UC San Francisco, Adventist Health want to buy Madera Hospital. ‘Firmly committed’

A joint venture to reopen the bankrupt Madera Community Hospital emerged Thursday in what health care leaders and elected officials called a unique opportunity to expand access to quality health care in the Central Valley. The development comes at a time when another suitor is seeking a court’s approval of the management agreement it proposed to reopen the shuttered hospital.

UC San Francisco Health and Adventist Health announced in a news conference with local state legislators that they will join the hospital’s bankruptcy proceedings as prospective buyers of the hospital, which suffered a financial crisis that led to it’s closure more than a year ago. It was the only acute general care hospital for adults in Madera County and served many low income Latino farm workers who also came from surrounding areas.

“We are firmly committed to restoring critical health care services to the Madera community,” said Suresh Gunasekaran, president and CEO of UCSF Health. “We are focused on doing this in a way that keeps care local that ensures that the citizens of the Central Valley are the ones that are taking care of the citizens in the Central Valley.”

Kerry Heinrich, president and CEO of Adventist Health, said this partnership puts together the strongest components of an academic medical system and a medical system committed to serving the underserved. Adventist is a faith-based non-profit health care system that operates in several states.

Madera County Administrative Officer Jay Varney said the Board of Supervisors supports the partnership.

Modesto-based American Advantage Management Inc., which has already proposed a plan to take over management of Madera hospital, said in a statement Thursday evening that changing directions at this stage could lead to “many more months of delays.”

This is Adventist’s second try as a potential player in the future of Madera hospital. It previously showed interest in becoming a reopening partner for Madera hospital, but ultimately pulled out of that deal in November. That was the second time a potential suitor had pulled out of a deal with Madera hospital, embroiled in a lengthy bankruptcy case.

“Adventist Health looked at the circumstances surrounding Madera and realized we just couldn’t do it on our own,” Heinrich said about its past conversations on helping to reopen the hospital.

The partnership between the two systems would not only reopen the hospital, but also bring prestige and stability that rebuilds community trust, said State Sen. Anna Caballero, D-Madera.

A purchase of the hospital by UCSF and Adventist would also mean a change in leadership, Caballero said.

Adventist would take the lead on operations, Gunasekaran said.

“We fully intend to be engaged as well in clinical program development, enhancing the workforce and assisting and ensuring that we have the highest levels of quality,” he said.

What about the American Advanced Management Inc. reopening deal?

Madera hospital has been banking on government approval of its proposed management deal with AAMI, which emerged as its most likely reopening partner in December. The possible deal with AAMI came after a long, tumultuous year in bankruptcy court and attempts to keep Madera hospital from reaching a liquidation stage.

That deal still seeks approval by a federal bankruptcy court and the California Attorney General Rob Bonta on Feb. 13.

AAMI previously announced that, if its management agreement is approved, it would take over management of Madera hospital in March and possibly reopen its doors by late summer.

“We will immediately begin the process of reopening the hospital, a process that will take four to six months,” AAMI said in its statement Thursday. “The path forward with American Advanced Management is not theoretical, to be determined, speculative, or uncertain.”

AAMI also said it has support from community physicians, and that further delays would put lives and health in jeopardy in Madera County.

The company is confident its agreement will be approved next week.

“AAM welcomes UCSF’s support in any way that it would like to offer and would be open to a productive collaboration,” the statement said.

It’s not immediately clear how the arrival of UCSF and Adventist will affect the judge’s decision on the path forward for Madera hospital, which owes millions of dollars to its creditors. According to the Congressional Research Service, bankruptcy proceedings have two objectives: Giving debtors, in this case Madera hospital, a “fresh start” from their financial obligations, and “maximizing total creditor return on debts.”

UCSF and Adventist did not divulge the financial details of their purchase proposal Thursday, citing the need to respect the hospital’s bankruptcy proceedings. They did say their plan includes what happens to the debtors and will engage in talks with their respective counsels “that have expertise in the bankruptcy process and the bidding process.”

Caballero and Assemblymember Esmeralda Soria, D-Fresno, worked together to push a loan program bill through the legislature last year to help hospitals at risk of closure. The Distressed Hospital Loan Program awarded Madera hospital $57 million to help it reopen. For the hospital to access the funding, its management deal would also need approval from the California Department for Health Care Access and Information, which is administering the program.

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On Wednesday, the department filed in court a response to the proposed agreement between Madera hospital and AAMI, noting a problem with the deal’s current draft.

Under this agreement, Madera hospital would be “ineligible for a loan through the Distressed Hospital Loan Program.”

“Under the current (agreement), all revenues, including any profits from the operations of the facility, would accrue to (AAMI),” says the filing, which is signed by Attorney General Bonta. The filing said it expects an updated draft to be submitted.

His office asked the court to allow Madera hospital more time to find the right suitor in December, as increasingly frustrated creditors wanted to move toward liquidation.

To Baldwin Moy, an attorney with California Rural Legal Assistance, the emergence of UCSF and Adventist is a “fantasy come true.” CRLA, a community advocacy group, has been following the bankruptcy proceedings during the past year.

Moy said there is no better arrangement for Madera hospital than one that has the backing of a state university. It’s possible, he said, that the courts take a closer look at how AAMI’s proposal aligns with the goals of the Department for Health Care Access and Information.

Even if the university and Adventist do end up buying the hospital, the road to reopening would be a tough one.

“But at least you would have the right players involved,” Moy said.

A possible Central Valley medical school

Soria told the Bee last year that she hoped the shuttered hospital facility, through partnerships with universities, could become a teaching hospital. UCSF and UC Merced expressed support at that time, mentioning a partnership with each other to expand medical education in the area.

That is a possibility in the partnership between UCSF and Adventist.

“It has the potential to serve as a teaching hospital for Fresno State and UC Merced medical students, and also for the nursing students that are coming out of our community college and university system,” Caballero said.

Soria said this partnership would be an investment in the future and connects the University of California’s mission of public service to the underserved communities of the Central Valley.