Private Equity Ownership Linked to Genesis Healthcare's Bankruptcy

Genesis Healthcare, a major skilled nursing facility operator, filed for Chapter 11 bankruptcy in July 2025, declaring $708 million in secured debt and over $1.5 billion in unsecured debt. A new report from the Private Equity Stakeholder Project (PESP) suggests that the company's financial troubles can be traced back to mismanagement by its private equity owners.

Financial Mismanagement and Leveraged Buyouts

Formation Capital, which acquired Genesis nearly two decades ago, employed several financial strategies that ultimately compromised the company's stability:

• In 2007, Formation Capital and JER Partners purchased Genesis for $1.7 billion through a leveraged buyout.
• A 2011 sale-leaseback transaction with Health Care REIT involved 147 properties for $2.4 billion, stripping Genesis of valuable assets.
• The company was burdened with long-term triple-net leases, requiring it to cover rent, property taxes, insurance, and maintenance costs.

These tactics reduced Genesis's financial flexibility and resources, leaving it ill-equipped to adapt to changes in the healthcare landscape.

Impact on Patient Care and Facility Operations

As Genesis struggled financially, there were apparent repercussions for patient care:

• In 2020, a Genesis Healthcare subsidiary settled with the Vermont attorney general after inadequate staff training led to patient injuries and one death.
• St. Joseph's Center in Trumbull, Connecticut, a Genesis facility, faced closure in 2025 due to multiple health and safety failures, including the discovery of Legionella bacteria in its water system and fire safety concerns.

Michael Fenne, senior research coordinator at PESP, stated, "Genesis Healthcare's bankruptcy was a predictable result of a financial strategy that extracted value through debt and real estate transactions while leaving the company with fewer resources to sustain care."

Broader Implications for the Healthcare Industry

The Genesis Healthcare case is not isolated. Private equity's involvement in healthcare has raised concerns about financial stability and patient care:

• In 2024, private equity-backed firms were involved in seven of the eight largest healthcare bankruptcies.
• Notable filings included Steward Health Care and WellPath Holdings, a healthcare provider for jails and prisons.
• The PESP report argues that without addressing these financial tactics, more nursing home operators may face similar fates, potentially impacting patients, workers, and public healthcare programs.

As the healthcare industry grapples with these challenges, the Genesis Healthcare bankruptcy serves as a cautionary tale about the potential consequences of private equity ownership in the sector.