LAFCO Starts Process To Dissolve Palo Verde Healthcare District In Effort To Stabilize Blythe Hospital

The Riverside County Local Agency Formation Commission (LAFCO) last week voted to begin the process of dissolving the Palo Verde Healthcare District (PVHD), which oversees Palo Verde Hospital in Blythe, and working to find a potential successor agency.

“Palo Verde Healthcare District has lost the full faith and confidence of the people it serves,” Commissioner Steve Sanchez said at the September 25 meeting. “Keeping the structure is not just unwise, it is dangerous.”

The La Quinta council member said that the problem didn’t start back in May, when the hospital suspended all patient admissions, but rather had been in the making for years, “if not decades.”

According to the Municipal Services Review (MSR) ordered by the commissioners, the district has what Sanchez characterized as “near zero cash flows,” with about six days of cash on hand as of September 22. 

The district was also experiencing reduced reimbursements while still dealing with the fallout from a cybertack and billing breakdowns. Additionally, the hospital has had four chief financial officers in 18 months.

“There’s no recovery plan, no stability and no trust,” Sanchez said. “Doctors, business leaders, residents, they’ve all lost confidence. The board has lost the community, and the community has suffered enough.”

In June, the board adopted a 60-day emergency reorganization plan in an effort to stabilize the hospital’s finances. The following month, the board adopted a resolution authorizing a bankruptcy filing.

For Sanchez, the only option at this point was for the county to temporarily take on the role of successor agency in an effort to stabilize the hospital as work to find a permanent successor agency continued.

“Only LAFCO has the authority and the responsibility to act when a district is no longer serving its mission,” Sanchez said. “We decide whether Palo Verde Healthcare District should be dissolved.”

Riverside County LAFCO is a state-mandated regulatory agency that generally has jurisdiction over changes in boundaries of local agencies such as cities and special districts within the county. The agency is overseen by a board of commissioners, which includes two supervisors, two city council members, two special district board members and one public member.

And while the agency has the authority to initiate the dissolution of a special district like PVHD, LAFCO Executive Officer Gary Thompson said the agency did not have the authority to mandate another public agency, or potentially a private business, to act as the successor agency, which would be required to dissolve the district.

“We can initiate the dissolution, but there’s pieces that go with that would need to be in place,” Thompson said.

As to the question of whether or not the county would be willing and able to step into the role of on a temporary, or potentially permanent, basis County Executive Officer Jeff Van Wagenen said if directed by the supervisors to do that, the county would do what it needed to do, however he said it would come at a cost.

“Our resources are already stretched and at limits, and we know that we are looking at potentially 20% cuts to that funding, at least as it relates to Medicaid over the next several years,” he said. “But also, we serve at the pleasure of the board of supervisors, so it is not something that we have a ready made team that goes in and acts as a successor agency to special districts, there would certainly be significant challenges for us to do it.”

One of those challenges is that the county this year adopted a deficit budget, meaning that it will spend more than it takes in, for the first time in four years.

“Anything now that is additional general fund expenses results in cuts to services somewhere else across the organization,” he said. “That is just a reality that we face.”

Another question, Thompson said, was whether any of this would even be legally feasible since the district voted September 22 to authorize the board to file for Chapter 9 bankruptcy.

“That’s one of those gray areas that we’d have to get a legal opinion on to see if we could actually do that if it’s in bankruptcy,” Thompson said.

A news release announcing the vote called the action “an important step” that would allow the hospital to continue its limited operations as it negotiated with its creditors. The release said the board took the action after learning that neither the city, the county nor the state would be providing emergency funding to the hospital. 

“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 two years,” Board President Carmela Garnica said in the release. “Our community deserves a functioning hospital. We are doing everything we can to keep it open.”

Garnica, addressing LAFCO, stressed the importance of working together, despite what she called “negativity” that started when she became president.

“We never had anybody go to our board meetings until I became board president, then we had a lot of people coming to our board meetings,” she said. “And, all of a sudden, negative bashing started, and there’s nothing that I can do about that, other than to see how we can bring this community together for the sake of the hospital and ignore all the negative bashing and the negative comments that happen in our community.”

Garnica’s call for everyone to work together to save the hospital was a common theme among those who spoke during the public hearing, including local elected officials who addressed the commissioners.

“With this bankruptcy, we need to work hard to get together with their board and whatever it takes to make it happen so we can get something, a plan, to keep it open,” Blythe Mayor Joseph “Joey” DeConinck said. “Bankruptcy is just buying some time, which is great, but we need to get it solved now. We don’t got no more time left.”

As part of LAFCO’s decision to begin the process of dissolving PVHD, the commission also directed staff to send a letter to the state listing out the actions taken at the meeting to demonstrate the efforts being taken to save the hospital. The hope is that this would bolster the hospital’s request for emergency funding from the state, which to this point has been largely ignored.

“The state has been absolutely no help, and I don’t expect it to be, quite frankly,” Thompson said. “There’s a hospital, a rural hospital up in Inyo County in the same situation, and the state isn’t helping them either, so apparently, their priorities of spending money doesn’t involve rural hospitals.”

The next Riverside County LAFCO meeting is set for October 16. The commissioners are expected to further discuss the process of dissolving PVHD. Once the agenda is posted, it can be found here. The next PVHD meeting is set for October 1. The agenda can be found here.