lawsuit regarding public nursing home deal

After a year filled with controversy, a county has sued two private nursing home chains for the full $8.3 million they had agreed to pay for a public facility before backing out of the deal.

A wave of setbacks swamped the attempted sale of the DeKalb County (IL) Rehab and Nursing Center. County leaders joined citizens in questioning and then protesting the private buyers who nearly took ownership.

Sales of public nursing homes to private owners are often controversial due to suspicions of how the acquisitions will affect quality of care. The financial troubles at DeKalb County Rehab and Nursing Center, however, made a sale seem like the best option to keep the nursing home operating. 

Mismanagement and declining resident numbers had plagued DCRNC and led to $7 million in debt that the facility’s sale was supposed to offset, according to county officials.

The county board had agreed in July 2022 to sell the facility to privately held Illuminate HC. But in the spring of 2023, officials became aware that Illuminate was collaborating with Saba Healthcare, another chain, to create DeKalb Healthcare Holdings LLC, which would ultimately manage the facility. 

However, county leaders had already voted to reject Saba’s bid to buy the public home in 2022, due at least in part to the company’s track record elsewhere. 

The lawsuit claims the organizations “defrauded and manipulated” the county before backing out of the deal and therefore should be held responsible for any financial losses their actions caused.

“Through collaboration and collusion with various business associates, Defendants secretly included as contracting or controlling parties the very bidders that the County had specifically rejected in the bidding process, defaulted under key deadlines under the contracts, and avoided mandated state approval activities, thus leaving the County to absorb millions of dollars in losses,” the lawsuit alleges.

Public backlash

News of Saba’s inclusion caused a months-long slowdown in the deal and sparked community protest at a public hearing in July.

More than 50 community members attended the hearing and none spoke in support of the deal, according to the DeKalb County Daily Chronicle.

Concerns focused on the quality of care residents receive at Saba’s 10 current facilities. Those facilities average a 1.3-star rating with the Centers for Medicare & Medicaid Services. Several Saba facilities also have faced allegations of resident abuse.

Illuminate later requested a new contract excluding Saba from the deal. However, the county board unanimously rejected that idea in September. Within days, the county claims, the prospective buyers attempted to drop out of the sale.

The intense controversy around the DeKalb deal illustrates the potential backlash to the sale of public facilities to private owners in general — even when those facilities are in precarious financial circumstances. 

It’s not yet clear whether cases like this may bring a chilling effect on future deals involving public nursing homes and private buyers.