The 11-year-old firm, based in Modesto, was already running a handful of small, rural hospitals, but Madera had far larger and more prestigious suitors, including Trinity Health and then Adventist Health.

After those two entities had backed out, the bankruptcy judge tentatively greenlighted the AAM proposal. But a nonprofit community group later , citing concerns about AAM’s commitment to fully reopen the hospital and airing allegations of “dishonesty, fraud, perjury, and maladministration.”

The Madera Coalition for Community Justice and other critics of the AAM deal hoped that Adventist and the University of California-San Francisco, which made a in February to take over the hospital, might get another look.

But Gov. Gavin Newsom all but ended the drama on April 8 by announcing the the AAM plan and would provide a $57 million loan from a fund for distressed hospitals to help reopen and operate the Madera facility.

The same day, AAM, along with the Madera hospital and its creditors, asked the court to from the record and for the judge to consider the motion. MCCJ pushed back with objecting to the request.

The closure of the hospital in left Madera County, home to 160,000 people, largely Hispanic agricultural workers, without a general acute care facility. Like many rural hospitals in California and around the country, the Madera hospital had suffered financial and demographic challenges, including a large proportion of patients on low-paying government insurance programs, low patient volumes, and difficulty attracting talent, in addition to pandemic-related pressures.

AAM has committed to pay to creditors and reopen the hospital as soon as late summer. The company has a portfolio of nine hospitals, many of them in underserved regions of California.

“American Advanced Management has a proven track record of reopening closed hospitals in California and saving others from the brink of closure,” said Matthew Beehler, the company’s chief strategy officer.

It remains uncertain whether AAM can make the Madera hospital financially viable. Reopening alone will cost millions, and many of the same constraints that led to the bankruptcy remain. In its final two years of operations, the Madera hospital lost $14 million.

Beehler said AAM would aim for “operational efficiency” through centralized administration and “elevate the quality of care” to attract more patients. “These strategic investments and improvements are designed to stabilize the hospital’s financial footing and ensure its sustainability in the long term,” he said.

According to a by the Pittsburgh-based Center for Healthcare Quality and Payment Reform, 30% of California’s 56 rural hospitals and the same percentage of rural hospitals nationwide are at risk of closing.

“The economics of small hospitals is such that it is unlikely they are going to be highly profitable,” said Harold Miller, the center’s CEO.

The group objecting to AAM, along with many members of the community, are particularly worried that the company won’t reopen the Madera hospital’s labor and delivery department, where over in 2022.

Labor and delivery at many rural hospitals are among the first services new owners cut because they tend to lose money, said Ge Bai, professor of health policy and management at Johns Hopkins University’s Bloomberg School of Public Health.

Beehler said a reopened Madera would provide “many of the ancillary services” related to pregnancy and that AAM would “regularly evaluate” whether it makes financial and clinical sense to have a labor and delivery unit at the hospital.

‘Someone Has to Take a Stand’

AAM is the brainchild of Gurpreet Singh Randhawa, who says he is its sole owner.

Singh, a gastroenterologist-turned-entrepreneur, has amassed hospitals and other health care-related companies, as well as numerous real estate holdings. dozens of businesses that are or have been associated with Singh.

After graduating from medical school in India in 2000, Singh completed further training in New York and New Jersey before moving to California in 2008. In an interview, Singh said he was inspired to open his first hospital after seeing a friend drive three hours round trip to the Sacramento area every day to visit his father in a long-term acute care hospital because Modesto didn’t have one of its own.

Singh said he thought “‘someone has to take a stand,’ so I took that stand.” He said he spent $36 million to at the site of a shuttered facility in Modesto. It opened in mid-2013, marking the beginning of AAM.

Since then, AAM has acquired numerous hospitals and clinics in Northern California and the Central Valley, including Colusa Medical Center and Glenn Medical Center in 2017, Sonoma Specialty Hospital in 2019, and Coalinga Regional Medical Center in 2020.

In 2023, the firm took over management of the troubled Orchard Hospital in Gridley, California. Last September, AAM announced it had taken over operations of Kentfield Specialty Hospital, with locations in San Francisco and Marin County. It also owns a rehabilitation hospital in Amarillo, Texas.

AAM lost a combined $22.3 million in 2021 and 2022, state data shows. But Beehler said the company returned to profitability in 2023 and expects profit margins in the high single digits this year. He estimated that AAM’s total operating revenue will jump to approximately $400 million in 2024 from $290 million in 2023, mainly due to the addition of three hospitals.

The source of the funds to finance the company’s growth is not entirely clear. Singh cited family wealth and real estate, but he declined to discuss his family’s money. The firm’s agreement with the Madera hospital says AAM will have “” to meet its obligations. The $57 million approved by the state this week will be a key source of funding.

Beehler said another source of cash to finance growth is AAM’s earnings on longer-term care. Central Valley Specialty Hospital has been profitable since its first full year of operations in 2014, posting cumulative earnings of over $66 million through 2022, according to data from the state’s Department of Health Care Access and Information. Coalinga Regional Medical Center has a 99-bed skilled nursing facility in addition to its acute care beds, and Sonoma Specialty Hospital recently added 21 beds, according to Beehler.

Acute vs. Long-Term Care

Critics fear AAM might take the Madera hospital in the direction of long-term care, depriving the community of a viable acute care facility. Cece Gallegos, who recently lost her bid for a seat on the Madera County Board of Supervisors, said in a campaign mailer that the firm would turn Madera into “a glorified nursing home.”

Beehler rebuffed that notion, saying the company couldn’t do that even if it wanted to. He said the conditions imposed by the state attorney general “require an acute care hospital with fully functional ER and ancillary services.” The , however, require AAM only to make “commercially reasonable efforts” to provide those services.

Singh and his health care businesses have hit plenty of bumps as they’ve grown.

In 2018, AAM took over management of Sonoma West Medical Center, a publicly owned hospital in the city of Sebastopol that had declared bankruptcy. In 2019, AAM acquired it outright and changed its name to Sonoma Specialty Hospital. Later that year, a bankruptcy trustee sued Singh, AAM, and the hospital for allegedly taking money that belonged to its predecessor, and the parties . Beehler said AAM did not retain any of the money but used it for hospital operations and became “an unintended victim.” The company chose to settle, he said, “to bring finality to this complex issue.”

In 2021, the state fined AAM’s Pacific Gardens Medical Center $276,000 for that put patients in “,” including one in which inadequate training caused an intravenous to drip into a patient nearly seven times as rapidly as the doctor had ordered.

AAM had reopened the hospital in January 2021, about three years after buying it out of bankruptcy. Its license was suspended less than five months later, according to the California Department of Public Health. Beehler said the hospital had reopened as a pandemic surge hospital with support, including the provision of nurses and physicians, from the state’s Emergency Medical Services Authority. “By its nature, a surge facility opening is temporary,” he said.

The accelerated timeline for getting it open contributed to the patient-jeopardy situations, he said.

In 2022, the California Department of Health Care Services sued , Singh, and AAM, accusing them of illegitimately seeking, and accepting, $270,000 from a program that provides federal financing for certain public hospitals.

DHCS said it had told AAM that it wasn’t eligible for the money, because it was now a for-profit facility, but that the company refused to pay it back. In February, a Sonoma County . DHCS spokesperson Leah Myers said in an emailed statement that the state does not typically have to sue to recover money. Beehler said AAM “disputes that there is any liability” and is appealing the decision.

Another Singh venture was Advanced College, a private vocational school for health care professionals with three locations in central and Southern California. After receiving numerous complaints, state regulators in December 2022, alleging it had falsified records and test results, and “failed to provide documentation of sufficient financial resources.”

Joshua Maruca, the school’s custodian of records, said Advanced College disagreed with the state’s allegations but had already been planning to shut down for other reasons, so it did not contest them.

Bank of the West and several of his businesses for repeated defaults on over $4.7 million in loans, mostly related to the college. The lawsuit was settled, but one of the bank’s lawyers, Wayne Terry, said he could not discuss the settlement. Beehler said the loans were not part of AAM’s financials. The bank was “paid fully,” he said.

The company’s critics say the state didn’t sufficiently scrutinize AAM before approving the loan and the operating plan this week.

“The state agencies and the Attorney General, all tasked here with protecting the public interest, have utterly failed to do the basic due diligence that would ensure Madera Community Hospital is resurrected as a viable going concern, under the stewardship of a reliable, trustworthy, and capable operator,” the MCCJ said in the court filing opposing the challenge to its objection.

AAM said in a statement that it was “grateful” to Newsom and the state for approving the deal, and “honored to serve the Madera community.” The bankruptcy court is likely to give its final blessing next week.

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Now, with the nonprofit Madera, California, hospital bankrupt and shuttered, St. Agnes looms as a dark knight, pushing to liquidate the hospital to get a loan it made to Madera paid back — even if that means dashing the hopes of the community activists, political leaders, and health care officials that the hospital can still reopen.

A pivotal moment in the case could come July 25, when a bankruptcy judge in Fresno will hear arguments on whether the Madera hospital should be allowed to spend its dwindling cash reserves on things such as building maintenance, security, utilities, and the salaries of its three top executives.

The hospital wants to run a skeletal operation while it seeks a buyer and develops a reopening plan. But the federal bankruptcy court in Fresno has authorized it to spend money . If the judge doesn’t think the hospital has a viable plan, he may refuse an extension, which would likely mean liquidation.

Problems like Madera’s are common among other small, financially challenged hospitals in California and nationwide. They typically have low patient volumes and rely disproportionately on payments from Medicaid and Medicare, which constrains revenue and makes it difficult to attract talent or invest in cutting-edge equipment. Add to the mix a crushing surge in expenses stemming from the covid-19 pandemic, and dozens of such facilities are struggling to survive. , both in California, have filed for bankruptcy this year.

Yet Madera had problems that were all of its own making. The hospital made money on patients insured by Medi-Cal, the state safety-net insurance program that pays notoriously low rates, according to financial data filed with state regulators. But it lost money on its commercially insured patients due to low volume and bad deals with insurance providers. It also funds in a timely manner. A state hospital came too late.

Plus, Madera had no backup plan when St. Agnes and its parent company, the hospital chain Trinity Health, walked away from a proposed merger with the troubled hospital late last year, giving virtually no notice and scant explanation. Their move shocked and infuriated officials, former employees, and community advocates in Madera and Sacramento.

In a brief , St. Agnes and Trinity blamed their decision on “complex circumstances” and “additional conditions” imposed by state Attorney General Rob Bonta. But industry experts said Bonta had agreed to most of what St. Agnes asked for and were baffled as to why they walked away from the deal.

The spectacle of St. Agnes and Trinity now pushing in court for the liquidation of tiny Madera has drawn Bonta’s ire.

“For Trinity, it was always about profit, not the health of the Madera community,” Bonta told Â鶹ŮÓÅ Health News in a statement. “They are now attempting to use their position as Madera’s biggest creditor to extract every dollar possible, instead of keeping the community’s interests at heart.”

Bonta said his office had “offered maximum flexibility to Trinity in recognition of Madera’s financial circumstances.”

An agricultural area of 2,150 square miles and home to nearly 160,000 people, Madera County is 60% Hispanic, and more than one-fifth of its residents live below the poverty line, according to census data.

A Community Left in the Lurch

Jennifer Lara, a former Madera Community Hospital nursing assistant, said she and colleagues had been looking forward to positive change after the anticipated merger with St. Agnes. “We were floored when we found out the hospital was closing,” she said. “We didn’t think anything other than the hospital continuing on was going to happen.”

St. Agnes and Trinity declined to comment. The longtime CEO of St. Agnes, Nancy Hollingsworth, retired in May amid a reorganization that made the hospital part of a regional group based in Idaho. It’s unclear whether her departure was related to the collapse of the Madera deal. Hollingsworth could not be reached for comment.

St. Agnes’ considerable leverage in the bankruptcy case is the result of a $15.4 million loan it extended to Madera during merger talks last year. Madera has since repaid $8 million, leaving a debt of over $7 million, which still makes St. Agnes its largest creditor.

St. Agnes, one of 88 hospitals belonging to Trinity, a multistate, Catholic, nonprofit health system headquartered in Livonia, Michigan, argued in a recent that Madera still has made no significant progress finding a buyer, more than four months after filing for Chapter 11 bankruptcy protection , and should not be allowed to continue spending money “without a serious path forward to either sell or mothball the hospital.”

The hospital has been talking to three potential partners, “one of whom is late to the game,” said Riley Walter, Madera’s bankruptcy lawyer.

Mohammad Ashraf, a cardiologist and member of the executive committee of Madera’s medical staff, said the first two entities in question, whom he declined to identify, are management service organizations, not hospital groups. “They don’t want to spend any money to buy it. They just want to run it,” he said.

Without a convincing strategy for the future of Madera Community Hospital, the end of the bankruptcy case could come quickly.

Ranjit S. Rajpal, a Madera cardiologist for over 40 years, said the closure of the hospital is bad news for patients who need time-sensitive care, such as for heart attacks, strokes, or other traumas, and who now must travel greater distances to get it.

And the closure will exacerbate existing health inequities for people who face challenges getting care because of immigration status, language barriers, lack of transportation, or other socioeconomic factors, he said. “Those disparities will be compounded as time goes by.”

Community leaders and the hospital’s leadership hold out hope for reopening. The hospital has applied for $80 million from California’s new, $300 million loan fund for distressed hospitals. Hospital leaders must produce a reopening plan by July 31, but even if it does, it’s unlikely to get the full requested amount: Sixteen hospitals have already applied for loans totaling over $385 million, said Joe DeAnda, spokesperson for the California State Treasurer’s Office.

“They’re not going to give a quarter of their total fund to one hospital that doesn’t even have a partner,” said Glenn Melnick, a health economist at the University of Southern California who commissioned by the AG’s office of the proposed St. Agnes-Madera merger. “Eighteen months ago, the ask would have been a lot smaller.”

Even if Madera Community Hospital finds a viable partner and gets the funding it needs, reopening would be daunting and expensive. The hospital would need to hire hundreds of nurses, technicians, and other staffers in a tight and expensive health care labor market and find a way to avoid the financial problems that landed it in bankruptcy.

“Some things an acute care hospital offers are profitable, and others are not,” said Jay Varney, Madera County’s administrative officer, whose role is akin to a CEO. “It doesn’t make much sense to have it reopen like it was and have it go bankrupt again.”

‘Running Out of Time’

Reopening the facility with all the services it provided before is not the only option. Baldwin Moy, an attorney for California Rural Legal Assistance, a community advocacy group, said he and colleagues have been arguing for the court to allow Madera additional time either to find a buyer or for the county “to put together a package that can reopen the emergency room with some stripped-down clinical operation.” But, Moy said, they are “running out of time.”

Karen Paolinelli, the hospital’s CEO, said the current suitors are interested in reopening it as an acute care facility that “may or may not have all services that were previously offered by Madera Hospital on day one.”

If the hospital can hold out for a few more months, it says, $23.5 million owed by the state for “provider fees,” and possibly an additional $10 million from the Federal Emergency Management Agency. Those payments would more than cover the hospital’s entire debt of $30 million. But the amount and timing of payments are unclear.

Paolinelli, voicing a common industry complaint, said the hospital has a disproportionately high number of Medi-Cal patients and Medi-Cal rates do not cover the cost of providing care. But shows that Madera received enough supplemental payments to earn nearly $15 million from Medi-Cal in 2021, though it lost over $11 million treating Medicare patients. Madera also lost about $6.8 million on commercially insured patients in 2021, the state data shows. Commercial insurance payments covered only 59.5% of what it cost to care for those patients. That compares with a statewide average of 156%, according to Melnick.

Paolinelli said Madera tried to negotiate better rates with commercial health plans but “does not have much leverage with the payors.” She added that many residents of Madera who get commercial insurance through their employers choose Kaiser Permanente, whose nearest acute care hospital is in Fresno, 20 miles away.

State Democratic Sen. Anna Caballero, whose district includes parts of Madera, Merced, and Fresno counties, said that if Madera Community Hospital were to successfully reopen, more people with commercial insurance would have to choose it over other hospitals outside the county, which they had not been doing frequently.

“The county and the city may need to say, ‘If you need hospitalization, you need to go to Madera, and there will be no copay, but if you go out of the county, there’s a copay you have to pay,’” Caballero said.

But with no clear path to reopening yet in sight, Caballero said, that discussion is premature.

Melissa Montalvo covers Latino communities for The Fresno Bee as part of the Central Valley News Collaborative, a partnership that includes The Fresno Bee, Vida en el Valle, Valley Public Radio, and Radio Bilingüe. This article is part of the Central Valley News Collaborative, which is supported by the Central Valley Community Foundation with technology and training support from Microsoft Corp.

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The 11-year-old firm, based in Modesto, was already running a handful of small, rural hospitals, but Madera had far larger and more prestigious suitors, including Trinity Health and then Adventist Health.

After those two entities had backed out, the bankruptcy judge tentatively greenlighted the AAM proposal. But a nonprofit community group later , citing concerns about AAM’s commitment to fully reopen the hospital and airing allegations of “dishonesty, fraud, perjury, and maladministration.”

The Madera Coalition for Community Justice and other critics of the AAM deal hoped that Adventist and the University of California-San Francisco, which made a in February to take over the hospital, might get another look.

But Gov. Gavin Newsom all but ended the drama on April 8 by announcing the the AAM plan and would provide a $57 million loan from a fund for distressed hospitals to help reopen and operate the Madera facility.

The same day, AAM, along with the Madera hospital and its creditors, asked the court to from the record and for the judge to consider the motion. MCCJ pushed back with objecting to the request.

The closure of the hospital in left Madera County, home to 160,000 people, largely Hispanic agricultural workers, without a general acute care facility. Like many rural hospitals in California and around the country, the Madera hospital had suffered financial and demographic challenges, including a large proportion of patients on low-paying government insurance programs, low patient volumes, and difficulty attracting talent, in addition to pandemic-related pressures.

AAM has committed to pay to creditors and reopen the hospital as soon as late summer. The company has a portfolio of nine hospitals, many of them in underserved regions of California.

“American Advanced Management has a proven track record of reopening closed hospitals in California and saving others from the brink of closure,” said Matthew Beehler, the company’s chief strategy officer.

It remains uncertain whether AAM can make the Madera hospital financially viable. Reopening alone will cost millions, and many of the same constraints that led to the bankruptcy remain. In its final two years of operations, the Madera hospital lost $14 million.

Beehler said AAM would aim for “operational efficiency” through centralized administration and “elevate the quality of care” to attract more patients. “These strategic investments and improvements are designed to stabilize the hospital’s financial footing and ensure its sustainability in the long term,” he said.

According to a by the Pittsburgh-based Center for Healthcare Quality and Payment Reform, 30% of California’s 56 rural hospitals and the same percentage of rural hospitals nationwide are at risk of closing.

“The economics of small hospitals is such that it is unlikely they are going to be highly profitable,” said Harold Miller, the center’s CEO.

The group objecting to AAM, along with many members of the community, are particularly worried that the company won’t reopen the Madera hospital’s labor and delivery department, where over in 2022.

Labor and delivery at many rural hospitals are among the first services new owners cut because they tend to lose money, said Ge Bai, professor of health policy and management at Johns Hopkins University’s Bloomberg School of Public Health.

Beehler said a reopened Madera would provide “many of the ancillary services” related to pregnancy and that AAM would “regularly evaluate” whether it makes financial and clinical sense to have a labor and delivery unit at the hospital.

‘Someone Has to Take a Stand’

AAM is the brainchild of Gurpreet Singh Randhawa, who says he is its sole owner.

Singh, a gastroenterologist-turned-entrepreneur, has amassed hospitals and other health care-related companies, as well as numerous real estate holdings. dozens of businesses that are or have been associated with Singh.

After graduating from medical school in India in 2000, Singh completed further training in New York and New Jersey before moving to California in 2008. In an interview, Singh said he was inspired to open his first hospital after seeing a friend drive three hours round trip to the Sacramento area every day to visit his father in a long-term acute care hospital because Modesto didn’t have one of its own.

Singh said he thought “‘someone has to take a stand,’ so I took that stand.” He said he spent $36 million to at the site of a shuttered facility in Modesto. It opened in mid-2013, marking the beginning of AAM.

Since then, AAM has acquired numerous hospitals and clinics in Northern California and the Central Valley, including Colusa Medical Center and Glenn Medical Center in 2017, Sonoma Specialty Hospital in 2019, and Coalinga Regional Medical Center in 2020.

In 2023, the firm took over management of the troubled Orchard Hospital in Gridley, California. Last September, AAM announced it had taken over operations of Kentfield Specialty Hospital, with locations in San Francisco and Marin County. It also owns a rehabilitation hospital in Amarillo, Texas.

AAM lost a combined $22.3 million in 2021 and 2022, state data shows. But Beehler said the company returned to profitability in 2023 and expects profit margins in the high single digits this year. He estimated that AAM’s total operating revenue will jump to approximately $400 million in 2024 from $290 million in 2023, mainly due to the addition of three hospitals.

The source of the funds to finance the company’s growth is not entirely clear. Singh cited family wealth and real estate, but he declined to discuss his family’s money. The firm’s agreement with the Madera hospital says AAM will have “” to meet its obligations. The $57 million approved by the state this week will be a key source of funding.

Beehler said another source of cash to finance growth is AAM’s earnings on longer-term care. Central Valley Specialty Hospital has been profitable since its first full year of operations in 2014, posting cumulative earnings of over $66 million through 2022, according to data from the state’s Department of Health Care Access and Information. Coalinga Regional Medical Center has a 99-bed skilled nursing facility in addition to its acute care beds, and Sonoma Specialty Hospital recently added 21 beds, according to Beehler.

Acute vs. Long-Term Care

Critics fear AAM might take the Madera hospital in the direction of long-term care, depriving the community of a viable acute care facility. Cece Gallegos, who recently lost her bid for a seat on the Madera County Board of Supervisors, said in a campaign mailer that the firm would turn Madera into “a glorified nursing home.”

Beehler rebuffed that notion, saying the company couldn’t do that even if it wanted to. He said the conditions imposed by the state attorney general “require an acute care hospital with fully functional ER and ancillary services.” The , however, require AAM only to make “commercially reasonable efforts” to provide those services.

Singh and his health care businesses have hit plenty of bumps as they’ve grown.

In 2018, AAM took over management of Sonoma West Medical Center, a publicly owned hospital in the city of Sebastopol that had declared bankruptcy. In 2019, AAM acquired it outright and changed its name to Sonoma Specialty Hospital. Later that year, a bankruptcy trustee sued Singh, AAM, and the hospital for allegedly taking money that belonged to its predecessor, and the parties . Beehler said AAM did not retain any of the money but used it for hospital operations and became “an unintended victim.” The company chose to settle, he said, “to bring finality to this complex issue.”

In 2021, the state fined AAM’s Pacific Gardens Medical Center $276,000 for that put patients in “,” including one in which inadequate training caused an intravenous to drip into a patient nearly seven times as rapidly as the doctor had ordered.

AAM had reopened the hospital in January 2021, about three years after buying it out of bankruptcy. Its license was suspended less than five months later, according to the California Department of Public Health. Beehler said the hospital had reopened as a pandemic surge hospital with support, including the provision of nurses and physicians, from the state’s Emergency Medical Services Authority. “By its nature, a surge facility opening is temporary,” he said.

The accelerated timeline for getting it open contributed to the patient-jeopardy situations, he said.

In 2022, the California Department of Health Care Services sued , Singh, and AAM, accusing them of illegitimately seeking, and accepting, $270,000 from a program that provides federal financing for certain public hospitals.

DHCS said it had told AAM that it wasn’t eligible for the money, because it was now a for-profit facility, but that the company refused to pay it back. In February, a Sonoma County . DHCS spokesperson Leah Myers said in an emailed statement that the state does not typically have to sue to recover money. Beehler said AAM “disputes that there is any liability” and is appealing the decision.

Another Singh venture was Advanced College, a private vocational school for health care professionals with three locations in central and Southern California. After receiving numerous complaints, state regulators in December 2022, alleging it had falsified records and test results, and “failed to provide documentation of sufficient financial resources.”

Joshua Maruca, the school’s custodian of records, said Advanced College disagreed with the state’s allegations but had already been planning to shut down for other reasons, so it did not contest them.

Bank of the West and several of his businesses for repeated defaults on over $4.7 million in loans, mostly related to the college. The lawsuit was settled, but one of the bank’s lawyers, Wayne Terry, said he could not discuss the settlement. Beehler said the loans were not part of AAM’s financials. The bank was “paid fully,” he said.

The company’s critics say the state didn’t sufficiently scrutinize AAM before approving the loan and the operating plan this week.

“The state agencies and the Attorney General, all tasked here with protecting the public interest, have utterly failed to do the basic due diligence that would ensure Madera Community Hospital is resurrected as a viable going concern, under the stewardship of a reliable, trustworthy, and capable operator,” the MCCJ said in the court filing opposing the challenge to its objection.

AAM said in a statement that it was “grateful” to Newsom and the state for approving the deal, and “honored to serve the Madera community.” The bankruptcy court is likely to give its final blessing next week.

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Now, with the nonprofit Madera, California, hospital bankrupt and shuttered, St. Agnes looms as a dark knight, pushing to liquidate the hospital to get a loan it made to Madera paid back — even if that means dashing the hopes of the community activists, political leaders, and health care officials that the hospital can still reopen.

A pivotal moment in the case could come July 25, when a bankruptcy judge in Fresno will hear arguments on whether the Madera hospital should be allowed to spend its dwindling cash reserves on things such as building maintenance, security, utilities, and the salaries of its three top executives.

The hospital wants to run a skeletal operation while it seeks a buyer and develops a reopening plan. But the federal bankruptcy court in Fresno has authorized it to spend money . If the judge doesn’t think the hospital has a viable plan, he may refuse an extension, which would likely mean liquidation.

Problems like Madera’s are common among other small, financially challenged hospitals in California and nationwide. They typically have low patient volumes and rely disproportionately on payments from Medicaid and Medicare, which constrains revenue and makes it difficult to attract talent or invest in cutting-edge equipment. Add to the mix a crushing surge in expenses stemming from the covid-19 pandemic, and dozens of such facilities are struggling to survive. , both in California, have filed for bankruptcy this year.

Yet Madera had problems that were all of its own making. The hospital made money on patients insured by Medi-Cal, the state safety-net insurance program that pays notoriously low rates, according to financial data filed with state regulators. But it lost money on its commercially insured patients due to low volume and bad deals with insurance providers. It also funds in a timely manner. A state hospital came too late.

Plus, Madera had no backup plan when St. Agnes and its parent company, the hospital chain Trinity Health, walked away from a proposed merger with the troubled hospital late last year, giving virtually no notice and scant explanation. Their move shocked and infuriated officials, former employees, and community advocates in Madera and Sacramento.

In a brief , St. Agnes and Trinity blamed their decision on “complex circumstances” and “additional conditions” imposed by state Attorney General Rob Bonta. But industry experts said Bonta had agreed to most of what St. Agnes asked for and were baffled as to why they walked away from the deal.

The spectacle of St. Agnes and Trinity now pushing in court for the liquidation of tiny Madera has drawn Bonta’s ire.

“For Trinity, it was always about profit, not the health of the Madera community,” Bonta told Â鶹ŮÓÅ Health News in a statement. “They are now attempting to use their position as Madera’s biggest creditor to extract every dollar possible, instead of keeping the community’s interests at heart.”

Bonta said his office had “offered maximum flexibility to Trinity in recognition of Madera’s financial circumstances.”

An agricultural area of 2,150 square miles and home to nearly 160,000 people, Madera County is 60% Hispanic, and more than one-fifth of its residents live below the poverty line, according to census data.

A Community Left in the Lurch

Jennifer Lara, a former Madera Community Hospital nursing assistant, said she and colleagues had been looking forward to positive change after the anticipated merger with St. Agnes. “We were floored when we found out the hospital was closing,” she said. “We didn’t think anything other than the hospital continuing on was going to happen.”

St. Agnes and Trinity declined to comment. The longtime CEO of St. Agnes, Nancy Hollingsworth, retired in May amid a reorganization that made the hospital part of a regional group based in Idaho. It’s unclear whether her departure was related to the collapse of the Madera deal. Hollingsworth could not be reached for comment.

St. Agnes’ considerable leverage in the bankruptcy case is the result of a $15.4 million loan it extended to Madera during merger talks last year. Madera has since repaid $8 million, leaving a debt of over $7 million, which still makes St. Agnes its largest creditor.

St. Agnes, one of 88 hospitals belonging to Trinity, a multistate, Catholic, nonprofit health system headquartered in Livonia, Michigan, argued in a recent that Madera still has made no significant progress finding a buyer, more than four months after filing for Chapter 11 bankruptcy protection , and should not be allowed to continue spending money “without a serious path forward to either sell or mothball the hospital.”

The hospital has been talking to three potential partners, “one of whom is late to the game,” said Riley Walter, Madera’s bankruptcy lawyer.

Mohammad Ashraf, a cardiologist and member of the executive committee of Madera’s medical staff, said the first two entities in question, whom he declined to identify, are management service organizations, not hospital groups. “They don’t want to spend any money to buy it. They just want to run it,” he said.

Without a convincing strategy for the future of Madera Community Hospital, the end of the bankruptcy case could come quickly.

Ranjit S. Rajpal, a Madera cardiologist for over 40 years, said the closure of the hospital is bad news for patients who need time-sensitive care, such as for heart attacks, strokes, or other traumas, and who now must travel greater distances to get it.

And the closure will exacerbate existing health inequities for people who face challenges getting care because of immigration status, language barriers, lack of transportation, or other socioeconomic factors, he said. “Those disparities will be compounded as time goes by.”

Community leaders and the hospital’s leadership hold out hope for reopening. The hospital has applied for $80 million from California’s new, $300 million loan fund for distressed hospitals. Hospital leaders must produce a reopening plan by July 31, but even if it does, it’s unlikely to get the full requested amount: Sixteen hospitals have already applied for loans totaling over $385 million, said Joe DeAnda, spokesperson for the California State Treasurer’s Office.

“They’re not going to give a quarter of their total fund to one hospital that doesn’t even have a partner,” said Glenn Melnick, a health economist at the University of Southern California who commissioned by the AG’s office of the proposed St. Agnes-Madera merger. “Eighteen months ago, the ask would have been a lot smaller.”

Even if Madera Community Hospital finds a viable partner and gets the funding it needs, reopening would be daunting and expensive. The hospital would need to hire hundreds of nurses, technicians, and other staffers in a tight and expensive health care labor market and find a way to avoid the financial problems that landed it in bankruptcy.

“Some things an acute care hospital offers are profitable, and others are not,” said Jay Varney, Madera County’s administrative officer, whose role is akin to a CEO. “It doesn’t make much sense to have it reopen like it was and have it go bankrupt again.”

‘Running Out of Time’

Reopening the facility with all the services it provided before is not the only option. Baldwin Moy, an attorney for California Rural Legal Assistance, a community advocacy group, said he and colleagues have been arguing for the court to allow Madera additional time either to find a buyer or for the county “to put together a package that can reopen the emergency room with some stripped-down clinical operation.” But, Moy said, they are “running out of time.”

Karen Paolinelli, the hospital’s CEO, said the current suitors are interested in reopening it as an acute care facility that “may or may not have all services that were previously offered by Madera Hospital on day one.”

If the hospital can hold out for a few more months, it says, $23.5 million owed by the state for “provider fees,” and possibly an additional $10 million from the Federal Emergency Management Agency. Those payments would more than cover the hospital’s entire debt of $30 million. But the amount and timing of payments are unclear.

Paolinelli, voicing a common industry complaint, said the hospital has a disproportionately high number of Medi-Cal patients and Medi-Cal rates do not cover the cost of providing care. But shows that Madera received enough supplemental payments to earn nearly $15 million from Medi-Cal in 2021, though it lost over $11 million treating Medicare patients. Madera also lost about $6.8 million on commercially insured patients in 2021, the state data shows. Commercial insurance payments covered only 59.5% of what it cost to care for those patients. That compares with a statewide average of 156%, according to Melnick.

Paolinelli said Madera tried to negotiate better rates with commercial health plans but “does not have much leverage with the payors.” She added that many residents of Madera who get commercial insurance through their employers choose Kaiser Permanente, whose nearest acute care hospital is in Fresno, 20 miles away.

State Democratic Sen. Anna Caballero, whose district includes parts of Madera, Merced, and Fresno counties, said that if Madera Community Hospital were to successfully reopen, more people with commercial insurance would have to choose it over other hospitals outside the county, which they had not been doing frequently.

“The county and the city may need to say, ‘If you need hospitalization, you need to go to Madera, and there will be no copay, but if you go out of the county, there’s a copay you have to pay,’” Caballero said.

But with no clear path to reopening yet in sight, Caballero said, that discussion is premature.

Melissa Montalvo covers Latino communities for The Fresno Bee as part of the Central Valley News Collaborative, a partnership that includes The Fresno Bee, Vida en el Valle, Valley Public Radio, and Radio Bilingüe. This article is part of the Central Valley News Collaborative, which is supported by the Central Valley Community Foundation with technology and training support from Microsoft Corp.

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