CEO of shuttered California hospital claims bidder gave unsolicited offer

Madera (Calif.) Community Hospital, which has been closed since December 2022, is accusing a company vying to take over the hospital of attempting to improperly influence the hospital's decision-making, The Fresno Bee reported Sept. 11. 

In a Sept. 8 bankruptcy court filing, Karen Paolinelli, CEO of the hospital, made a declaration that Modesto, Calif.-based American Advanced Management — which is among the third parties the hospital has engaged in negotiations with to find operating funds and/or to sell assets of the hospital's estate — made an unsolicited, written employment offer to her in May. 

She said she met with American Advanced Management's president, Gurpreet Singh, MD, and chief strategy officer, Matthew Beehler, and was given an envelope with a check made payable to her personally for $150,000. Court filings show the offer was to retain Ms. Paolinelli in "an active leadership capacity" if American Advanced Management were selected as the hospital reopening partner, according to the Bee.

Ms. Paolinelli said she sent a certified letter to American Advanced Management's president, reiterating that she was declining the offer and that no decision had been made related to the sale of assets.

"The entire interaction made me feel very uncomfortable," Ms. Paolinelli said.

Ms. Paolinelli's declaration comes after Madera filed for Chapter 11 bankruptcy March 10. The hospital officially closed at midnight Dec. 30 after Livonia, Mich.-based Trinity Health's plan to buy the hospital fell through. Trinity already owns and operates Saint Agnes Medical Center in Fresno, Calif. In July, Madera and Roseville, Calif.-based Adventist Health entered a non-binding letter of intent for Adventist to take over operations.

American Advanced Management has continued to pursue a partnership with Madera amid the agreement with Adventist, according to the Bee. Ms. Paolinelli said Dr. Singh also continued to offer her employment, with late August being the last time.

In a statement shared with Becker's, Mr. Beehler said Ms. Paolinelli "has worked diligently with many local and state agencies to prepare Madera Community Hospital to reopen as quickly as possible. We have and continue to believe that her committed involvement will be a key element of a fast, efficient reopening."

Regarding the May meeting, American Advanced Management presented Ms. Paolinelli with an offer letter and signing bonus, and at the time, the firm's focus was on reopening the facility as quickly as possible, he said.

"We had been in talks with Karen and the board for several months at that point and believed they were moving forward with us as their partner," Mr. Beehler added. "The hospital board expressed a desire for Karen to continue as the board's representative within any new management structure. With Karen's experience and specific work to reopen the hospital, securing her commitment seemed to be the next logical step."

Mr. Beehler also said that at the time of the May meeting, American Advanced Management did not believe there were any other interested parties or competing offers, and the California Distressed Hospital loan program was still being defined. It was announced in August that Madera will receive a $50 million loan through the program.

Ms. Paolinelli said Madera has yet to finally determine the identity of a stalking horse bidder for the purchase of the hospital's assets. If the hospital determines the best interests of the hospital and its creditors are best served by the sale of the assets to a third party — whether that be Adventist, American Advanced Management or another party — Madera will identify the proposed buyer as the stalking horse bidder and provide the bankruptcy court and all parties with notice of the proposed sale and its terms, she said.

Mr. Beehler said American Advanced Management remains focused on moving quickly to reopen the facility and "will continue to pursue all avenues to get support from the debtor, creditors and bankruptcy court for our offer. Our offer will pay the creditors, take financial responsibility for current and future operations, and begin opening the hospital as soon as the court approves."

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars