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Madera Community Hospital in California files for bankruptcy

by John R. Fischer, Senior Reporter | March 15, 2023
Business Affairs
Madera Community Hospital
Owing between $10 and $50 million to at least 200 creditors, Madera Community Hospital in California has filed for Chapter 11 bankruptcy two months after shutting down its services and clinics.

The funds will be available to unsecured creditors, said Riley C. Walter, the hospital’s bankruptcy attorney, who completed the filing through the U.S. Bankruptcy Court for the Eastern District of California.

Chapter 11 bankruptcy allows individuals or practices to reorganize their finances to pay back parties they owe, but it’s not known how the hospital will handle its assets, according to digital news radio station KVPR.

In a written statement, hospital CEO Karen Paolinelli told KVPR that filing for bankruptcy may attract “additional interest from organizations qualified to acquire and reopen Madera Community Hospital. Filing also makes it more likely the facilities can be preserved and protected.”

Prior to its closure, Madera Community provided emergency services to about 150,000 people in rural areas. Facing financial difficulties that were only enhanced by the pandemic, the company was in talks to be acquired by Trinity Health, the owner of Saint Agnes in Fresno, until the latter backed out due to strict conditions imposed by the attorney general's office, according to ABC News 30.

A staffing shortage led the hospital to close earlier than expected in December, and it has since incurred $900,000 in monthly expenses from continuing to pay at least 32 employees, Paolinelli’s salary, and maintain the hospital and surrounding properties. It is unknown if these expenses will continue following the bankruptcy filing.

One group of physicians who worked in the hospital said in a letter to Paolinelli, the hospital board of trustees and Walter, that the hospital still owes it money for services performed since November and December. It listed 22 physicians with the amounts they were owed, ranging individually from $600 to $300,000, according to KVPR. Unpaid services, it said, including PTO, cost $787,000 together.

Some of the physicians worked through Affiliated Physicians Practice Inc., a medical practice group which performed administrative and physician staffing services for Madera Community.

The company filed for Chapter 7 bankruptcy at the end of December to liquidate its assets. Filings obtained by KVPR showed that the hospital was a secured creditor that provided it with several loans, and that Affiliated Physicians Practice owed it $6.2 million.

Since filing, the medical practice group has turned over all receivables, equipment and bank accounts to the hospital.

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