are.

“There were times on the way that the cost of care was completely inverted,” Bertram said. “When I joined the organization last year, we worked to shore up where our bleeds of cash were. We’re one organization, but each community needs to stand on its own, each program needs to be able to produce positive income.”

As a way to continue operating, high-performing communities in the organization’s portfolio were being used to underwrite the losses of lower performing communities, which Bertram noted simply wasn’t sustainable in the long run.

In addition to the increased costs for staff, the incoming number of new residents dropped drastically. Christian Horizons estimated that between one quarter and one third of new residents and short-term rehabilitation patients were lost due to the impact of necessary shelter-in-place policies earlier in the pandemic.

Costs also ballooned, with some expenses increasing as much as 30% with the pandemic.

“The runway shortened,” Bertram said. “That’s the biggest piece for us that we couldn’t get our arms around quick enough.”

The organization has since the start of its woes attempted to generate revenue by selling assets. The organization sold off its Program of All-Inclusive Care for the Elderly (PACE) program to St. Louis-based Lutheran Senior Services (LSS) in February, and its leaders have met with advisors over the past year to attempt affiliations with other nonprofit providers.

However, Bertram said it was alarming to find out how many other providers were in a similar position as Christian Horizons, particularly those in the Midwest.

“It didn’t make sense really, especially in the Midwest, to try and find that partnership or affiliation that wasn’t there,” she said. “You have to get these communities performing in a way that’s attractive, even in an affiliation, ​​and unfortunately we didn’t have the time when I got in this role to do that.”

Next steps after Ch. 11 bankruptcy

Looking at next steps, Bertram said Christian Horizons’ options will be largely left to the U.S. bankruptcy code. In the meantime, the day-to-day operations for the organization will remain the same.

Bertram said after 2022, occupancy has been on the rise. Skilled nursing has averaged between 90% and 95% occupancy, and assisted living has averaged around 85% – both selling points for a potential buyer.

“These are great numbers from where they were two years ago,” she said. “We’re seeing that recovery.”

Still, “we’re not seeing enough to decrease in inflation to turn that around,” she said.

Christian Horizons partnered with Ziegler and began soliciting potential buyers between late April and early May, though at this time the organization is technically in debt to bondholders, who get the final say on community sales as part of the bankruptcy process.

Bertram’s hope is that whoever takes on the different parts of the nonprofit is willing to maintain its 60-year legacy as a faith-based organization.

“They need high quality engagement, they need to be able to have their spiritual support in place,” Bertram said. “That’s what’s important to the older adults in the moment that we serve.”