California hospital board clears path for bankruptcy filing
The leadership of Blythe, Calif.-based Palo Verde Hospital was granted the authority to file a Chapter 9 bankruptcy petition, should it become necessary, The Riverside Record reported July 17.
The Palo Verde Healthcare District board of directors granted the authority to the hospital’s CEO and interim CFO less than a month after declaring fiscal emergency, according to the report.
Interim CFO Michael Rose said the need for the fiscal emergency declaration was the result of a “series of compounding financial crises,” according to the report. Those include pandemic-related costs, protracted litigation in 2024, major operating system replacements, a cyber incident that paused billing for 45 days and the sudden resignation of key finance leadership. Provident Bank in May also took money from the district’s accounts to pay back a $2.8 million line of credit.
Mr. Rose said the hospital has have taken a number of steps to stabilize finances, including requesting $4 million in emergency funding from the state of California; limiting hospital operations to the emergency department ancillary services related to emergency care and the community clinic; and developing a 60-day emergency plan that includes layoffs and furloughs, the cancellation or nonrenewal of contracts, reductions in medical services and contract and loan modifications.
Chapter 9 bankruptcy allows financially distressed cities, hospital districts and other public entities protection from creditors while they develop and negotiate plans for adjusting debt. A bankruptcy declaration is one of several possibilities on the table for the 51-bed hospital.
“There are many options: continued operations, a merger, Riverside University Health System coming in, a potential sale,” Lena Wade, the district’s general counsel, said, according to the Record. “All of that takes time, and many of these options require a vote of the residents of the district, so our advice is that we need to have this as an option.”