The Palo Verde Healthcare District in Blythe has filed for Chapter 9 bankruptcy in an attempt to stem longstanding financial problems and maintain services at Palo Verde Hospital ahead of the facility’s planned closure next month.
The PVHD Board of Directors voted Sept. 22 to file for bankruptcy, and a petition was submitted Tuesday to the U.S. Bankruptcy Court for the Central District of California, Riverside Division.
The district started the process of closing the hospital Sept. 24, according to the California Employment Department.
The next-nearest health care facility for area residents is in the Coachella Valley, over 90 miles away from Palo Verde Hospital.
The organization’s financial stress resulted from multiple issues — COVID-19 pandemic-related expenses, a cyberattack that delayed billing and collections, a reduction in Medicare funding, Provident Bank seizing about $2.8 million to satisfy the district’s line of credit and a turnover of four chief financial officers.
As of Tuesday, the district had about a week’s worth of cash to operate the hospital, officials said.
According to a district staff report, as of Sept. 1 available cash totaled just under $1.26 million. Outstanding liabilities totaled over $5.28 million.
“Chapter 9 is the last tool left while we work to fix the financial management challenges that have so drastically impacted the hospital during the past several years,” board President Carmela Garnica said in a statement. “Our community deserves a functioning hospital. We are doing everything we can to keep it open.”
Despite receiving $4 million in emergency assistance from the state in May for payroll and operating costs, the hospital had insufficient funds to sustain the facility and suspended inpatient services and surgeries.
In November 2023, PVHD received $8.5 million from the state Distressed Hospital Loan Program administered by California Health Facilities Financing Authority. District officials said payments were deferred and may be eligible for partial forgiveness, but the relief did not fix short-term cash flow problems.
A $591,000 Nondesignated Public Hospital Bridge Loan from CHFFA was also deferred for three years with possible forgiveness, but that also did not help enough to avert the bankruptcy filing.
A recent review by Riverside County’s oversight commission deemed the district’s finances “very unstable,” with an immediate need for a major cash infusion to maintain even reduced services. The commission consists of two members from the county Board of Supervisors, two members from city councils appointed by the mayors of all the cities in the county, two special district board members selected by all the independent special districts in the county and one public member chosen by the other six commissioners.
“Nothing in the (the commission’s review) was news to our team or the public, as we had been reporting on the challenges since early this year,” Garnica said. “In any case, these facts left us with no viable path other than to pursue Chapter 9 bankruptcy protection to enable us to evaluate all of our options and take the necessary actions in the future.”
If the court grants Chapter 9 status, that will allow the district to continue daily operations while it plans to adjust debts and communicate with employees about any changes.
“This is an important step since getting the news that we would not be receiving emergency funding from the state of California,” hospital CEO Sandra J. Anaya said in a statement. “One of the advantages of filing for Chapter 9 bankruptcy is that we can continue to operate the hospital and clinic while continuing to negotiate with our creditors.”
The hospital will close on Nov. 23, with a layoff of 94 employees, according to the state Employment Development Department. Officials sent a notice to the state Sept. 24 to satisfy terms of the Worker Adjustment and Retraining Notification Act. The law requires employers to provide employees with 60 days’ notice of layoffs or closures.
On May 24, the PVHD board suspended inpatient admissions and surgical services. The emergency room, clinic and auxiliary services remain open.
The next steps will be to continue to consult with legal and financial consultants and communicate with all involved, while exploring financial assistance options from the state, county and private sector, according to the district.
