In California, Bankrupt Doctors Medical Center Is Saved—For Now—With $20 Million Dollar Bailout Plan
In San Pablo, California, Doctors Medical Center has been saved by a $20 million bailout plan that was approved by the California Medical Assistance Commission board last week. Under the details of the financial plan, the hospital, which had filed for bankruptcy, will receive a cash infusion this month and stay open for the near future. The money will be funneled in stages through the state to the West Contra Costa Healthcare District, which owns the hospital. Contra Costa County plans on later getting its money back through the district’s property tax revenue.
The county plans to later get its money back through the district's property tax revenue. The county and healthcare district will work together to set a contract that will delineate management responsibilities for a joint board.
Operating at a $1 million/month loss, the hospital has been forced to cut back on services, reduce pay, and lay off 300 employees. Under the new plan, the hospital is expected to start making a profit by mid-2007.
Doctors Medical Center and the West Contra County Healthcare District had filed for Chapter 9 Bankruptcy at the US Bankruptcy Court in Oakland in October 1, citing $50-$100 million in debts as well as assets.
Chapter 9 Bankruptcy is for the reorganization of municipalities (towns, cities, counties, villages, taxing districts, school districts, and municipal utilities. Its purpose is to protect financially distressed municipalities from creditors while a plan is developed for adjusting the municipality’s debts. Chapter 9 does not provide a law for liquidating assets to pay creditors.
Function of Bankruptcy Court in Chapter 9 Cases:
· Approve the eligible debtor’s petition.
· Confirm a plan for debt and adjustment.
· Ensure the plan’s implementation.
Section 109(c) of the Bankruptcy Codes sets forth four additional eligibility requirements for chapter 9:
1. The municipality must be specifically authorized to be a debtor by State law or by a governmental officer or organization empowered by State law to authorize the municipality to be a debtor.
2. The municipality must be insolvent, as defined in 11 U.S.C. § 101(32)(C).
3. The municipality must desire to effect a plan to adjust its debts.
4. The municipality must either:
o Obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan in a case under chapter 9.
o Negotiate in good faith with creditors and fail to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan.
o Be unable to negotiate with creditors because such negotiation is impracticable.
o Reasonably believe that a creditor may attempt to obtain a preference.
Sagaria Law, P.C. handles Chapter 7, 11, and 13 bankruptcy cases, as well as other bankruptcy-related matters in Santa Clara County, Monterey County, and Alameda County. Contact Sagaria Law, P.C. for a free consultation.
Multi-million Dollar Plan Revives Bankrupt Doctors, Contra Costa Times.com, November 3, 2006
Doctors Medical Center Files For Chapter 9 Bankruptcy Protection, San Francisco Business Times, October 2, 2006
Chapter 9: Municipality Bankruptcy, U.S. Courts.gov
Related Web Resource:
Municipality Bankrupty Chapter 9, Public Information Series of The Bankrupty Judges Division
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