Judge to consider Madera hospital reopening plan. ‘We all have been waiting a long time’

What's at stake: For the first time since the Madera hospital filed for bankruptcy in March 2023, a reopening plan is up for court approval and both the debtor and creditors are happy with it.

A plan to reopen Madera Community Hospital will be brought in front of a judge for approval on Feb. 13 — a first in the bankruptcy case that’s slogged on for more than 10 months. 

If approved, the plan would transfer the hospital’s operations to American Advanced Medical, Inc., which is seeking to reopen the facility as early as July. That’s all thanks to a carve out in the December liquidation plan brought forth by a committee of creditors in the bankruptcy case. 

Due to the hospital’s nonprofit status, California Attorney General Rob Bonta also has to approve the plan. If he does, it would separate the reopening of the hospital from the rest of the bankruptcy process.

The plan was brought forward by a joint motion, which marked the first time the debtor and creditors in the case agreed on a specific plan for a potential operator to take over and reopen the Madera hospital.

“After potential deals with Saint Agnes and AH (Adventist Health) fell through, MCH kept searching for the highest and best offer,” wrote hospital Chief Executive Officer Karen Paolinelli in a court filing. “The deal on the table with AAM represents the best opportunity to open the hospital and restore acute care for the residents of Madera County.”

Key to the Madera hospital reopening plan is the more than $50 million in loans from California’s Distressed Hospital Loan Program. Many terms exist in the potential arrangement, including AAMI’s ability to walk out of the deal if the loan funds are not made available during the reopening process. 

AAMI is still able to shore up a maximum of $30 million to pay off most of the hospital’s debts, according to court records filed this month.

State Sen. Anna Caballero, whose district includes Madera County, told Fresnoland she was “cautiously optimistic” about the reopening plan.

“We all have been waiting a long time for this to come together.”

Many suitors contacted Madera hospital, but few stuck around

In a recent court filing, Paolinelli explained how after Saint Agnes Medical Center pulled out of a deal with the hospital in December 2022, her team heard from at least 20 potential operators inquiring about taking over the hospital.

Most led to conversations over the following months, but only eight resulted in an actual proposal or letter of intent. Many of them did not receive the hospital board’s approval. 

Last summer, Adventist Health entered into negotiations to reopen the hospital, but it fell apart because it called for at least $80 million in state funds, since it did not want to put forth its own funds for a reopening.

A month before Adventist Health backed out of talks, Madera hospital executives renewed talks with AAMI, which is headquartered in Delaware but has experience with reopening several California hospitals.

AAMI first reached out to Madera hospital with an initial proposal back in December 2022. But they didn’t garner much attention from hospital executives, but tried to stay in the picture. At one point its representatives even caught flak from Paolinelli in September for offering her a $150,000 check while she and the hospital board were still choosing a potential operator. 

At that point, it seemed AAMI had a rocky relationship with Madera hospital’s executives. But since the two parties restarted negotiations in October, the possibility of reopening has never looked more likely.

That’s especially the case with the newfound progress of a reopening plan under court approval, something the bankruptcy case hasn’t featured so far.