Owner of 2 Hospitals Files for Bankruptcy Protection

In an escalating battle for control over two debt-burdened San Fernando Valley hospitals, their owner, Triad Healthcare Inc., has filed for federal bankruptcy protection to evade state efforts to place the hospitals in receivership.

Triad’s action effectively voids a state court order that last week barred Triad from firing the management company that has been running the hospitals since November. The company, Alpha Partners, was hired by Triad at the urging of the state’s Cal-Mortgage loan guarantee program--Triad’s largest creditor. Since then, relations between Triad’s board and state officials have deteriorated.

A Triad spokeswoman said Wednesday that the board was still determined to fire Alpha and would seek the U.S. Bankruptcy Court’s approval at a hearing scheduled for today in Los Angeles. State officials said they would attend the hearing to oppose Alpha’s removal.

Douglas Drumwright, president of Alpha and chief executive of Triad, could not be reached for comment Wednesday.

The legal wrangling has injected new uncertainty into prospects for the two hospitals: Sherman Oaks Hospital and Health Center in Sherman Oaks, and West Valley Hospital and Health Center in Canoga Park. They are laboring under a $167-million debt load, which Triad took on to acquire the hospitals in 1991. The state’s Cal-Mortgage program guaranteed the loan, but Triad defaulted last summer, leaving taxpayers potentially on the hook for the debt.

Lawyers for the state last week sought to force Triad into receivership, saying the Triad board had failed to act on key issues and was threatening to disrupt hospital operations by firing Alpha.

A Superior Court judge postponed action on the receivership request but issued a temporary restraining order barring the Triad board from firing Alpha.

Tuesday’s bankruptcy filing transfers the matter out of state court jurisdiction.

Defending the court action, Triad Chairman Sanford Weiss said it was forced by the state’s “ill-conceived and precipitous attempt to foreclose on the hospitals.” He said the company hoped to stabilize operations at the hospitals by putting them under the supervision of a neutral bankruptcy referee.

State officials said they would argue in court against any change of management at the hospitals.

“Alpha is doing a good job, has the confidence of the staff and is working toward the betterment of the hospitals as near as we can determine,” said Dennis Fenwick, director of Cal-Mortgage.