‘The finish line.’ Madera hospital reopening plan approved by judge. Here’s who’s involved

Madera Community Hospital took a big step toward reopening later this summer after a federal bankruptcy judge approved the management deal proposed by Modesto-based firm American Advanced Management Inc.

This comes after the company’s months-long negotiations with the hospital and its creditors who are owed more than $30 million, and after a last-ditch proposal from UC San Francisco to buy the hospital outright, a deal that was announced last week by the university, Madera County officials and Central Valley legislators.

U.S. Judge René Lastreto heard hours of debate Tuesday about who is best fit to finance and reopen Madera’s shuttered hospital – including testimony from community groups and public health officials about why they believe UCSF would be a better long-term regional investment. Lastreto acknowledged the benefits to the community under UCSF’s proposal, but questioned why the university was so late to the game. UCSF and faith-based non-profit Adventist Health filed their alternative proposal to buy Madera hospital Monday afternoon with the support of Madera County.

“Where has UCSF been for the last year?” Judge Lastreto asked UCSF lawyers.

He also questioned Adventist, which pulled out of a deal to help reopen Madera hospital in November, citing at the time that it could not see a sustainable path forward. AAMI was then selected as the hospital’s reopening partner after a year of courting the hospital. The firm previously announced that, upon execution of its management service agreement, its plans would reopen Madera hospital as early as this summer.

Lawyers for AAMI and the creditors’ committee stressed throughout the hearing that millions have been spent to get to “the finish line.” In response to requests for more time by UCSF lawyers, Madera County, the California Department of Public Health, the attorney general’s office and community groups, AAMI and creditors’ lawyers railed hard against any further delays.

“Under these circumstances, we do not think it’s appropriate to go back to another two, three, four or, God forbid, another 11 months of trying to get to the finish line,” said Paul Jasper, co-counsel for the creditors’ committee.

Lastreto agreed.“It doesn’t behoove the creditors and estate to continue to delay this.”

In his closing remarks, Lastreto referenced AAMI’s previous “credibility issues” with the court, mentioning allegations by Madera hospital’s lawyers that AAMI tried to “improperly influence” CEO Karen Paolinelli during the search for a reopening partner by offering her a $150,000 check, which she returned and reported. But AAMI has shown its “bona fides” and commitment to reopening the hospital since then, Lastreto said.

“AAMI went from essentially being an antagonist to a protagonist,” he said of the firm.

“We are very happy (with) the outcome,” Dr. Gupreet Singh, AAMI’s President, told The Bee after the hearing. Paolinelli declined The Bee’s in-person request for comment immediately after the hearing, saying she would only answer questions over email.

Spokespersons for Adventist Health and UCSF Health said in email statements to KFF Health News that they are “deeply disappointed” in the court’s decision. “UCSF Health and Adventist Health remain committed to our proposal and are working together to understand what options may be available to jointly pursue our plan to restore lifesaving services to Madera County and bring high-quality, accessible care to the community for decades to come.”

In a joint statement issued Tuesday afternoon, Senator Anna M. Caballero of Merced, Assemblywoman Esmeralda Soria and Assemblymember Dr. Joaquin Arambula of Fresno also called the decision “disappointing.”

“We hoped that the court would have granted UCSF, Adventist Health, and Madera County the opportunity to move forward and provide a full presentation of their joint venture to purchase and reopen Madera Community Hospital – to show what it could mean immediately for the residents and the long-term viability of this hospital for the region.”

Closer to ‘the finish line’

While Tuesday’s decision means the hospital is a step closer to reopening, it’s not a done deal.

“It’s not a done deal, there are major steps along the way,” said Riley Walter, attorney representing Madera hospital in the bankruptcy proceedings, in an interview with The Bee Tuesday afternoon.

But, Walter said, there’s an automatic 14-day appeal period during which time parties can object to the judge’s order. If no objection is filed, then the order becomes final, he said.

For now, he said, “a major gate was opened today that will allow the transaction to proceed.”

AAMI’s plans for Madera hospital have initial approval of the California Attorney General, which filed a 150-page stipulation agreement with AAMI and Madera hospital for court approval last week.

But AAMI still needs approval by the California Department of Public Health to take over operations and their application is still pending, Deputy Attorney General Kenneth Wang said on behalf of CDPH.

As of Tuesday, the California Department of Health Care Access and Information, the agency overseeing the loan program, is still reviewing AAMI’s application for the hospital to access the $57 million in funds. However, AAMI said during Tuesday’s hearing they would remove the condition on their deal that requires the hospital receive the state loan by a certain date.

What services will be restored?

According to bankruptcy filings, AAMI 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.

AAMI Turnaround Plan by Melissa Montalvo on Scribd

The hospital will not immediately provide delivery services for pregnant individuals.

“While a full delivery program is not feasible as part of the reopening and turnaround plan ($4.5M annual loss prior to closure), with the restoration of the RHC (rural health clinic) on site at Madera Community Hospital, a strong prenatal program can make significant improvements into the travel burden of expecting mothers in the Madera service area,” AAMI’s reopening plan said.

AAMI also pledged to put $16 million into escrow within two weeks from Tuesday into a trust that will begin paying off creditors if the management agreement takes effect in March.