As Madera County Supervisors await a letter of intent from a possible buyer for Madera Community Hospital, attorneys for the hospital say a suitor has been selected.
At the same time, Adventist Health says an announcement concerning the hospital will come out at noon Friday.
Madera County Supervisors were waiting until Aug. 1 to get a serious offer before giving the shuttered hospital $500,000 to keep the lights on through August.
Madera Community Hospital CEO Karen Paolinelli had written a letter to supervisors saying the hospital was burning through $500,000 a month.
Supervisors agreed to give the hospital the money, but before the county would open its pocketbook, officials wanted to make sure a potential buyer was serious.
“From a fiduciary standpoint, I’m very, very leery of providing bridge money for a burn rate without a real plan,” said Madera County Supervisor Jordan Wamhoff at Tuesday’s board meeting.
Any buyer would have a tall hill to climb; needing $44.8 million to open, rehire staff, build a network of patients with premium insurance that the hospital never had, and get its debtors to sign off on the deal, according to consulting group Force 10, which audited the hospital.
Still, consultants forecast opening could be done within nine months of an agreement and could be profitable within five years.
Opening Madera Hospital Would Take $45M, not Including Debt
Reopening the hospital would take $44.8 million, Robert Minkin, managing partner with Force 10 told supervisors Tuesday.
It would take $13 million for the supplies, utilities, and three months of staff training before the hospital opened its doors. Operating costs for the first 180 days would take $30 million.
Minkin said the hospital should request at least $30 million from the state of California’s $300 million Distressed Hospital Loan Program. Long-term profitability models assume the $30 million wouldn’t need to be repaid.
Riley Walter, an attorney with Wanger Jones Helsley, who is handling Madera Community’s bankruptcy, said the costs of reopening do not include repayments of existing debt.
St. Agnes Medical Center provided a $15.4 million loan to Madera Community during the proposed merger that fell through. The hospital has since repaid $8.5 million according to a court filing with the U.S. Bankruptcy Court Eastern District of California.
“The $15 million loan to Madera was made in good faith and it was agreed by both parties if the affiliation did not go forward, the loan would be repaid,” said Kelley Sanchez, a spokesperson for St. Agnes.
Adventist Health Has History of Buying Distressed Hospitals
Adventist Health purchased Tulare Regional Medical Center in 2019 after controversy regarding the board and management. That hospital closed suddenly, leaving many employees without pay.
In 2011, Adventist Health purchased Sierra Kings Hospital, which operated Reedley Hospital at the time.
Adventist Health began its presence in 1998 when it purchased Central Valley General Hospital in Hanford. A year later, it purchased Selma Community Hospital.
Large Network Required for Long-Term Sustainability
Operating the hospital independently is not a sustainable venture, Minkin said in the meeting.
Only affiliation with an experienced hospital network could provide the leverage necessary to negotiate better rates and patient mix that the hospital never had before, Minkin said.
The Adventist Health Central Valley Network operates four hospitals and 60 clinics in Fresno, Tulare, Kings, and Madera counties.
Larger networks can get better insurance reimbursement rates as well as pay for supplies, according to Minkin.
Reimbursement rates for the Madera hospital’s outsized ratio of patients on Medicare, combined with staffing costs during the pandemic, were largely to blame for its financial downfall.
Any incoming network would have to work with its physician group to get more commercial patients to come to the hospital “in a way that wasn’t done in the past,” Minkin said at the meeting.
Six to Nine Months to Reopen
After a deal is made, Minkin said it would take six to nine months to ramp up before they could open doors.
The longer the wait, the more issues arise around the hospital’s license and Medicare certificates.
Without the $500,000 monthly to keep the hospital operating, any shutdown, even for a few days, could mean starting the reopening process over with the State of California, said Madera County Supervisor Rob Poythress.
“If it’s shutdown for even a few days, then it’s a whole different ballgame and it’s something we seriously need to consider going forward,” Poythress said.