Closed Hospital Files for Chapter 11

Santa Paula Memorial Hospital has filed for bankruptcy protection from creditors in federal court, days after mounting debt forced the 42-year-old institution to close.

A lawyer for the hospital, which filed for Chapter 11 in Santa Barbara on Monday, is scheduled to appear in court this morning to ask a judge’s permission to use assets to pay its remaining employees.

Many of the hospital’s 200 full- and part-time employees were given a 30-day notice and are expected to work through Jan. 14 to close down operations.

“We had hoped to be able to reorganize informally by agreement with our creditors, but some of them were uncooperative,” Phillip H. Romney, chairman of the hospital’s board of directors, said Tuesday in a prepared statement.

“We had to secure the protection of the bankruptcy court so that we could continue to pay the employees who are still with us.”

Talks on negotiating a merger of the closed facility into the county health-care system broke off last week, but both sides have agreed to return to the table Jan. 6.

Ventura County Supervisor Kathy Long said the bankruptcy filing “wasn’t a surprise.”

“I suspected they would and should do that to protect their standing in terms of their creditors and cash flow,” the supervisor said.

Long, whose 3rd District includes the Santa Clara Valley where the hospital is located, has worked about six months to negotiate a merger of the facility into the county health-care system.

Santa Paula Memorial had operated the only emergency room between Ventura and Santa Clarita along heavily traveled California 126.

Long predicts that the Jan. 6 meeting will produce significant results.

“I think it will be definitive, in as much as the hospital trustees are very committed to reopening the hospital soon,” she said.

“We’ll go to the table with full optimism that we can work to restructure the hospital and bring it out of bankruptcy under the county operation and have a good partnership.”

Even if a merger agreement is reached early next month, it would very likely take up to two additional months to approve a transfer of the hospital’s operating license, according to the state Department of Health Services.

In court documents, the hospital listed assets of $14.5 million and $8 million in liabilities.

Perhaps its largest creditor is Quorum Health Group, the Nashville-based hospital management company that receives nearly $500,000 annually to oversee Santa Paula Memorial. Quorum is owed $398,070.

Other unsecured medical creditors include Comp Heath in Dallas, owed $172,214; Quadramed Corp. in Pennsylvania, owed $170,854; Sacramento-based Cardinal Health, $165,030,and McKesson HBOC Medical in Texas, $143,777.

Closer to home, the facility owes Professional Hospital in Los Angeles $133,441; Southern California Edison, $75,335; Clinical Equipment Services in Camarillo, $65,979, and Dr. Guillermo Acero of Somis, the hospital’s chief pathologist and a 26-year staff member, $37,539.

The hospital was also delinquent in paying more than $28,000 in Ventura County property taxes due Dec. 10.

If the bankruptcy delays payment of the second tax installment in April, the debt to the county would exceed $55,000.

Treasurer-Tax Collector Larry Matheney said the hospital had not been delinquent on tax bills until earlier this month -- “they were good taxpayer citizens” -- and that he doesn’t worry about eventually receiving payment.

“We will get paid,” Matheney said. “It’s a question of when and then a question of how much in penalties will we be able to collect.”

Santa Paula Memorial, one of only three hospitals in California built solely with community donations, has struggled in recent years as its number of patients fell and its debt load increased. The facility has not made a profit in 15 years.

Wally Bobkiewicz, Santa Paula’s city manager, said the bankruptcy was expected as the hospital board tried to shield its primary asset: the nearly 26 hilltop acres on which the medical center sits.

Along with being licensed to operate 49 beds, it also has approval to build a 62-unit nursing home on an undeveloped portion of its property.

“The board is trying to be prudent to protect its assets as best they can. Now that the hospital is closed the options are limited,” he said.

Bobkiewicz, the Fillmore city manager and council members from each city have contacted several hospital operators in the region -- in addition to county health leaders -- since last week to determine whether any would consider building a hospital or provide temporary emergency service to the valley’s 50,000 residents.

The group contacted officials at the St. Johns hospitals in Oxnard and Camarillo; Community Memorial Hospital and Clinicas del Camino Real, both in Ventura; Simi Valley Hospital; and Cottage Hospital in Santa Barbara. The cities are waiting for their formal replies, Bobkiewicz said.

“What we’re asking these hospitals to do is a pretty unusual thing,” he said.

“That’s where the cities are now, trying to be creative ... trying to find a way so that if someone needs emergency care they don’t have to be sent to Ventura or Oxnard.”

Among other short-term solutions in the works, state licensing officials are working to allow former satellite clinics operating in Santa Paula and Fillmore to continue serving the public independent of the support once received by the full-service medical center.

“We’ve given them special permission to stay open while the paperwork runs its course,” said Robert Miller, spokesman for the California Department of Health Services.

The ambulance company that serves the Santa Clara Valley has doubled from two to four the number of emergency vehicles stationed in Santa Paula and Fillmore to make up for additional travel time.

And Dr. Logan Bundy, director of the Santa Paula Memorial emergency room, said last week that he hoped to open a new urgent-care center in downtown Santa Paula to accommodate at least half of the 15,000 patients treated in the hospital’s emergency room each year.

The new facility could assist patients whose injuries and illnesses are not life-threatening, but not those critically injured in auto accidents, heart attack victims or those needing sophisticated X-ray equipment.

*

Times staff writer Daryl Kelley contributed to this report.