What's next for a bankrupt California hospital?

Less than three months after closing its doors, Madera (Calif.) Community Hospital filed for Chapter 11 bankruptcy March 10 — a last resort it had been holding out on as it explored other ways to restore operations. 

"We have not given up; we will continue our efforts to seek alignment, acquisition, or forge our own path to once again provide services," CEO Karen Paolinelli told mycentralvalley.com March 13.

The Central Valley hospital had entertained between 10 and 12 conversations and letters of intent from other organizations to take over the facility after a proposed affiliation agreement with Livonia, Mich.-based Trinity Health fell through, according to the outlet.

The bankruptcy filing will give the hospital "some breathing room from pending creditor claims and the board and staff will be able to refocus on finding an alternative suiter or proceeding with an orderly court-supervised liquidation of its assets," Riley Walter, an attorney representing the hospital with Wanger Jones Helsley in Fresno, said in a statement shared with yourcentralvalley.com

During a community meeting earlier this month, Stell Manfredi, vice chair of the Madera Community board, weighed some of the pros and cons of filing for bankruptcy. While the filing would protect assets and provide a pathway for another hospital operator to acquire the hospital, Mr. Manfredi said a downfall is that every decision would have to go through a judge, which will be time-consuming and costly. 

Madera Community posted a $11.5 million loss in fiscal year 2021-22 — its last full year of operations — as the pandemic destroyed its bottom line, according to Ms. Paolinelli. Other contributors were low Medi-Cal reimbursements and a lack of nurses, which forced it to pay a premium for contract labor. 

In the bankruptcy filing, the hospital reported liabilities between $10 million and $50 million to at least 200 creditors.

The facility comprises almost 40 acres of property and has millions of dollars of equipment sitting idle — it's costing about $900,000 a month to maintain its skeleton operations such as cleaning, security and accounting, KVPR reported Feb. 28.

State lawmakers have previously called on Trinity Health to renegotiate the failed acquisition of Madera Community. Trinity's plan to buy the hospital late last year fell through because the health system did not accept the conditions set forth by California Attorney General Rob Bonta.

"If we can't quickly do something and the state can't step in and help us get this hospital back open, it might be impossible to open if we can't find a partner," Ms. Paolinelli told KVPR in February.

Finding a health system partner can be a difficult task, according to the California Hospital Association, as even the largest organizations have faced significant financial setbacks in the wake of the pandemic. 

"They used to be able to step in when a hospital was failing … they no longer have the financial wherewithal to do that," CHA CEO Carmela Coyle told Becker's.

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