3 California Hospitals Declared Bankruptcy This Year. Health Chains Could Keep Them Alive

Madera is also awaiting another $5 million in state funding that was granted in last year’s budget but placed on hold when the hospital closed.

In a letter outlining its terms (PDF), Adventist Health said it will require at least $55 million to fund staffing, supplies, maintenance, training and services in the first year, and another $30 million in the second year. Madera Community Hospital would have to pay Adventist a management fee.

In exchange, the health system would provide its management expertise and personnel to support Madera’s reopening. According to the proposal, Adventist would have the option to purchase the hospital after three years.

Empty building covered with a tarp.
Outlines of the Madera Community Hospital sign being covered by a tarp at the Emergency Room entrance of the hospital on Jan. 2, 2023. Madera County Sheriff Tyson Pogue announced a state of emergency for the county when the hospital shut its doors due to bankruptcy. (Larry Valenzuela, CalMatters/CatchLight Local)

Paolinelli said a management agreement is the hospital’s best bet at reopening. It has not found a buyer for a straightforward sale. Paolinelli said she has not discussed with Adventist whether she will stay on as head of the hospital.

Adventist Health has experience reopening closed hospitals. For example, five years ago Adventist reopened and rebranded what was once known as Tulare Regional Medical Center. That hospital is now Adventist Health Tulare.

Obstacles to Beverly hospital’s sale

Beverly Community, a 202-bed hospital in Montebello east of Los Angeles, filed for bankruptcy in April. It suspended a number of services by June, including maternity, pediatric and outpatient radiology.

The Attorney General’s office last month announced the conditional approval of the hospital’s sale to a Glendale-based chain called American Healthcare Systems. That proposed deal is quickly dissolving.

According to bankruptcy court documents, bondholders raised concerns about American Healthcare Systems’ ability to support the hospital financially. Recent filings show that Beverly Hospital is now exploring an alternative transaction with Adventist Health.

“Given Beverly Hospital’s critically low cash position and as of now uncertainty about state funding (from loan program), the bid from Adventist Health represents Beverly’s greatest chance of continuing to serve the community it has served for the past 75 years,” said Justin Bernbrock, a lawyer for Beverly Hospital.

This month will be key for the hospital. Beverly is losing about $5 million a month and projects to run out of cash by September, court documents show. The hospital applied for $35 million from the Distressed Hospital Loan Program.

On Thursday, the hospital is due to present a deal proposal to a bankruptcy court judge.

Hazel Hawkins takes first step with potential partner

The 25-bed Hazel Hawkins Memorial Hospital is San Benito County’s sole hospital. After months of looking for potential partners, management at Hazel Hawkins recently announced that it received a “letter of intent” from Modesto-based American Advanced Management.

The small chain is a private, for-profit company that operates six other hospitals in the state. It’s proposing to lease Hazel Hawkins for five-to-10 years (PDF) before having the option to purchase the hospital.

American Advanced Management has taken over a handful of distressed or closed hospitals in rural parts of the state, according to its website. These include Coalinga Regional Medical Center, Glenn Medical Center and Colusa Medical Center.

Hazel Hawkins is part of a publicly governed health care district, and the deal would need to be approved by the district’s board and by county voters.

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