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Adventist Health plans to manage services at Madera Community Hospital amid funding challenges

Madera Community Hospital
Soreath Hok
Madera Community Hospital sits empty after closure. Photo taken February 2023.

Update: Aug. 3, 2022 Click here for past coverage of the closure of Madera Community Hospital.

KVPR has obtained a copy of the letter of intent signed between Madera Community Hospital and Adventist Health, which proposes a management agreement between the two entities.

The proposal includes the possibility that Adventist will purchase the hospital after three years of operations. Adventist laid out in its conditions that the Madera hospital must secure $55 million in funding for the first year of operations and $30 million for the second year.

Madera Community Hospital has applied for $80 million from the state’s hospital loan program and is awaiting another $5 million in state funding for reopening costs. A decision from the state is expected this month.

If approved for the funding, Advenstist would provide management and personnel to support hospital operations. It could take between six to nine months for the hospital to reopen under the deal.

Original story below.

FRESNO, Calif. — Adventist Health on Friday confirmed its plans to manage services at the bankrupted and shuttered Madera Community Hospital.

As part of the potential agreement, officials said the Madera County hospital must still qualify for assistance through the state’s$300 million Distressed Hospital Loan Program.

Madera Community Hospital has applied for the program, but it’s unclear how much funding the hospital would need to secure in order for the agreement with Adventist Health to move forward.

“If Madera succeeds in getting the financial resources it needs, Adventist Health will provide Madera Community Hospital with the expertise of a large healthcare system, helping to secure a sustainable future for healthcare in Madera County,” Adventist Health's president and CEO, Kerry L. Heinrich said in the news release.

Madera Community Hospital CEO Karen Paolinelli said she was “thrilled” with the potential management relationship with Adventist Health.

“Their clinic expertise perfectly aligns with the work we have passionately pursued for the past 51 years. Together, we can significantly and positively impact the communities we serve,” Paolinelli said.

This week, Madera County supervisors approved $500,000 to pay for the hospital’s base operating and salary costs for the next 30 days while it searches for a reopening partner.

That funding was contingent on submission of a letter of intent by an operator – who is now confirmed to be Adventist Health. Madera County Supervisor David Rogers confirmed to KVPR Friday the funding is available immediately.

At a bankruptcy hearing this week, the hospital’s bankruptcy attorney Riley Walter stated the entity that would ultimately run the hospital would focus primarily on restoring services.

“They're going to run the hospital. We believe that there may be an option to purchase the hospital in the future. But initially, it's a strict management services agreement,” Walter said.

Adventist Health runs hospitals and clinics in Tulare, Kings, Kern and Fresno counties. The health system has other locations throughout California, Oregon and Hawaii.

Adventist stepped in to operate the former Tulare Regional Medical Center back in 2018 as the hospital there also faced bankruptcy.

Soria, Caballero optimistic

State Sen. Anna Caballero, whose district includes Madera County, said state agencies have been cautious about ensuring that funding will be used for its intended purpose – to reopen services and not to pay off debts.

A detailed reopening plan was required when Madera Community Hospital submitted its application for the Distressed Hospital Loan Program. Now it’s up to the Department of Health Care Access and Information (HCAI) and the California Health Facilities Financing Authority (CHFFA) to decide on allocation of funding.

Caballeo said Adventist Health will help Madera’s chances of securing funding. She emphasized Adventist Health’s record in operating rural hospitals.

“They can look at the numbers, look at the population and see that there's a real commitment to reopening locally. And they want to be part of it. So I think that changes the dynamic entirely,” Caballero said.

State Assemblymember Esmeralda Soria echoed a sense of hopefulness about the new developments with Adventist Health. She said the letter of intent was a good first step.

“Even though I'm optimistic, I want to make sure that people understand that this is not a done deal,” she said.

Soria said the state’s hospital loan program was driven by the closure in Madera Community Hospital. Although it doesn’t guarantee funding, Soria said state leaders made a commitment to create a pathway for the hospital to open.

“The hospital has to do their part putting a plan together, bringing partners to the table that will help them be sustainable long-term,” Soria said.

With a limited amount of county funding and cash reserves left to pay for operating costs through August, Caballero believes the state hospital funding could arrive soon.

“I don't expect it's going to take very long,” she said.

Long road to reopening

Madera Community Hospital has sat closed since December, ever since CEO Karen Paolinelli abruptly announced to all staff just ahead of Christmas that the hospital was shutting down operations.

Services slowly began to close, including the rural clinics spread across the county – leaving thousands without their regular medical care facilities.

Months later, the hospital officially filed for bankruptcy. The move was anticipated, but it set off a clock on restoring operations – if it was even possible.

Although Madera County supervisors unanimously agreed to fund hospital operations through August, some supervisors had reservations but ultimately saw it as a potential beneficial move.

The funds were a critical insurance measure as the hospital sought to restore operations and fend off liquidation during its bankruptcy process.

The hospital was left owing $15 million to Trinity Health from its failed merger with the healthcare company.

KVPR News Director Cresencio Rodriguez-Delgado contributed to this report.

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.