OJAI : Hospital’s Owners File for Bankruptcy

Ojai Valley Community Hospital, the third largest employer in Ojai, is greeting its owners’ decision to file for bankruptcy as good news, officials said Thursday.

“It’s actually helpful. Cash has been tight, but now we have a plan to go forward,” said Ronald A. Pavellas, executive director of the 116-bed acute-care hospital that employs 300 doctors, nurses and other workers.

Affiliated Medical Enterprises, the Orange-based company that bought the Ojai hospital for $6.6 million in June, 1987, filed for Chapter 11 reorganization under federal bankruptcy code on Wednesday. It asked for the federal court’s protection from creditors while it restructures a short-term debt of $110 million.

Pavellas said he spent much of Wednesday and Thursday reassuring department managers that no layoffs or other service changes are expected. “It’s going to be business as usual, and it may free up some cash to do some cosmetic improvements and buy some equipment we have not been able to purchase,” he said.

Affiliated Medical promised that its hospitals will remain open during the reorganization.

President Dan S. Young, who formed the investor-owned company in August, 1986, said the decision to file for bankruptcy came after more than a year of negotiations with lenders and creditors to restructure its $110 million in debt, including $88 million owed to banks and $14 million owed vendors.

Douglas Webster, senior vice president, said the company’s problems stemmed from its $100-million leveraged buyout of American Health Group International’s four hospitals in 1988. The hospitals, located in Palmdale, Sun Valley, Huntington Beach and Portales, N.M., are the subject of a lawsuit that Affiliated Medical filed last year against American Health and its accounting firm for alleged misrepresentation of expected revenues and $6 million in Medicare overpayments.

Ojai hospital’s revenues have been on target and are not part of that suit or ongoing arbitration, Webster said.