Bankrupt Madera hospital secures initial loan from state. ‘A step in the right direction’

Bankrupt Madera Community Hospital has received a $2 million lifeline from the state to keep its doors open as it works out a reopening plan with Adventist Health – and stands to receive millions more in the future.

On Thursday, the California Department of Health Care Access and Information announced $300 million in no-interest loans for 17 healthcare facilities throughout the state as part of its new Distressed Hospital Loan Program.

In addition to the $2 million bridge loan to cover operational costs, the state also allocated the Madera hospital an additional $50 million loan contingent upon submission and approval of a “comprehensive hospital turnaround plan” from Adventist Health.

The faith-based, nonprofit health system operating in California, Oregon and Hawaii announced last month its plans to take over management of Madera Community Hospital, provided the hospital received funding from the state’s loan program.

The award is about $30 million less than the $80 million the hospital requested from the state program. Still, the funding is a crucial next step toward reopening Madera Community Hospital.

The hospital in December and filed for bankruptcy in March after a deal to sell the hospital to Trinity Health, owners of Fresno-based St. Agnes hospital, fell through. The abrupt closure left 160,000 Madera County residents without access to an acute medical care facility in their county.

“This financial assistance is an important step in the right direction to help Madera Community Hospital reopen its doors to the community,” Assemblymember Esmeralda Soria, D-Merced, said in a press release. Soria and state Sen. Anna Caballero, D-Merced, were champions of the Distressed Hospital Loan Program.

Caballero also welcomed the news of the funding. In a press release, she said her “number one priority this year has been to ensure health access for residents and all Californians who desperately need hospital services.”

Madera Community Hospital’s chief executive couldn’t be immediately reached for comment.

In an email statement to The Bee, Adventist Health acknowledged the state decision to award a $2 million bridge loan to help cover operational costs while they take “the time necessary to work with community partners and stakeholders in developing a thoughtful, comprehensive hospital turnaround plan.”

“We will need all parties to be involved in developing the approved plan and negotiating the terms of management services,” Adventist Health spokesperson Japhet De Oliveira said.

State loans are ‘significant concern’ for hospital creditors

Another key moment for the hospital’s future occurred Thursday during a hearing in the U.S. Eastern District of California bankruptcy court, when U.S. Judge René Lastreto II extended the hospital’s exclusivity period for more than a month.

According to the U.S. Bankruptcy Code, this means the Madera Community Hospital now has the exclusive right until Oct. 6 to file a reorganization plan to keep the business alive and pay creditors over time.

Lastreto also pushed back a hearing for the hospital’s cash collateral spending plan for another month, provided the hospital secures another month of funds from the county of Madera, the city of Madera or another third party to cover operational expenses.

While the $2 million bridge loan is forthcoming, Lastreto said there wasn’t a clear timeline yet.

“We still have no cash provided for after the county’s current commitment expires,” he said.

Lastreto said that while the case has been “limping along” for six months, time is running out.

“At some moment,” he said, “I anticipate some sort of motion, either a plan on file, a competing plan, motion to dismiss, because this matter, it just has to get going.”

The Madera County Board of Supervisors voted Aug. 1 to allocate $500,000 to fund Madera Community Hospital’s operating costs while they worked out a deal with Adventist Health and awaited news of the state loan program. On Friday, the board will hold a special session to discuss whether to allocate another month of funding for Madera Community Hospital’s operational expenses.

“I don’t have a vote,” said Jason Rios, Madera County’s legal counsel in the bankruptcy proceedings, “but I would expect the news this morning would be helpful to the process.”

Meanwhile, Andrew Sherman, legal counsel who is representing the unsecured creditors through the bankruptcy proceedings, said the state loans are of “significant concern.”

“I think the next number of weeks will now be a challenge to understand the implications of this loan, how it will affect the (hospital) potential reopening, which is obviously beneficial to the community, but it shouldn’t be at the expense of the creditor body,” he said.

The next cash collateral bankruptcy hearing is scheduled for Sept. 28 at 9:30 am.