Judge Transfers Control of Brea Community Hospital to Trustee
Federal bankruptcy Judge John Ryan on Thursday ordered control of Brea Community Hospital to be transferred to an appointed trustee, after officials learned that the hospital could not pay more than 200 employees, the Orange County Register reports. The move could force the hospital to close, after which the trustee would arrange for alternative care for about 24 patients.
Ryan denied a request by hospital attorney Sarah Petty for additional time to negotiate with Prime Healthcare Systems, a group with which the hospital apparently was negotiating to buy the hospital. The group "had not been mentioned in the previous seven weeks of the bankruptcy," the Register reports.
Brea Community as late as Wednesday had $6,000 to cover $320,000 in payroll expenses. In addition, the hospital has assets of only $4.5 million. The hospital's monthly cash flow has decreased from $1.6 million to about $600,000, in part because of low patient demand.
According to the Register, Ryan's order follows "months of decline in the quality of patient care" and shortages of essential medical equipment and services at the hospital.
Brea Community has been cited by state and federal officials for payroll-related delinquencies. The state fined the hospital $100,000 for delaying workers' compensation payments, and the U.S. Department of Labor is investigating late and missing payments into employees' 401-K plans.
In his decision, Ryan said Brea Community CEO Gaetano Zanfini "has lost the confidence of the creditors. He has lost the confidence of the creditor committee." He added that the appointed trustee could continue negotiations with investors in an effort to find emergency funding to keep the hospital open. However, he said, "My sense is, because there's no financing to continue operations, that the decision will be to close the doors."
Hospital officials on Thursday were continuing to seek a way to keep the hospital open.
Some health plans on Thursday said that they could help divert patients to nearby hospitals, according to the Register.
Sovereign Healthcare, which had an option to buy Brea Community for $6 million, said it intends to bid again for the hospital, according to Sovereign CEO Jeremy Hogue (Orange County Register, 3/18).