Petersen Health Care is asking a Delaware federal judge to approve some $1.3 million worth of lump-sum payments for certain employees as the Peoria-based nursing home company's bankruptcy case continues.
That includes $557,970 in a key employee incentive plan (KEIP) for members of the company's senior leadership, and another $732,323 to 26 company "non-insiders" under a key employee retention plan (KERP).
David Campbell, Petersen's chief restructuring officer, said the KEIP is meant to incentivize four executives to move the sales of Petersen's nursing homes forward as quickly as possible.
He said the proposed payments to chief financial officer Danielle Berry, director of assisted living Doug Currier, general counsel Marikay Snyder, and director of senior nursing facilities Greg Wilson are based on four metrics ahead of the closure of the four pending sales. That apparently includes the "prompt and effective closure" on or before Sept. 1 of some facilities designated for wind down that were acquired by Skokie-based Cascade Capital Group. It isn't immediately clear which facilities are impacted.
Campbell said the key employee retention plan for another 26 employees is needed to slow the churn of administrator turnover, which has accelerated after Petersen Health Care filed for bankruptcy. He said at least 13 licensed nursing home administrators have resigned, leaving regional directors to run the facilities.
Several regional directors have also resigned, which means those remaining are now also overseeing wider geographic areas. For instance, the regional clinical director overseeing the Chicago metropolitan area and northern Peoria is now also responsible for Bloomington and Champaign. Another regional clinical director who oversees facilities in Kewanee and Sterling is now also managing northeastern Illinois nursing homes.
"I believe that the KEIP and KERP are also necessary to, on the one hand, retain the KERP Participants through what could be a lengthy regulatory process, in the case of the KEIP Participants, incentive such individuals to act so as to facilitate an expeditious change of ownership process with the relevant regulatory authorities, or closure of certain facilities, while also maintaining the quality of patient care," Campbell wrote.
Two creditors are objecting to the proposed executive incentives. The committee of unsecured creditors and the U.S. Trustee say the program is actually a disguised insider retention program that makes little sense to implement six weeks after U.S. Bankruptcy Judge Thomas Horan first approved the sales, which are expected to close by Oct. 1.
"There is little incentive for KEIP Participants to exert any additional effort; all that is required of the participants to receive these bonuses is that they continue to perform their responsibilities as required, work for which they are already being more than fairly compensated," said attorneys Nancy Peterman and Dennis Meloro in a filing for the unsecured creditors.
Attorneys for the unsecured creditors have said the $116 million sale price for the vast majority of Petersen's nursing homes is lower than they expected, thus lowering their chances at compensation. They have subpoenaed CEO Mark Petersen and his companies for more information about the movement of money between entities.
The next court hearing is scheduled for Wednesday.
