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Groups push to delay – or deny – company’s reopening plan for Madera Community Hospital

The bankruptcy case for Madera Community Hospital is being heard at a federal courthouse in downtown Fresno, California.
Kerry Klein
The bankruptcy case for Madera Community Hospital is being heard at a federal courthouse in downtown Fresno, California.

See more coverage from KVPR on the closure of Madera Community Hospital. 

FRESNO, Calif. – Two groups are objecting to a reopening plan for Madera Community Hospital, casting doubt on the ability of the proposed owner to operate services while also pointing to past allegations against the company and its CEO.

The non-profit Madera Coalition for Community Justice in mid-March filed an objection in federal court and argued American Advanced Management’s (AAM) plan for reopening would not serve the community’s needs. Separately, this week, Blue Shield of California, filed an objection that opposes the plan for reasons related to financial agreements the insurer had with the hospital before it closed.

In the objection she wrote on behalf of the Madera Coalition for Community Justice, attorney Patience Milrod said the organization isn’t necessarily advocating for the judge to reject AAM’s reopening plan, but instead to ask Attorney General Rob Bonta and other state authorities to impose additional conditions on the prospective new owners.

Some of those conditions include a deadline for when labor and delivery services must resume at the hospital, and a stronger guarantee that a physician will be on-site at the emergency department at all times. The objection also requests the judge delay approval in favor of a closer review of an alternative reopening plan he previously rebuffedby Adventist Health and UC San Francisco Health.

Blue Shield, in its objection, does request the judge deny AAM’s reopening plan as it stands, or to revise how it requires the company to honor contracts between the insurer and the hospital.

It’s unclear whether the questions raised by the objections are likely to change the course of bankruptcy and reopening proceedings.

However, Riley Walter, an attorney representing Madera Community Hospital, told KVPR of the propositions laid out in the objections, “all of these could be an outcome … the court could also hear the arguments pro and con and overrule the objection, or could take under submission and issue a written ruling shortly thereafter.”

He said it’s likely that these arguments will be discussed in an upcoming hearing in federal court on April 16, where the next steps will be decided by the judge.

Also on the agenda that day is a formal restructuring plan written by a committee representing the hospital’s unsecured creditors.

If the judge overrules the objections and approves the restructuring plan, that will set in motion a process for paying back creditors, releasing AAM’s initial payments from escrow, and transferring ownership over to the company in the coming months.

Medi-Cal services continue to be sticking point

Since December, Modesto-based AAM has been in exclusive talks with hospital leadership to purchase and reopen the shuttered facility, which closed abruptly in late 2022 and filed for chapter 11 bankruptcy a few months later.

In the last few months, Attorney General Bonta and various state agencies have signed off on the company’s management services agreement. The company also waived all ability to voluntarily walk away from the agreement, and so reopening the hospital under AAM has been considered all but a done deal.

But one of the central questions raised by Milrod is whether AAM can maintain financial viability while serving a county where the majority of residents are on the government-sponsored insurance for low-income residents known as Medi-Cal or Medicaid.

To say that we don't operate any safety net hospitals is just frankly untrue.
Matthew Beehler

Doctors and hospitals receive less money for treating Medi-Cal patients than those on private insurance, and the hospital’s leaders have pointed to the region’s higher-than-average Medi-Cal payer mix as one reason the facility went under in the first place.

In 2021, state data showed Medi-Cal patients made up more than half of all Madera Community Hospital’s discharges and outpatient visits — the highest Medi-Cal share of any of the eight hospitals that AAM already operates. Among the company’s other facilities are Coalinga Regional Medical Center, Central Valley Specialty Hospital in Modesto, and Orchard Hospital near Yuba City.

However, Matthew Beehler, AAM’s Chief Strategy Officer, pointed out that although the Medi-Cal share at AAM’s other facilities may be lower, those hospitals treat a higher share of patients on Medicare, another form of government-sponsored insurance that serves Americans 65 and older.

“To say that we don't operate any safety net hospitals is just frankly untrue,” he said.

Questions over maternity, emergency services

Madera Community Hospital is empty.
Soreath Hok
Madera Community Hospital is empty.

Milrod’s objection also questioned whether AAM has the necessary experience to run crucial services formerly offered in Madera County, like labor and delivery.

AAM does not plan to offer labor and delivery immediately upon reopening — which Milrod finds troubling, given that there is no other birthing center in the county for the 700 to 800 babies on average born there each year. Even if the company did promise to deliver babies, that’s not a service it has offered at any of its hospitals.

As for why, Beehler pointed to the fact that birthing centers have been closing all around the state in recent years because they place facilities under so much financial strain — a trend that has been growing.

“We hope that everyone's energy and advocacy is directed towards fixing the underlying challenges facing labor and delivery, rather than targeting any one provider who is trying to build a sustainable acute care operation from the ground up,” he said.

In addition, none of AAM’s other facilities operate an emergency department at the size and scale to treat the roughly 30,000 patients that had been seen each year in Madera. Previously, a physician had been on site 24 hours a day.

However, Milrod expressed concern that AAM’s four other emergency departments operate as “standby” facilities with a physician on-call instead of being present on-site.

Beehler said that the company does plan to have a physician on-site at all times, according to conditions already imposed by Attorney General Bonta. He also said comparing Madera Community Hospital to its other facilities is “not an apples to apples comparison” because they serve much smaller regions.

“Madera, on the other hand, is a much larger community and a much larger county and has supported those services in the past…and those are what we're going to return to,” he said. “Not sure where the thoughts of a bait and switch, or a reduction of services, or that we're trying to provide something less than meets community needs, came from.”

Milrod, however, countered that what she has seen in the current drafted plan doesn’t seem congruent with the company’s promises.

“If it is the fact that AAM is going to take over this hospital, run it for profit, and presumably make a profit on it, and not provide services that have got to be legitimately part of any safety net hospital’s portfolio — if that's going to be the case, then say so,” she said.

Past hospital dealings and a shuttered medical school loom in legal documents

Milrod’s objection also highlighted legal entanglements involving AAM and some of its affiliated companies that have resulted in fines and enforcement actions from the state in the past.

In her objection, she wrote that a review of the company and CEO’s business practices showed “a truly confounding number of allegations of dishonesty, fraud, perjury, and maladministration.”

One case involves Sonoma Specialty Hospital, which AAM purchased in 2019 shortly after the facility declared bankruptcy. In late 2021, a federal bankruptcy judge fined the hospital $1.15 million, finding it had “wrongfully appropriated” money and other assets during the ownership transition while the facility was still under its previous management.

If it is the fact that AAM is going to take over this hospital, run it for profit, and presumably make a profit on it, and not provide services that have got to be legitimately part of any safety net hospital’s portfolio — if that's going to be the case, then say so.
Patience Milrod

In 2022, the state Department of Healthcare Services filed a complaint against the same hospital, arguing that it had failed to notify the agency it had come under private ownership and that it had continued to receive state funding intended for public hospitals.

The agency requested $270,000 in compensation. A Sonoma County court ruled in its favor, but has not yet decided on a specific payment amount.

Beehler addressed some specific details with KVPR but said AAM would soon submit a lengthier, written response in court.

“We stepped in with very short notice to keep a hospital open and not have to go through the process of reopening a closed facility,” Beehler said. “There have been some challenges based on liabilities that were incurred prior to our involvement in the facility — and whose responsibility those will ultimately be, some of that is still up in the air.”

AAM’s CEO Dr. Gurpreet Singh also opened a vocational nursing training program called Advanced College in 1999.

In Dec. 2022, the state Department of Consumer Affairs ordered all three of the school’s locations to shut down, following an investigation that accused the administration of falsifying admissions tests, attendance records and test scores, as well as misrepresenting fees to some students and failing to demonstrate it could pay all of its operating costs.

Although Singh had owned the school, Beehler said neither Singh nor AAM had any control over its daily operations.

“That was a completely separate entity, separate leadership team, separate business, separate industry,” he said.

This story was updated on April 5, 2024 to clarify the conditions imposed on the hospital’s emergency department and AAM’s response to emergency-related concerns in the coalition's objection. This story was also updated on April 8, 2024 to include that a court ruled in favor of the Department of Healthcare Services in its lawsuit against AAM.

Kerry Klein is an award-winning reporter whose coverage of public health, air pollution, drinking water access and wildfires in the San Joaquin Valley has been featured on NPR, KQED, Science Friday and Kaiser Health News. Her work has earned numerous regional Edward R. Murrow and Golden Mike Awards and has been recognized by the Association of Health Care Journalists and Society of Environmental Journalists. Her podcast Escape From Mammoth Pool was named a podcast “listeners couldn’t get enough of in 2021” by the radio aggregator NPR One.