What's at stake?
A bill to establish a loan program for distressed rural hospitals - like Madera Community - landed on Gov. Gavin Newsom's desk. If signed, it's still one piece of a bigger puzzle to reopen the bankrupt hospital.
A unanimous bipartisan vote in California’s State Senate made room to fund a bill that could provide millions in interest-free loans to struggling nonprofit or public hospitals.
If it gets Gov. Gavin Newsom’s signature in the coming weeks, the bill gives hope that Madera Community Hospital could be reopened after its executive team closed it down in December 2022 and filed for bankruptcy in March.
On May 4, the state senate passed AB 112, which would create the Distressed Hospital Loan Program and institute a process for nonprofit or public hospitals to apply for interest-free loans.
“For me, this is a signal of hope and a signal that the state of California understands that we must do everything we can to help hospitals like Madera Community Hospital,” Assemblymember Esmeralda Soria told Fresnoland in an interview. She added that as much as $150 million in loans would be available with Newsom’s approval.
The loan program would be run by California’s Department of Health Care Access and Information (HCAI), and it would set criteria for loan eligibility. If granted a loan, hospitals would have to pay it back within three years. But if they couldn’t, due to finances being so poor, hospitals could get that timeline extended, or potentially get the loans forgiven.
In order to be eligible, hospitals would have to first demonstrate need by providing financial information, as well as a sizable local Medi-Cal patient population.
In terms of reopening Madera Community Hospital, Soria said a number of solutions could take shape, especially with potential aid from the state level. She said Madera County could craft a proposal to take over the medical facility and turn it into a public hospital. UC Merced could turn the facility into a teaching hospital if it sees expanding south as an opportunity for its new medical education program, which is set to open this fall.
Regardless of who it is, any potential buyer would have to get in touch with Madera Community Hospital’s current leadership with a plan to get it out of bankruptcy and reopen it to provide essential medical services that Madera County has now gone four months without. In Soria’s mind, that would have to be done with new leaders in charge.
“What we’re looking at is that there would be a willing partner — not the existing board, or the existing hospital folks there — but a willing partner that will come in and put a plan together to get it out of bankruptcy, and a plan to operate that would be sustainable,” Soria said.
In an emailed statement, Riley Walter, the lawyer representing the Madera hospital in its bankruptcy case, said the bill’s approval in the state senate was good, since it acknowledges the dire situation for rural hospitals with high Medi-Cal patient populations.
“MCH is very hopeful that the bill is signed by the Governor and even more hopes that the funding process is streamlined and swift to get the funding out quickly,” Walter said.
He added that the hospital would give serious attention to bona fide proposals from qualified prospects. Walter did not say whether current hospital administrators would entertain a proposal that would seek to establish a completely new leadership team and board of trustees.
“It is impossible to say without knowing the deal but it is very common for management and leadership to change in deals,” Walter said. “Happens all the time.”
At the time of filing for bankruptcy in March, Madera Community Hospital was in more than $27 million of debt, according to bankruptcy court documents. Exactly $15.4 million is owed to Saint Agnes Medical Center — which was in negotiations to merge with the Madera hospital under its parent company health corporation Trinity Health — before walking out on the deal in December, a couple weeks before the hospital closed.
The hospital also owes another $1.1 million to construction company New England Sheet Metal. The hospital’s former workers are also owed about $2 million in unpaid personal time off. It also owes $9 million to a long list of creditors, including $1.1 million to Citizens Business Bank in Madera.