Regulators shutter Alabama nursing home amid Genesis Healthcare bankruptcy

Federal and state regulators ordered Magnolia Ridge, a 148-bed nursing home in Glendale, Alabama, to shut down, a rare move tied to the ongoing Chapter 11 case of Genesis Healthcare and concerns about the facility’s operations. An estimated 100 residents were being relocated ahead of the facility’s scheduled Oct. 15 closure, according to the regulator actions and filings related to the case.

Magnolia Ridge has drawn repeated scrutiny from federal inspectors. CMS rated the facility one star out of five for several years, and regulators cited ongoing concerns about care and safety ahead of the shutdown. In a broader regulatory context, the closure comes amid mounting financial pressure across the health-care sector, with hospitals and nursing home operators facing rising costs, debt, and structural challenges.

Genesis Healthcare, one of the nation’s largest operators of skilled nursing facilities, acknowledged the bankruptcy process in July after reporting about 20,000 licensed beds across the country. The company once expanded to as many as 60,000 licensed beds in more than 30 states but has been in bankruptcy court since July. Genesis said it would not shut any facilities outright, but regulators proceeded with the Alabama site closure. The company’s leadership framed the move as a regulatory action rather than a strategic decision tied to the bankruptcy, with plans to appeal while not contesting the regulator’s authority.

Louis Robichaux IV, a co-chief restructuring officer for Genesis, told The Wall Street Journal that the company had been “mired in corporate inefficiencies,” including past expansion efforts, and that “without a more holistic solution, the company would be unable to continue delivering high quality care and appropriately invest in its facilities and equipment.” During the bankruptcy proceedings, Genesis’s chief operating officer said the company did not expect any impact to resident care or staffing across its facilities, including Magnolia Ridge.

The Alabama shutdown drew scrutiny from a U.S. bankruptcy judge who questioned the rationale for closing a facility with a prior satisfactory rating from a patient-care watchdog. Lawyers for hundreds of Magnolia Ridge residents with injury claims pointed to a long trail of warnings, noting that CMS gave Magnolia Ridge a one-star rating from 2017 through 2024. The judge’s questions underscored the tension between enforcement actions and the settlement of ongoing patient-care disputes.

The Magnolia Ridge action is not occurring in a vacuum. In January, Prospect Medical Holdings filed for Chapter 11 protection, affecting 166 clinics in California, Connecticut, Pennsylvania, and Rhode Island and resulting in the closure of two hospitals in Pennsylvania. In May 2024, Steward Health Care System, a large network serving two million patients across 31 hospitals, also filed for bankruptcy protection. Together, these developments illustrate renewed financial stress in U.S. health care as providers contend with higher operating costs, debt, and shifting ownership structures.

For residents and families, the immediate priority is ensuring continuity of care during transitions. Regulators typically require transfer plans, including ongoing access to medical records, medications, and coordinated care with receiving facilities. The Magnolia Ridge case has highlighted the tension between regulatory oversight and the financial realities facing operators, a dynamic likely to influence debates about funding, oversight, and the availability of quality long-term care across the country.

As the Magnolia Ridge transition proceeds, state and federal officials emphasized patient safety and orderly relocations, while Genesis and its counsel prepared to pursue appeals. The broader industry context remains unsettled, with systemic financial pressures continuing to reshape care delivery for vulnerable populations.