Doctors Medical Center files for Chapter 9 bankruptcy protection
East Bay Business Times - by Chris Rauber
Financially ailing Doctors Medical Center and the public district that runs it have filed for Chapter 9 bankruptcy protection, while they try desperately to line up new revenue sources to save the 247-bed facility.
The San Pablo-based West Contra Costa Healthcare District electronically filed for bankruptcy protection late Sunday in U.S. Bankruptcy Court in Oakland, listing $50 million to $100 million in debts and the same range of assets, according to published accounts. Those assets include the hospital building and the land beneath it, valued at roughly $40 million in a recent appraisal, said Andrea Porter, a bankruptcy attorney at San Francisco's Friedman Dumas and Springwater law firm who is representing the health care district and Doctors.
The filing will not directly affect day-to-day operations of the hospital, she said. But it will freeze the hospital's assets, "so the District can gets its arms around the problem," Porter told the San Francisco Business Times. It prevents creditors from attempting to collect debts immediately and could help the hospital line up additional financing, she said.
That said, Doctors has shut its emergency department to all but walk-in patients, and has said in recent weeks it will close its outpatient clinic in Pinole, shutter its obstetrics department, and cut salaries by 10 percent for nurses and others as it struggles to staunch losses. It is in danger of losing the medical group that staffs its ER and is threatened with needing to shut its doors in the near future, barring a huge cash infusion from an unknown source or sources.
Although CEO Irwin Hansen reportedly is working on a deal with the California Department of Corrections worth $84 million over three years to care for inmates at state prisons, officials have said that will not be enough on its own to salvage the hospital's battered balance sheet.
The hospital has been losing roughly $1 million per month for the last two years, despite multiple attempts to trim expenses and boost revenue. At various points in recent weeks, the hospital has said it would have trouble meeting payroll at the end of September and in mid-October. The shortfall in 2004, the year the district took the hospital over from its previous operator, Tenet Healthcare Corp. (NYSE: THC), was $24 million.
In late September, Hansen said the hospital would need $8 million in subsidies to meet an Oct. 13 payroll, and another $1 million per month for approximately nine months to keep its doors open. To date, neither Contra Costa County nor the state of California has stepped forward with a tangible bailout plan for the facility, which has been struggling for survival for a number of years under several different owners and management teams.
Further financial details will be filed in bankruptcy court within the next six to eight weeks, Porter said.
Rauber is a reporter for the San Francisco Business Times.
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