Cold Spring Hills: Long Island Nursing Home's $10 Receivership After AG Scandal

Cold Spring Hills Center for Nursing & Rehabilitation, Long Island's second-largest nursing home with 588 licensed beds, filed for chapter 11 bankruptcy on January 2, 2025, after losing more than $600,000 weekly. The distress stemmed from a convergence: a 2022 Attorney General lawsuit alleging $22.6 million in Medicaid and Medicare fund diversions by the Philipson family owners, COVID-19-driven census declines, and union restraining notices that blocked access to operating cash. The case included an attempted emergency evacuation blocked by the state, a sale delayed by union negotiations, a court-approved closure plan, and a receivership arrangement that preserved the facility as a going concern. The case resulted in a structure where 378Sywood LLC assumed operations for a $10 purchase price plus approximately $75.9 million in mortgage obligations, leaving general unsecured creditors facing an estimated 2% recovery on $79.1 million in claims.

Company Background and Ownership Structure

Cold Spring Hills Center for Nursing & Rehabilitation operated a 588-bed skilled nursing facility in Woodbury, New York, providing long-term care, rehabilitative services, hospice care, dementia programs, and a senior day program. The facility employed approximately 500 personnel and generated $75.5 million in annual gross revenue in 2023.

Philipson family ownership. The facility entered the Philipson and Landa portfolios in 2016 through a $67.8 million acquisition. Bent Philipson served as principal owner, though according to state enforcement filings, he allegedly used straw owners to conceal his control from regulators. His son Avi Philipson held a 24% stake and served as managing member as approved by the state Public Health and Health Planning Council. The ownership arrangement later became a focus in the bankruptcy proceedings and examiner investigation.

The landlord entity, Cold Spring Realty Acquisition LLC, was controlled by the Philipson family and was owed approximately $21.8 million in unpaid rent at the time of filing. This intercompany debt structure meant that a substantial portion of the estate's liabilities were owed to entities controlled by the same principals who managed the debtor.

Pre-Filing Distress

The First Day Declaration filed by CRO Martin A. Cauz described multiple operational and financial pressures.

The Attorney General Investigation and Lawsuit.

In December 2022, New York Attorney General Letitia James filed a 186-page lawsuit against Cold Spring Hills and its owners, alleging "repeated neglect and inhumane treatment" of residents and the diversion of over $22.6 million in Medicaid and Medicare funds to 13 companies owned by the Philipsons. The complaint alleged poor quality of care that predated the COVID-19 pandemic.

The lawsuit specifically accused Bent Philipson of serving as the principal owner while using straw owners to deceive the Department of Health about his control of the facility. Avi Philipson was characterized as "a willing straw owner inserted to deceive" regulators. The suit alleged the diverted funds flowed to affiliated entities.

Operational impact. The First Day Declaration stated that admissions of Medicare patients declined and by September 2024 the resident census had fallen below 350, below the approximately 600-bed capacity needed for profitable operations.

COVID-19 Pandemic Effects.

The facility reported that COVID-19 affected operations, including COVID-positive admissions and resident deaths that reduced census levels.

Union Restraining Notices and Liquidity Crisis.

In October 2024, the 1199SEIU National Benefits Funds imposed CPLR § 5222 restraining notices on the debtor's Medicaid reimbursement funds. These restraining notices—a creditor enforcement mechanism under New York law—blocked the facility's access to its primary source of operating cash. With Medicaid reimbursements frozen, the debtor could not make payroll or cover essential expenses.

Weekly payroll expenses totaled approximately $1.14 million, and the facility had no alternative funding sources to bridge the gap. By November 2024, the combination of restrained funds and declining revenue left the debtor unable to make payroll or cover essential expenses.

The December 2024 Crisis: Attempted Closure and State Intervention

In December 2024, Cold Spring Hills planned an "emergency evacuation" of residents, with a December 31 facility closure and sweeping layoffs. The debtor filed a WARN notice on December 17, 2024, as required under the Worker Adjustment and Retraining Notification Act, and planned to begin layoffs on December 23 while evacuating approximately 320 residents.

The planned evacuation required relocating approximately 320 residents on short notice.

Attorney General intervention. The New York State Attorney General's Office filed papers requesting a temporary restraining order and arguing the planned evacuation was "illegal" and put vulnerable residents at risk. On December 20, 2024, the state court issued a TRO to keep staff and residents in place, blocking the planned evacuation and requiring the facility to continue operating.

The chapter 11 filing followed two weeks later.

Chapter 11 Filing and Case Administration

Cold Spring Acquisition filed its chapter 11 petition on January 2, 2025, in the Southern District of New York before Judge Sean H. Lane. The bankruptcy filing disclosed between $1 million and $10 million in assets against $50 million to $100 million in liabilities.

First Day Relief and DIP Financing.

The court entered interim first day orders on January 8, 2025, authorizing the debtor to continue critical operations including payment of employee wages and benefits, maintenance of insurance policies, and continuation of patient care. An interim DIP Financing Order followed on January 13, 2025, with CSHACQDIP, LLC serving as DIP lender. The postpetition financing provided the working capital necessary to maintain operations while the debtor pursued a sale or reorganization.

U.S. Trustee Challenges to Management.

The U.S. Trustee's office, which monitors bankruptcy cases for compliance and protects creditor interests, quickly raised concerns about the Philipson family's continued control of the debtor.

Trustee motion. On January 16, 2025, the U.S. Trustee filed a motion seeking appointment of a chapter 11 trustee, citing concerns about the Philipson family's management and insider conduct. The motion argued that the prepetition management—the same principals who faced allegations of diverting $22.6 million from resident care—should not continue to control the bankruptcy estate. The trustee motion was resolved by stipulation on January 23, 2025, without displacement of management.

Examiner appointment. On February 13, 2025, the U.S. Trustee filed an application for appointment of a chapter 11 examiner to investigate pre-petition insider transactions, Philipson family fund diversions, and self-dealing with related entities. Unlike a trustee who would take over management, an examiner conducts an independent investigation and reports to the court without displacing existing management. The court appointed Leslie A. Berkoff as examiner on February 21, 2025, with a scope and work plan approved on March 26, 2025. The examiner investigation remained ongoing as of late 2025, examining the same transaction patterns that were the subject of the Attorney General's lawsuit.

Unsecured Creditors Committee.

The Official Committee of Unsecured Creditors was appointed on February 5, 2025. The committee retained Rimon P.C. as counsel and Kroll Associates, Inc. as financial advisor.

Rule 2004 discovery. In November and December 2025, the committee conducted extensive Rule 2004 discovery—the bankruptcy equivalent of pretrial discovery—targeting over 20 Philipson-related entities. The scope of the investigation encompassed Bent and Avi Philipson personally, Cold Spring Realty Acquisition LLC, Graph Insurance Company, Graph MGA, Graph Management, Standard & Preferred Insurance Company, Sentosa Care entities, Ventura Services LLC, Highview Management, Milenia IPA LLC, RAP 118 LLC, and numerous other affiliated entities.

Capital Structure at Filing

Cold Spring had no traditional secured debt and no public debt—all obligations aside from the Greystone mortgage were unsecured. The Greystone Funding Company claim, at nearly $76 million, was larger than all other obligations and would be handled outside the bankruptcy estate through assumption by the purchaser.

Insider dynamics. The landlord claim held by Philipson-controlled Cold Spring Realty Acquisition LLC exceeded $21.8 million. Trade creditors held approximately $20 million in claims, representing the accumulated unpaid bills from vendors who provided goods and services to the facility. The 1199SEIU union funds held approximately $15 million in claims, reflecting unpaid contributions to employee benefit and pension funds—the same obligations that had triggered the restraining notices precipitating the bankruptcy.

Sale Process and the Union Standoff

On January 13, 2025, the debtor filed a Sale Motion seeking approval of a sale and receivership arrangement with 378Sywood LLC, an entity controlled by Eliezer Jay Zelman, who operates several nursing homes across New York. The proposed transaction was structured as a receivership rather than a traditional asset sale.

Sale Terms.

The $10 purchase price was paired with the assumption of the Greystone mortgage and no cash to the estate. The purchaser was not paying cash to the estate; instead, it was assuming the obligation to fund all operating and capital expenses going forward while taking over the Greystone mortgage.

Union Negotiations Collapse.

The sale was conditioned on 378Sywood reaching a modified collective bargaining agreement with 1199SEIU United Healthcare Workers East.

At the January 28, 2025 sale hearing, the sale could not proceed because the purchaser and union remained at impasse. The union had filed a Sale Objection on January 24, 2025, raising concerns about the purchaser's proposed changes to the collective bargaining agreement.

Disputed terms. According to union representatives, Zelman sought to remove certain positions from the bargaining unit, including registered nurses, physical therapists, occupational therapists, respiratory technicians, and dietitians. The union also raised concerns about proposed benefits reductions and canceled wage increases. Union leadership warned that these changes could trigger mass resignations, threatening continuity of care at a facility already struggling with staffing.

Over 800 people—residents, employees, and their families—faced displacement if the parties could not reach agreement.

Closure Plan as Negotiating Lever.

With the union negotiations stalled, the debtor submitted a closure plan to the New York Department of Health on January 31, 2025. On February 14, 2025, the bankruptcy court entered a Closure Plan Order approving the plan with a May 15, 2025 deadline. The DOH granted approval on February 27, 2025.

Resolution and Receivership Closing.

In March 2025, after the closure plan was approved and residents had begun to be relocated, 378Sywood and 1199SEIU reached a satisfactory agreement. The precise terms of the modified collective bargaining agreement were not publicly disclosed.

The bankruptcy court entered a Receivership and Sale Order on March 20, 2025. 378Sywood LLC commenced operations as receiver on April 22, 2025, taking over day-to-day management of the facility while the regulatory approval process for permanent ownership transfer continued. The receivership structure preserved the facility as a going concern.

The transaction structure meant that Greystone Funding Company's $75.9 million claim was satisfied entirely through assumption by the purchaser, outside the bankruptcy estate. Other creditors looked to estate distributions.

Chapter 11 Plan of Liquidation

The debtor filed an initial Chapter 11 Plan on September 2, 2025, followed by an Amended Plan of Liquidation and Disclosure Statement on October 14, 2025. The plan documents estimated a 2% recovery for general unsecured creditors.

Treatment by Class.

Plan mechanics. The plan provides for distribution of remaining estate assets to creditors following the standard priority scheme. Because the purchaser assumed the Greystone mortgage outside the estate, that claim receives 100% recovery without consuming estate assets. Personal injury claims are limited to recovery from applicable insurance policies.

The plan estimated a 2% recovery for general unsecured creditors.

Committee objection. The Official Committee of Unsecured Creditors filed an objection to the disclosure statement on October 21, 2025, and the case remained pending confirmation as of December 2025.

Professional Retentions

The case included the following professional retentions. The appointment of a Patient Care Ombudsman is required in healthcare bankruptcies.

Key Case Timeline

Nursing Home Industry Context

Cold Spring's case aligns with broader distress in the senior care industry since the COVID-19 pandemic. According to Bloomberg Law, nursing homes are more vulnerable to financial distress than other healthcare sectors, with senior living and care facilities accounting for 25% of healthcare bankruptcies in 2024. Industry analysts projected senior care facility bankruptcies would rise from 11 in 2024 to 15 in 2025.

Structural challenges. The industry faces multiple headwinds. Medicaid reimbursement rates, which fund the majority of nursing home residents, have not kept pace with rising labor and operating costs. Staffing shortages have intensified following the pandemic, as healthcare workers reconsidered careers in settings that experienced high COVID-19 mortality. Union pressures have increased as workers demand higher wages and better benefits to compensate for the risks and difficulties of nursing home employment.

The Cold Spring case includes industry-wide pressures and facility-specific problems, including alleged fund diversions and regulatory enforcement. The receivership resolution preserved the facility, and the plan estimated a 2% recovery for general unsecured creditors.

Frequently Asked Questions

What caused Cold Spring Hills to file bankruptcy?

Multiple factors contributed to the filing. A 2022 Attorney General lawsuit alleging $22.6 million in fund diversions reduced profitable Medicare admissions. COVID-19 reduced the resident census. In October 2024, union restraining notices on Medicaid funds blocked access to operating cash, creating a liquidity crisis with $1.14 million weekly payroll obligations. The facility was losing more than $600,000 weekly by the time of filing.

Who purchased the facility?

378Sywood LLC, controlled by Eliezer Jay Zelman, acquired the facility through a receivership structure for $10 plus assumption of approximately $75.9 million in Greystone mortgage obligations. Zelman operates several nursing homes across New York. The receivership structure allowed immediate operational transfer while regulatory approval for permanent ownership change proceeded separately.

What recovery will unsecured creditors receive?

General unsecured creditors—holding approximately $79.1 million in trade, landlord, and union claims—face an estimated 2% recovery under the Chapter 11 Plan of Liquidation. The plan provides no cash distribution from the receivership transaction.

What was the Attorney General lawsuit about?

Attorney General Letitia James alleged that Cold Spring and its Philipson family owners diverted over $22.6 million in Medicaid and Medicare funds from resident care to 13 companies they owned, while providing "repeated neglect and inhumane treatment" to residents. The lawsuit accused the owners of using straw owners to deceive regulators about facility control.

Why was a closure plan approved if the facility was ultimately sold?

The February 2025 closure plan set a May 15, 2025 deadline. The purchaser conditioned closing on a modified collective bargaining agreement with 1199SEIU. Once the union deal was reached, the closure plan became moot and the receivership preserved the facility as a going concern.

What is the examiner investigating?

Examiner Leslie A. Berkoff is investigating pre-petition insider transactions, including Philipson family fund diversions and self-dealing with related entities. The examination parallels the allegations in the Attorney General's lawsuit. The Official Committee of Unsecured Creditors has conducted Rule 2004 discovery of over 20 Philipson-affiliated entities.

What happened to the planned December 2024 evacuation?

The New York Attorney General obtained a temporary restraining order on December 20, 2024, blocking the debtor's attempt to evacuate approximately 320 residents by December 31. The AG argued the planned evacuation was "illegal" and put vulnerable residents at risk. The facility filed chapter 11 two weeks later.

Is Cold Spring part of a larger nursing home distress trend?

Yes. Senior care facilities accounted for 25% of healthcare bankruptcies in 2024, with projections of 15 senior care bankruptcies in 2025, up from 11 in 2024. Industry-wide pressures include Medicaid reimbursement constraints, staffing shortages, union pressures, and COVID-19's long-term census impacts.

What is the status of the bankruptcy case?

As of December 2025, the case remains pending. The debtor filed an Amended Plan of Liquidation on October 14, 2025, and the Official Committee of Unsecured Creditors filed an objection to the disclosure statement on October 21, 2025. Meanwhile, 378Sywood LLC has been operating the facility as receiver since April 22, 2025, and the examiner investigation into insider transactions continues.

Who is the claims agent for Cold Spring Hills?

Omni Agent Solutions, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

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