Palo Verde Healthcare District Adopts Resolution Authorizing Bankruptcy Filing

The Palo Verde Healthcare District Board of Directors Wednesday adopted a resolution that would authorize Interim Chief Financial Officer Michael Rose and Chief Executive Officer Sandy Anaya to file a Chapter 9 bankruptcy petition, should it become necessary.

“This is really a last resort,” Vanessa Burke, a financial consultant hired by the district, said at the July 16 meeting, which was streamed live on social media by a resident. “We are looking at all options for the hospital.”

The vote came less than a month after the board declared a fiscal emergency on June 25, which Rose said was the result of a “series of compounding financial crises,” which included pandemic-related costs, protracted litigation in 2024, major operating system replacements, a cyber-incident that halted billing for 45 days, the abrupt resignation of key finance leadership and the decision by Provident Bank to take money from the district’s accounts to pay back a $2.8 million line of credit in May.

“These events have brought our available cash on hand down to approximately $1.4 million,” Rose said, which is about 18 days of funding.

Rose also noted that the district had taken a number of steps to stabilize its finances including reaching out to lawmakers to request $4 million in emergency funding from the state; limiting hospital operations to the emergency department, ancillary services related to emergency care and the community clinic; and adopting a 60-day emergency plan that included employee layoffs and furloughs, the cancelation or non-renewal of contracts, reductions in medical services and contract and loan modifications.

“Our leadership team continues to pursue emergency funding opportunities at the state level, while aggressively collecting outstanding accounts receivable and carefully managing expenses,” Board President Carmela Garnica said at the start of the meeting. “Recent collection efforts have yield[ed] positive results, and we remain committed to maximizing every available resource to support the hospital’s day-to-day operations.”

Despite the district’s current financial situation, Chapter 9 bankruptcy is not the hospital’s only option, attorney Lena Wade said.

“There are many options: continued operations, a merger, Riverside University Health System coming in, a potential sale,” she said. “All of that takes time, and many of these options require a vote of the residents of the district, so our advice is that we need to have this as an option.”

Wade said having the option to file for Chapter 9 bankruptcy, in the event the district ran out of money, would provide the district with more time to explore its options for moving forward and allow the board to go to the voters if that became necessary as part of a reorganization.

Even if the district was able to find a way to stabilize its finances in the short-term, there were still deep concerns about whether it would be able to sustain itself long-term.

“There’s going to be significant reductions in the future with our payer mix and lack of resources,” Board Member Trina Sartin, who also serves as both the chief nursing officer and the chief operating officer of the hospital, said. “I am very, very concerned about the hospital, as a district with our tax base, ever being able to sustain permanently.”

Also concerning Board Member Rosie Rowell were the upcoming cuts to Medicaid, known locally as Medi-Cal, as part of President Donald Trump’s “One Big Beautiful Bill Act.” According to KQED, rural communities would be some of the hardest hit when the cuts go into effect.

“It takes a lot of money to run even our little hospital,” she said. “And with the cuts to Medicare and Medi-Cal, it’s really scary, and it’s going to get worse.”

During a presentation to the board on the proposed budget for the 2025-2026 fiscal year, which began July 1, Rose said an estimated 40% of outpatient revenue is expected to come from Medi-Cal managed care plans with another roughly 25% is expected to come from patients with Medicare plans. Rose said the finance team was still evaluating the impact of the new cuts.

Burke said the proposed draft budget presented to the board at the meeting worked to restore financial stability to the hospital while continuing to offer critical emergency room and community clinic services to the community and surrounding areas as well as to the people currently incarcerated at Ironwood State Prison.

However, in order to accomplish this, the draft proposed budget provided no contingency and very little flexibility and included additional funding from the state and participation in the Voluntary Rate Range Intergovernmental Transfer which might not materialize. The draft proposed budget also did not include capital planning expenditures, debt service or funding for reserves, all of which would need to be included in future drafts.

“We’ve been trying to stop the bleeding and put the tourniquet on so that the hospital can continue operating its emergency department, its mission critical services, as well as the community clinic and any ancillary services,” Burke said. “But really we should be talking about recovering operating reserves, so that you’re not in this place again in the near future.”

Rose said the board would receive its next budget update at the regularly scheduled July 30 meeting with adoption of the final budget set for August 27.

In a further effort to balance the hospital’s budget, the board directed the finance team to look into potential changes to clinic operations as well as continued cost-cutting measures such as the review and potential renegotiation of existing contracts, consideration of additional staffing changes and the review and proposed use of swing beds and the impact to medical-surgical (med-surg) care.

And while the decision to authorize Rose and Anaya to file a Chapter 9 bankruptcy petition, multiple board members said it was their goal to take whatever steps necessary to ensure the hospital continued to operate.

“We can’t let this hospital go down. That’s all there is to it,” Rowell said. “This hospital is going to stay open, even if only partially, if I have anything to say about it.”