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Madera Community Hospital, closed for two months, officially files for bankruptcy

The building's signage has been stripped away.
Soreath Hok/KVPR
The building's signage has been stripped away.

For past coverage on the closure of Madera Community Hospital from KVPR, click here.

MADERA, Calif. — More than two months after shutting down all services and clinics, Madera Community Hospital officially filed for Chapter 11 bankruptcy on Friday.

According toa copy of the filing, the hospital reported liabilities between $10 and $50 million to at least 200 creditors.

The hospital’s bankruptcy attorney Riley C. Walter completed the filing through the U.S. Bankruptcy Court for the Eastern District of California. He confirmed the filing to KVPR.

The filing reports the value of hospital assets range between $50 and $100 million, and it states funds will be available to unsecured creditors. Chapter 11 bankruptcy allows debtors to reorganize finances.

However, it’s unknown how the hospital will handle assets.

Delays and continued costs

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

The hospital had held off on filing for bankruptcy since its closure in late December. Hospital leadership have been in search of an operating partner. So far, no announcements have been made about a partner.

In a statement to KVPR, Riley C. Walter, the hospital’s bankruptcy attorney, said the delay in filing for bankruptcy was “occasioned by the suitors’ beliefs that it would be easier and less expensive to have a transaction outside of bankruptcy.”

Since the hospital’s closure, the hospital has continued to rack up $900,000 in monthly expenses.

Costs included keeping at least 32 employees on payroll, Paolinelli’s salary, and costs to maintain the hospital and surrounding property. But it’s unknown if these costs will continue to incur following the bankruptcy filing.

One outstanding cost has come from a group of physicians that worked with the hospital.

Physicians seek payment

KVPR obtained a letter sent on behalf of the physicians who claim they are owed money by the hospital for their services since November and December of last year.

The letter was issued in late February to Paolinelli, the hospital board of trustees and Walter, the hospital’s attorney. The letter listed 22 physicians with amounts they say are still owed. Some amounts range individually from $600 to $300,000.

In total, the group behind the letter said unpaid services, including PTO, amounted to $787,000.

Attorney Walter responded to the letter informing doctors they may have a claim against Madera Community Hospital. He instructed them to “...devote time and energy to pulling together all of the relevant supporting documentation so that they will be in a position to file a ‘Proof of Claim’ once they receive notice of the Chapter 11 filing.”

The group’s representative, Madeeha Ashraf, said some of the physicians worked through Affiliated Physicians Practice, Inc., a medical practice group which provided Madera Community Hospital with administrative services and physician staffing support.

Separate bankruptcy

That company filed for Chapter 7 bankruptcy at the end of December– around the same time that the hospital closed.

Chapter 7 bankruptcy is an orderly way of shutting down a business to have its assets liquidated.

KVPR obtained bankruptcy filings for the company which showed it owed the hospital $6.2 million.

Hagop Bedoyan is the Fresno bankruptcy attorney who filed for Chapter 7 bankruptcy on behalf of Affiliated Physicians Practice. He confirmed Madera Community Hospital was a secured creditor for the company and made several loans over time.

Since filing, Bedoyan said all the medical practice group’s receivables, equipment and bank accounts have been turned over to the hospital.

In Paolinelli’s most recent statement to KVPR, she outlined next steps for the hospital.

“We are continuing to work with our state and local officials to retain our license and explore funding and models for reopening financially sustainable acute care services in Madera, while preserving our very valuable facilities and collecting money owed to the Hospital.”

Soreath Hok is a multimedia journalist with experience in radio, television and digital production. She is a 2022 National Edward R. Murrow Award winner. At KVPR she covers local government, politics and other local news.