Bankrupt Madera hospital could reopen late summer. Why some are ‘cautiously optimistic’

Madera Community Hospital could start seeing patients later this summer if a bankruptcy judge approves their new proposed deal.

On Friday, the hospital’s lawyers said an agreement had been reached with Modesto-based management firm, American Advanced Management Inc., to take over day-to-day operations of Madera hospital and restore emergency and primary care services.

Details of the service agreement were filed in a federal bankruptcy court on Friday, Riley Walter, counsel for the hospital in its bankruptcy proceedings, told The Bee in an email.

Matthew Beehler, chief strategy officer for AAMI, told The Bee on Friday afternoon that “barring anything unforeseen right now, we’re looking at something like 120 days from when the management agreement goes into effect (in late February).”

It’s not immediately clear which services would be restored under this agreement, but statements from hospital leadership indicate that emergency and primary care services are at the top of the list.

“Our goal is to open with as many of the services that had been provided as we can and grow and expand from there,” Beehler said.

Pending approval by a federal bankruptcy court and California Attorney General Rob Bonta, AAMI will take over hospital operations in March and aims to reopen the hospital sometime in July.

A hearing to approve the transaction is scheduled for Tuesday, Feb. 13, at 9:30 am.

“The deal on the table with AAM represents the best opportunity to open the hospital and restore acute care for the residents of Madera County,” CEO Karen Paolinelli said in bankruptcy filings in which she urged a federal bankruptcy judge to approve the transaction.

“I am cautiously optimistic,” said State Sen. Anna Caballero, whose 14th District covers Madera County. Caballero was instrumental in pushing for the state’s emergency loan program alongside Assemblymember Esmeralda Soria of Fresno. The program awarded up to $57 million for Madera hospital to reopen.

“We all have been waiting a long time for this to come together,” Caballero said. “While I wait to see the plan to re-open, and the bankruptcy resolved, I have offered my support to ensure that Madera Hospital re-opens as soon as possible.”

Any agreement is subject to the approval of a bankruptcy judge and the state attorney general. The California Department of Health Care Access and Information, the agency overseeing the loan program, will also have to approve the deal in order for the hospital to access the $57 million in funds.

Before it closed over a year ago after efforts to sell the hospital to owners of Fresno’s Saint Agnes Medical Center, Trinity Health, fell through, the 106-bed Maderal hospital was the only general acute hospital that served Madera County’s 160,000 residents, primarily made up of low-income Latino agricultural workers.

Two failed transactions

Time has been ticking for the Madera hospital to secure a reopening partner after filing for Chapter 11 bankruptcy in March.

In November, the hospital’s creditors filed a plan to liquidate the the hospital’s assets after growing impatient with the amount of time the hospital was taking to propose a reopening plan.

Over the summer, hospital officials announced they planed to partner with faith-based healthcare system, Adventist Health

But in late November, Adventist Health backed out of the deal, because they couldn’t find a “fiscally viable solution for the costly process of reopening and operating a closed facility.” The failed deal marked the second failed effort to sell the hospital or find a financial partner to take over operations.

“The urgency of the financial predicament MCH (Madera Community Hospital) faced made it challenging to attract viable partners willing to navigate the complexities arising from the terminated affiliation and the post-COVID-19 financial strain MCH and many other hospitals faced,” Paolinelli said in a declaration submitted to the court.

Madera hospital then announced in late December they had selected AAMI as a reopening partner.

AAMI made public their interest Madera hospital over the summer, though initial conversations with the hospital began in December 2022, according to court filings. AAMI argued they had a better offer than that of Adventist Health because they had a clear plan to pay back Madera hospital’s creditors.

The deal with AAMI represents a turning of the page in what had initially appeared to be a contentious relationship. In September, Paolinelli and Madera hospital attorneys said in court filings that AAMI leadership tried to “improperly gain a competitive advantage” during the bidding process for a reopening partner when they offered Paolinelli a job and a $150,000 check. Paolinelli did not accept the check and reported the incident. AAMI representatives denied the allegations and said the check was a “signing bonus.”

Details of the reopening plan

Upon approval by the bankruptcy court, AAMI will be responsible for all costs associated with the operation of the hospital in exchange for a management fee. AAMI has committed up to $30 million to pay back the hospital creditors.

The initial agreement is for AAMI to provide management services for an initial period of one year, and can be extended for as long as the parties agree.

AAMI intends to acquire the hospital within three years, according to court filings.

“Our committment is not a temporary one,” Beehler said.