Healthcare Conglomerate Associates’ (HCCA) contract with the Tulare Local Healthcare District will stand as the bankruptcy judge in the district’s case deliberates on whether to allow the district to reject the contract. At the same time, the California Department of Public Health (CDPH) has doubts over the hospital’s continued operations, whether they’re under HCCA or a successor company.
Riley Walter, a bankruptcy attorney representing the district, had joked earlier in the day that he felt like a miracle worker — but not much was worked in court Thursday, and certainly no miracles from either side’s perspective.
Walter did come back and state that there was one point both sides could agree on.
“There’s a toxic, toxic, toxic relationship,” he said.
While that’s not in dispute, the judge stated that he needed time to review additional filings in the case before coming to a decision. The district had submitted a flurry of documents Wednesday night, likely necessitating a continuance of any decision in the case.
CDPH Concerned About Hospital’s Future
The California Department of Public Health weighed in before the hearing Thursday in documents filed with the court.
“It is not clear at this stage that the Debtor’s proposed plan for the continued operation of the hospital sufficiently provides for patient safety and quality care by a Department-approved management company at all times and complies with applicable law,” the filing read.
That’s because no company has filed an application with CDPH to manage the hospital.
That includes Community Medical Centers, though the district stated that it was ready to manage the hospital once the contract with HCCA was rejected.
Although the district had submitted a plan to transition the hospital away from HCCA’s management and towards that of Community, it wasn’t one that was good enough for the department.
The department also expressed doubt regarding the current operation of the hospital under HCCA.
“The Debtor and/or its agents have been providing the Department with a daily close and transfer plan, but the Department has not received evidence of the Debtor’s financial ability to implement its plan,” the statement reads, “and therefore cannot adequately assess the plan.”
It requested multiple financial documents, which it states it has not received.
“Good Business Judgement”
Walter also claimed that HCCA had recorded a $10m deed of trust on some of the hospital’s property on September 28.
Mark Levinson, an attorney for HCCA, conceded that there was a deed of trust, but that the healthcare district hadn’t provided sufficient evidence to the court to prove that.
“There is one, but there’s a story,” Levinson said.
In light of that fact, and others, Walter stated that the rejection of the contract would be a good business judgement.
“We think there are any number of reasons alone to justify rejection of this contract,” Walter said.
Those reasons included, he said, a 30% surcharge to HCCA on employee pay, financial information that the company “does not choose to provide,” and “efforts to interfere” with the election and seating of Senovia Gutierrez, a member of the hospital’s board.
He also stated that the rejection of the contract was necessary to ensure that its potential partners — at this point, Community Medical Centers and Sante Health — would be able to apply to take over management of Tulare Regional without facing legal interference from HCCA.
“This puts the district in a very tough spot,” Walter said.
Mark Levinson, an attorney representing HCCA, specifically mentioned the district’s Wednesday night filings in his rebuttal.
“The debtor simply sandbagged us,” he said.
Levinson also claimed that the hospital district didn’t give HCCA any way to turn the hospital around.
“There was no chance,” he said. “They didn’t give HCCA a chance.”
Levinson asked the judge to reject the request to reject HCCA’s contract, stating that it acted imprudently and in bad faith — that it had rejected requests to learn about potential financing opportunities and potentially avoid bankruptcy.
“It didn’t have to file bankruptcy on one day’s notice,” he said.
Court documents previously revealed that Community Medical Centers would be tapped to run the hospital on an interim basis, with assistance from Sante Health.
In exhibits included with his declaration, the district’s transition plan would include tapping “unencumbered buildings and land” as collateral for a loan with Community Medical Centers.
Community would finance the hiring and payroll of staff and providers “for the first 30-60 days.”
Walter stated that the district would work to keep as many of the hospital’s workers — currently employed by HCCA — as possible, stating that the district considers them “very valuable assets.”
Officials with Community did not elaborate on the potential of a short-term management agreement turning into a long-term one.
“It’s premature to say anything beyond what’s in the bankruptcy court documents which is that, assuming all legal hurdles are cleared, Community Medical Centers is willing to explore a short-term management agreement to keep the Tulare Medical Center open and properly serving its community,” a statement from Community Medical Centers read.
Dr. Benny Benzeevi, CEO of HCCA, was not able to comment for this article besides a brief statement.
“We want what’s best for the residents of the district. Period.”