The Madera hospital closed in January. Why does it still have more than 30 employees?

Two months after Madera Community Hospital closed its doors and laid off most of its staff, it continues to employ certain workers including its chief executive officer who this week held out the possibility for a reopening.

The Fresno Bee confirmed that CEO Karen Paolinelli and other “necessary” employees are working after the hospital was shuttered in January. The nonprofit hospital also has not yet filed for bankruptcy, despite a December statement saying the hospital was going to “file bankruptcy on January 3, 2023 at 12:00 a.m.”

As of Friday, the hospital expects to have around 32 workers on its payroll, Paolinelli told The Bee during an interview.

Paolinelli didn’t provide the amount the hospital is paying in salaries — including her own, which she said she believed she didn’t have to disclose. Paolinelli in 2019-2020 earned $341,773, of which $18,972 was in bonus and incentive compensation, according to the hospital’s latest available tax records.

The CEO said the work being done, including sometimes her own 16-hour days, is necessary in making preparations to file for bankruptcy.

“When you shut your doors, you still have your accounts receivable you are trying to collect, and just necessary employees that we need going into a filing of a Chapter 11 (bankruptcy) and to maintain our facility,” Paolinelli said.

It’s still unknown when Madera Community Hospital will file for bankruptcy. Chapter 11 is a reorganization bankruptcy, which would allow the hospital to reopen. A plan would need to be approved by a court.

“Our pathway was always to file (for bankruptcy). It’s taken longer,” Paolinelli said. “I know people have asked that question, and I don’t have a date for you, but it’s taken longer because of the enormous amount of paperwork required.”

She referred questions to hospital attorney Riley Walter on the delay.

The Bee couldn’t reach Walter on Wednesday or Thursday.

Jerry Lowe, a bankruptcy attorney in Fresno, said there are a number of things that could have gone wrong to cause the filing to be delayed. Filing for bankruptcy for a hospital is “no small undertaking.”

Typically, he said, it takes a few weeks to a few months to file for bankruptcy.

“They’re probably looking at all of the ways that they can make it work, and trying to find supporters, people to back up, new creditors, new sources of lending,” Lowe said. “”They’re probably looking at all of their options, and that can take some time.”

But Lowe said the hospital also “certainly could have” filed for bankruptcy without having to lay off the majority of its staff. He speculated the decision could have been more of a financial issue.

“If they are trying to make a go of it, they may have needed to lay off a bunch of people to save up money to reorganize to start over again,” he said.

In general terms, when an entity files for Chapter 11, there are no rules on what happens first. The entity, Lowe said, can file for bankruptcy and then reopen on a smaller scale shortly after, or can get the new operations going first and then file for bankruptcy.

‘Necessary’ employees

Paolinelli gave examples of the people who are still employed.

For instance, she said, security personnel are needed to keep the facility safe. Employees monitoring the hospital’s plant 24-7 to maintain fire safety and its mechanical aspects also are essential, she said.

The hospital still has a few employees working in financial roles.

“We do have our people in the accounting department that’s helping us with all of those schedules for filing,” Paolinelli said.

“There is a regulation we have to follow as far as medical records,” she said. “We have a huge number of requests (and a) very small staff in there trying to deal with that.”

The hospital employs people in billing and collections, but they won’t be needed for much longer, she said.

“We really pay close attention to the work that’s required to make sure that we are doing our financial responsibility of making sure we only have the minimal staff that’s needed to continue,” she said.

When Paolinelli was asked how the hospital is able to pay its existing staff, she said: “The hospital before it closed, we provided a lot of services, like I said, we continue to bill and get receivables from past services that we provided, and like I said, it’s a minimal staff that we have here to maintain the facilities. We need to bring in whatever money we can collect from the insurance of the services that we have provided.”

Paolinelli didn’t answer questions about hospital management practices, ending her interview with The Bee by saying she had to jump on a call.

One glaring expense: A former CEO was paid by the hospital for a few years after he left his position, according to the hospital’s tax records.

Evan Rayner is listed on the hospital’s tax records for a few years as “Former Executive Director/CEO” and was paid $395,947 in 2018-19, of which $34,100 was in bonus and incentive compensation. The same year, Paolinelli was paid $362,443, of which $18,600 was in bonus and incentive compensation.

The year prior (2017-18), Rayner’s total pay was $411,471, of which $93,000 was in bonus and incentive compensation. The same year, Paolinelli was paid $225,946, of which $11,981 was in bonus and incentive compensation. That year, most other executives also received bonuses, including the vice president for finance, who received a $28,606 bonus. Other retirement, deferred compensation and nontaxable benefits are not included in those totals.

In 2016-17, Rayner was the CEO and earned a salary of $314,287.

What’s next for the hospital

Paolinelli said that since Madera Community Hospital closed its doors, hospital officials have had talks about potential partnerships, but no plans have come to fruition. Talks are ongoing. She refused to disclose what organizations are involved in the private talks.

“We are always looking for somebody, and if anybody is willing to speak to us, we are trying to share data,” she said. “We are a big entity, and it does take potential partners time to look through that to see how they can be successful.

“We haven’t had anybody that came to our board, yet, to say, ‘Hey, I’m ready .. (for) an affiliation agreement and go down this process,’” she said. “That hasn’t happened.”

But she said hospital officials also are bracing themselves for a different kind of future.

“If we truly can’t find a partner, how can we reorganize ourselves?” Paolinelli said, adding that officials are trying to bring the community together to say, “We need a hospital. Let’s work together.”

“But maybe we have to start small; is there a way where we can just open an ER? In California you just can’t have an ER without a hospital. Is there a pathway to how many beds we can open?”

There’s workforce issues, as well. Paolinelli said what led to the hospital’s financial issues was the high cost of travel nurses. In areas like the ICU and the ER, the ratio is two patients per nurse, but depending on how sick the patient is, the ratio becomes one patient per nurse.

Fresnoland on Wednesday reported low reimbursements with private insurance health plans were a factor in the hospital’s collapse.

“We still have a nursing shortage,” Paolinelli said. “If we wanted to reorganize ourselves, how many nurses can we really get that belong to Madera Community Hospital that are hired internally by Madera hospital, and support the beds? Those are the processes that we are working on. What is a sustainable reorganization plan for Madera Community Hospital where we can at least get some services here?”

But she said the hospital still plans to file for bankruptcy. If a partner comes through before that final step, “that’s really great,” she said.

“We want this hospital back open,” Paolinelli said. “We’ve served this community for 51 years and our board is very much on their pathway that we are not going to give up. We are going to continue to fight to get this hospital open.”