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State takes over nursing home in Evansville

The Minnesota Department of Health seized control this week of the Crestview Manor nursing home in Evansville because of the financial troubles of its owner, the nonprofit Foundation for Rural Health Care in Fosston.

Crestview, which is licensed for 42 beds, houses 28 full-time residents and employs 45 people.

MDH assumed management of Crestview and McIntosh Manor (in Polk County) under a receivership granted Tuesday in Ramsey County Court.

Nursing home receiverships are authorized by state law and are used only in emergency situations, primarily when the finances of a nursing home are insufficient to cover expenses, including payroll.

The last time MDH took over a nursing home was in July 2004.

In this situation, MDH took control of the homes when it learned in late December that the financial institution holding the mortgages of the homes would not continue to advance money to pay for operating expenses.

"We have taken this step because the two homes are no longer able to meet their financial obligations," said Darcy Miner, director of the compliance monitoring division at MDH. "It is our responsibility to protect the health and safety of nursing home residents, so we needed to take this step to keep the homes open and functioning until a resolution can be found."

The department learned of the homes' financial straits from their former administrator, Allen Potvin, who voluntarily resigned his post on Wednesday.

Potvin, who was hired in August to manage both Crestview and McIntosh, said the homes' money problems date back to 1999 when, just months after first purchasing Crestview, the Foundation for Rural Health Care tried unsuccessfully to file for bankruptcy.

The situation has only worsened since.

"[The foundation] was more then technically bankrupt," when it hired Potvin, he said; it currently owes millions of dollars to the bank, the state and various other creditors.

The foundation lost more than $1.24 million in 2007 alone, ending the year with more than $5.52 million in total debts, according to the organization's 990 form, a report all nonprofits must provide to the Internal Revenue Service in exchange for their tax-exempt status.

"I was [initially] unaware how bad the situation was," Potvin said. "As soon as I found out, I worked to get something to take place."

Potvin said he and the foundation's sole remaining board member, Dr. Stephen Zuckerman, discussed the possibilities of bankruptcy and foreclosure before settling on a state receivership.

"There is no way [Crestview] could have continued with the way it was run," Potvin said. "It had to go this route in order to stay in existence."

As of press time, Zuckerman could not be reached for comment.

Going forward, options for the homes include finding new owners for each home or closing one or both of the homes and relocating the residents to other homes.

"There are kind of two choices," Miner said. "Either [Crestview] stays open under new management, or it closes and we'll work with the county to relocate its residents."

In the coming weeks, MDH will evaluate the homes to determine if it is practical for them to remain open and continue serving their communities.

The department's goal, Miner said, is to conclude the receivership as quickly as possible, while still protecting the needs of the residents. By law, the receivership cannot exceed 18 months.

"We want to do what is best for the residents and the community, but that includes making sure the homes can be financially viable if they remain open," Miner said. "We will thoroughly evaluate all of the options and make the best decision possible. In the mean-time, we want to assure the residents and their families that they will continue to be cared for. If it turns out that we need to relocate residents to other facilities, we will work to make that transition as smooth as possible."

Potvin said he's hopeful the state will be able to find a suitable buyer for Crestview, which is a good nursing home, despite the massive debts incurred by the foundation.

"This facility can make a profit," he said. "I had brought it from about a $40,000 a month loss to about a break even point in my five months here.

"If I had more time, I know I would make a profit."

Miner praised Potvin for his efforts in helping to turn around both Crestview and McIntosh.

"He has done a very good job improving health care at the facilities," she said.

Both homes needed improvement. Miner said McIntosh has been on the state's "special focus" list for the last four years, which is not a good thing.

The facilities on that list - there are four - have to be inspected by MDH officials twice as often as average nursing homes, Miner said, because of how many complaints and violations they've accrued.

But when staff visited McIntosh two weeks ago, they found the facility had substantially improved, Miner said.

Crestview has also had some problems, and, like McIntosh, has worked hard to resolve them.

During an inspection of the home last May, Miner said MDH staff reported 20 deficiencies, ranging in severity from "potential for minimal harm" to a possible "immediate jeopardy to a resident's health or safety."

Some of the violations included improper care for skin sores, insufficient supervision to prevent accidents and even some cases of home residents not receiving their prescribed medications.

"That's a lot of deficiencies," Miner said. "But [Crestivew] has been revisited, and on the second revisit they had closed all of those deficiencies."

With Potvin leaving, however, MDH has had to appoint a new managing agent for Crestview.

Little Falls-based Eldercare of Minnesota, LLC, will temporarily operate the home while simultaneously assessing Crestview's long-term viability.

Eldercare is experienced in managing five nursing homes and 12 assisted living homes in Minnesota, especially in rural Minnesota, according to health officials.

The company is owned and operated by Jim and Kathy Birchem. Jim is a Minnesota licensed nursing home administrator and Kathy is a registered nurse. They each have more than 30 years experience in health care.

Jim Birchem said he expects to provide MDH officials with a formal report on Crestview's performance in two to three months.

"There are several options," he said. "The last resort would be to close."