Minnesota’s takeover of the Bay View nursing home in Red Wing last month is an ominous sign to advocates that the state’s elder-care system is fraying, despite rising demand for care in an aging population.

Bay View has unique problems — violating multiple care standards and landing on a federal list of troubled facilities — but it was the third nursing home placed under state control in two years through court-ordered receivership. Minnesota had only taken that emergency step once in the preceding seven years.

While receiverships prevent broke nursing homes from closing abruptly and kicking frail residents to the curb, they come late after facilities have lost workers, fallen behind on bills and cut corners, said Cheryl Hennen, Minnesota’s ombudsman for long-term care.

“I don’t think this is a one-off,” she said of the recent state takeovers. “This is a problem. We need to dive into this and figure out what needs to be put in place to be more proactive and prevent this, because we are running out of beds.”

Nursing homes remain central to elder care, serving residents with medical and behavioral conditions that are beyond the scope of assisted-living facilities. But they are under unprecedented strain from rising costs and declining workforce numbers — with 26 nursing homes closing in five years and others reducing capacities.

More would have run out of money last year had the Minnesota Legislature not secured roughly $300 million in emergency aide, said Toby Pearson, chief executive of Care Providers of Minnesota, a trade association for the elder-care industry.

“Absent that investment, I think you would have seen a lot more chaos,” he said.

Minnesota increases Medicaid payments to nursing homes based on the actual costs of care, but it takes 15 months or more to figure out how much more they earned above base payment rates. Pearson said many operators lack the cash reserves to wait for that financial boost because of increased staffing costs and upkeep of aging buildings.

Long list of concerns at Bay View

Bay View has long been a concern and was cited in September for 15 violations of nursing home standards — including unsanitary food preparation that presented immediate health risks, according to an inspection report. It was one of 10 Minnesota nursing homes that met criteria this fall to be added to a federal list of facilities needing more supervision.

It also is a nursing home Minnesota can ill-afford to lose, because it specializes in high-need patients who suffer traumatic brain injuries or need mechanical ventilation or trach tubes in their throats to breathe.

The facility gained $203,000 in federal pandemic relief and the promise of nearly $1 million in direct aide from last spring’s emergency legislation. Lawmakers also singled out the Red Wing facility last session with an exemption to limits that cap what nursing homes usually are paid.

Bay View nonetheless lacked the funds in December to pay its workers and a staffing agency, which pulled its temporary workers from the facility. It also owed Minnesota $1.8 million in overdue licensing fees. The home was transferring out high-need patients because of staffing shortages when a Dec. 18 court order put it under state control.

“The whole concern is about making sure the needs of the individuals who live in that setting are going to be met,” said Maria King, director of the Minnesota Department of Health’s regulatory division.

The takeover is distressing for Bay View’s owner, Sam Weinberg, who said he dipped into savings to maintain payroll in 2019 when he bought the facility from a bankrupt company. Weinberg said he invested in electrical upgrades this fall so the nursing home could take even more high-need patients, in part to relieve pressure on overcrowded Minnesota hospitals, but didn’t receive promised financial relief because of state administrative delays.

“It just kind of spiraled out of control. I needed to cover payroll and the money I was supposed to get just wasn’t there,” said Weinberg, who hopes the court will return control of the facility to him now that it is receiving state aid.

Hennen said regulators should be looking at Bay View’s failure to see what it has in common with others that could be next. She called for legislation that increases financial transparency, so the state can see whether owners pocket government support or invest it in their facilities.

“What’s public about some of the past receiverships is evidence of staff payroll checks being returned with insufficient funds, unpaid bills for oxygen, insurance, medication, food,” she said. “And, really, who suffers the most from this? Imagine the amount of pain this brings to people that live there, people that work there.”

Bay View only had 61 of 120 beds filled when the state took over. That is common across Minnesota’s 349 nursing homes because of staffing shortages, especially for the 61 facilities with low one-star federal quality ratings.

Bay View in the latest ratings had a 99% turnover rate of its nursing staff in one year. Low-rated nursing homes averaged 62% turnover annually compared with 34% for Minnesota’s highest-rated facilities.

Highly rated homes are equally or more at risk for closure, perhaps because of the financial pressures of maintaining high standards and nurse-to-resident ratios, according to a national study published in July. But local nursing home officials said low bed usage and high staff turnover are warning signs.

Constantly changing workers lack familiarity with residents to anticipate their needs and prevent problems, said Peter Schuna, chief executive of Pathway Health, the management company that Minnesota hired to run Bay View during the receivership.

Schuna said he is optimistic about Bay View despite its past staffing problems, because most workers stayed on without pay last month out of concern for residents. Life at the nursing home is getting back to normal, he said, after an upsetting month.

“The residents, especially those that are cognizant, they felt the change in attitude of the staff when they were stressed about not getting paid, especially days before the Christmas holiday,” he said.

Survival under new management?

The goal of receivership is to determine in 18 months whether Bay View can survive under new management. But the process can take longer.

Minnesota took over Pine Haven Care Center in Pine Island in June 2022 after it fell behind on payments for workers, food and medication. The state remains in charge 20 months later with the facility’s future uncertain.

King said receiverships aren’t a cure-all, and wouldn’t have saved a Cannon Falls nursing home, which had financial struggles but closed in March 2023, when water damage forced its evacuation.

Pearson said legislative relief buys nursing homes two years to adjust operations and capacities so they can survive — and reduce the need for closures or receiverships.

Without that funding, some owners were asking whether they could voluntarily put their homes in state receivership.

“That’s how desperate they were,” he said.