Bankrupt California hospital receives lifeline from Adventist, report says

Reviewed by Megan Craig, M.Sc.Jul 27 2023

Bankrupt Madera Community Hospital has received a last-minute lifeline from the hospital chain Adventist Health, which reached a preliminary agreement to take over the shuttered hospital and save it from liquidation, The Fresno Bee reported July 27.

The deal comes as a federal bankruptcy court in Fresno weighs whether to force Madera to sell off its assets to satisfy creditors. The biggest creditor is Fresno's St. Agnes Medical Center, which walked away from a deal to take over Madera and effectively forced it into bankruptcy. The hospital closed in January.

"I can confirm the [Madera Community Hospital] board accepted a letter of intent with a suitor," Riley Walter, the hospital's lead bankruptcy lawyer, told the Bee in an email. The paper identified the suitor as Adventist, a faith-based nonprofit health system that operates in California, Oregon, and Hawaii and recently took over another troubled hospital, in Bakersfield.

A lot still must happen for the Madera hospital to reopen. Madera County supervisors are considering whether to spend $500,000 to keep the hospital's skeletal operations running after the bankruptcy court this week declined to authorize any spending beyond Aug. 4. The hospital has also applied for an $80 million loan from the state's new distressed hospital fund, but it's not clear how much it will receive.

Analysts said it would take many months to hire staff and resume operations at the hospital, the only one in the rural and majority-Hispanic agricultural county of Madera.

Rural hospitals across California and much of the country are struggling in the face of low reimbursements for low-income patients served by Medicaid, skyrocketing costs during the pandemic, and chronic staffing troubles. Madera also suffered from bad contracts with private insurers and management missteps, according to an article reported jointly by KFF Health News and The Fresno Bee.

Experts warn that reopening will be costly, and that any plan must address the underlying problems that caused Madera to go bankrupt in the first place.

Staffers said they were devastated when St. Agnes walked away from a deal to save the hospital last December. California Attorney General Rob Bonta blasted St. Agnes and its parent, Trinity Health, for trying to "extract every dollar possible" in the bankruptcy after walking away from the deal with no notice and little explanation. St. Agnes blamed the decision on complex circumstances and additional conditions imposed by Bonta, but he had agreed to most demands, experts said.

More details on the Adventist deal are expected by Aug. 1, when the Board of Supervisors will vote on whether to authorize the $500,000 to keep things running and the bankruptcy court will hold another hearing.

Madera Community Hospital board officials declined to comment to the Bee. The Adventist CEO could not immediately be reached, the newspaper reported.

This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.