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Judge OKs operator for bankrupt California hospital

A U.S. bankruptcy judge has approved American Advanced Management's plan to operate Madera (Calif.) Community Hospital, a 106-bed acute care facility which has been shuttered for more than 13 months. 

Madera Community Hospital is the city's only hospital for about 66,000 residents, and it filed for Chapter 11 bankruptcy in March 2023.

American Advanced Management began meeting with the hospital's board and leadership shortly after its closure in December 2022, according to a Feb. 13 news release the company shared with Becker's. The current plan has been in the works since September 2023 and was approved by the hospital's board and creditors committee two months ago. AAM's Chief Strategy Officer Matthew Beehler estimates the hospital will reopen in four to six months. 

Modesto, Calif.-based AAM — which operates eight acute care hospitals in California and one in Texas — will provide $30 million for Madera Community Hospital to pay off creditors and restore services, per the agreement. 

"We've been at this for months and we're at the finish line, your honor," an attorney for the company said in court Feb. 13, local NPR affiliate KVPR reported. 

Judge Rene Lastreto ruled in AAM's favor, and in doing so, denied an eleventh-hour joint purchase bid from San Francisco-based UCSF Health and Roseville, Calif.-based Adventist Health. Per the system's plan — introduced Feb. 8 — UCSF would provide clinical oversight to the hospital while Adventist would oversee operations. 

This was Adventist's second bid for the hospital. In July 2023, the system reached an initial nonbinding agreement to take over — but in November, it said the endeavor was financially inviable.

"We are deeply disappointed to hear that the bankruptcy court has chosen a different path to reopening Madera Community Hospital," the two health systems said in a joint statement shared with Becker's. "UCSF Health and Adventist Health remain committed to our proposal and are working together to understand what options may be available to jointly pursue our plan to restore lifesaving services to Madera County and bring high-quality, accessible care to the community for decades to come."

The pair's proposal — backed by Madera County — offered an immediate $35 million infusion to pay creditors and cover purchase fees and a deposit. In court on Feb. 13, county attorneys argued that AAM's proposal did not allow the hospital to "maximize the value of its estate," according to the radio station. Additionally, the county argued that there was no evidence the company had put any money into the hospital or had $30 million immediately available; Madera County has put $3 million into the hospital's maintenance throughout its bankruptcy. 

Mr. Lastreto ultimately decided time was of the essence, reportedly saying, "the court has not been given any evidence to suggest [AAM] will not be a good steward for healthcare for the people of Madera County."

Jay Verney, Madera County's chief administrative officer, told Becker's the board was disappointed that the court did not take time to consider UCSF and Adventist's proposal. 

"The Board will continue to fund the $125,000 per week 'burn rate' that it has provided to MCH since the first week of August 2023 to keep it a viable campus until an operator takes over," Mr. Verney said. "Beyond that AAM was clear in their bankruptcy court presentation today that they are well capitalized so we anticipate they will be self-supporting once their proposal is finalized."

Fifteen Madera Community Hospital physicians have signed letters of support for AAM, according to its news release. The hospital's most recent media contact was not immediately available for comment. 

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