Gov. Newsom approves Madera hospital loan. Critics say there was no ‘due diligence’

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The shuttered Madera Community Hospital got a multi-million dollar infusion of cash as well as the green light to reopen by state hospital regulators.

California Gov. Gavin Newsom announced Monday that a $57 million state loan for the Madera hospital has been approved, a key source of funding to help reopen the hospital and part of a statewide $300 million distressed hospital loan fund.

The state also signed off on a change of management that was approved by a federal bankruptcy court in February: The hospital will now be managed by Modesto-based hospital management firm, American Advanced Management Inc. The firm was selected as the reopening suitor in December after would-be deals with major nonprofit hospital chains Trinity Health and Adventist Health fell through.

“Getting this hospital back open and on its feet financially will allow Madera County residents to get the care they need — in their own community,” Newsom said in a news release. “We are doing everything we can at the state level to keep crucial health care access points open and accessible – a key pillar in keeping our promise of a Healthier California for All.”

The approval comes at a time that some are asking a federal bankruptcy judge to take a closer look at the new management firm’s track record. Last month, a Madera-based nonprofit filed an objection to the planned takeover in federal bankruptcy court.

AAMI’s Chief Strategy Officer Matthew Beehler thanked Newsom and the multiple state agencies working hard behind the scenes in a press release Monday afternoon. In a statement to The Bee, Madera Community Hospital CEO Karen Paolinelli also thanked the governor and local legislators. The hospital “is now poised to embark on a path forward with American Advanced Management to restore the healthcare services to our community,” she said.

State Sen. Anna Caballero of Merced said in a news release she is “cautiously optimistic that our work over the last two years will result in the successful reopening of the hospital.”

“Today I’m pretty excited,” 27th District Assemblymember Esmeralda Soria said in an interview with The Bee on Monday afternoon. “My whole goal and my top priority has been to figure out a pathway to reopen the hospital.”

But Patience Milrod, counsel for Madera Coalition for Community Justice, the nonprofit group that filed the court objection, criticized the state’s decision.

“We, as residents of California, count on the Attorney General, we count on our Department of Health Care Services. We count on the California Department of Public Health, to be good stewards of our tax dollars and to be watchdogs for us and to make sure that our hospitals are run by people who are capable of running hospitals,” Milrod said. “What has happened here is that there was no due diligence.”

The 106-bed hospital closed in January 2023 and has left Madera County’s 160,000 primarily low-income Latino residents without a general acute care facility for adults. The hospital filed for Chapter 11 bankruptcy last March.

Some are calling for more due-diligence of firm

Last month, Milrod filed an objection to the plan on behalf of MCCJ and has asked the judge to schedule an evidentiary hearing to examine the firm’s track record.

The objection cites a number of lawsuits against AAM, as well as state regulatory enforcement action against a for-profit vocational college owned by AAM’s owner, Dr. Gurpreet Singh. The group is asking the bankruptcy judge to put more conditions and requirements on the deal to ensure the firm restores hospital with essential services.

“Those troubling facts — which the press has uncovered, the Madera Coalition for Community Justice has submitted, they really should be part of the conversation,” Milrod said.

The governor’s office and Caballero did not respond to specific questions by The Bee’s deadline about the objection or the concerns raised.

Beehler of AAM said in a statement to The Bee there are “significant oversight structures” over the loan program.

“AAM will be responding to that objection through bankruptcy court in a manner that is respectful of the process and the court,” he said.

Soria acknowledge she received a “synopsis” of the allegations raised in the objection, but that she trusts the state health agencies and leadership that have spent months evaluating the reopening plan.

“If we just continue to delay, it’s going to get much harder to reopen,” she said.

Caballero, Soria, as well as Madera County officials, threw their support behind another last-minute proposal by UCSF-Health and nonprofit healthcare system Adventist Health announced in February. But U.S. Judge René Lastreto said the deal had come too late in the process.

Soria also said she doesn’t think today’s decision precludes any future opportunities to team up with the UC system, such as the UC Merced medical school.

“Ideally, I would have wanted the UC (system involved in reopening Madera hospital) way long ago, but the timing didn’t work,” she said.

When will Madera hospital reopen?

Madera Community Hospital could reopen sometime this summer, according to AAMI’s projected timeline.

“Our teams have already started making significant progress on the path to reopen this hospital,” Beehler said Monday.

He also said AAM will announce job fairs and employment opportunities at Madera Community Hospital in the coming months.

Bankruptcy court filings indicate AAM plans to reopen the hospital with a basic services Level 3 Emergency Department, Med/Surg Units, Intensive Care Unit, the rural health clinic onsite at Madera hospital’s campus and all necessary ancillary services.

A court hearing is scheduled for April 16.