Watsonville Hospital’s Bankruptcy Filing, By Jondi Gumz • Cabrillo VP Charged with Embezzlement at his Former Job

COMMUNITY NEWS

Watsonville Hospital’s Bankruptcy Filing

By Jondi Gumz

The financial woes that led to Watsonville Community Hospital filing for Chapter 11 bankruptcy protection on Dec. 5 with plans to sell to a local consortium erupted six months after new operators took over.

That’s according to attorney Debra Grassgreen of Pachulski Stang Ziehl & Jones, who explained the situation at the first-day hearing Dec. 7 in federal bankruptcy court in San Jose to Judge M. Elaine Hammond.

“The goal of keeping the doors open… is top of everyone’s mind,” Grassgreen said, noting that the closest emergency department is 25 to 30 minutes away depending on traffic.

The hospital is the third largest employer in Watsonville.

In September 2019, with the hospital in financial straits, new operators took over.

The building in which the hospital operates was sold to Medical Properties Trust of Birmingham, Alabama, a real estate company founded in 2003 that owns healthcare facilities worldwide.

Watsonville Community Hospital leases the property from MPT.

Six months after the sale, the hospital operators were in default on that debt.

The reason: Patient mix, Greengrass said.

She’s referring to reliance on Medicare or MediCal, which pay only a portion of the cost of care, and not enough privatepay patients who pay full freight.

Staffing shortages led to hiring traveling nurses, which are more costly than staff nurses.

The arrival of the COVID-19 pandemic in March 2020 made the financial situation worse.

Grassgreen said Watsonville Community Hospital owes MPT $40 million, which includes $9.25 million in emergency advances to keep the doors open.

She said there’s another $19 million in liquidated claims and potentially other unsecured claims.

The list of the 35 largest unsecured claims is headed by the California Nurses Association, followed by the California Technical Employees Coalition, Teamsters Local 912, Meritain Health Inc. of Amherst New York, and Principal Financial Groups of Des Moines, Iowa, and QHCCS Retirement Committee of Brentwood, Tennessee.

The filing then lists Health Trust Workforce Solutions of Atlanta, Georgia, $2.9 million, Guidehouse Managed Services, Chicago, $1.3 million, PG&E, $1.1 million, Lucile Packard Children’s Hospital, Palo Alto, $930,000, Emergency Medical Services Authority of Rancho Cordova, $789,000.

Local entities in the top 35 include: Kaiser Permanente, $373,000, and Dominican Hospital, $215,0000.

WHM, the management for the nine physicians in Coastal Health Partners, has claims of less than $150,000.

The operators hope to sell the operation to the Pajaro Valley Healthcare District Project, a new nonprofit entity in the process of formation headed by Mimi Hall, former Santa Cruz County Heath Service Agency director.

The consortium includes the county, the city of Watsonville, Community Health Trust of Pajaro Valley and Salud Para La Gente.

Greengrass said the consortium is expected to assume the lease, and all employee obligations, PPO, pension and health insurance.

This year, two independent board members, Frank Williams and Jeremy Rosenthal joined the board, followed by David Gordon in September.

The new board appointed Rosenthal CEO.

Greengrass said on the eve of Thanksgiving, the coalition was unable to pay the financing and sign the term sheet for the proposed sale.

The day after Thanksgiving, Watsonville Community Hospital posted state-required WARN notices indicating plans to lay off 677 employees.

At that point, MPT agreed to provide emergency financing while coalition pursued government funding to buy the hospital operation.

Greengrass said the goals are to sell the hospital, keep the doors open, keep providing health care services to people who need health care and preserve the jobs.

“There’s a lot riding on it,” she said.

The timetable calls for closing the sale by March 31.

The judge set Jan. 19 as the filing date for financial records after an attorney for the hospital said it could not be submitted accurately by Jan. 4.

The second-day hearing will be by Zoom at 10 a.m. Jan 5 and with the third hearing at 10 a.m. Feb. 15, which will be hybrid, allowing in-person proceedings

“This is new,” the judge said. “If we find we’re going to have too many people, we may limit it.”

She said she found Zoom works for large chapter 11 cases, but not for people who don’t generally show in such cases, older people representing themselves, people who are hard of hearing and people who aren’t English speakers. n

A recording of the Dec. 7 hearing is on Stretto.com at https://cases.stretto.com/ WatsonvilleHospital

Cabrillo VP Charged with Embezzlement at his Former Job

On Dec. 9, Paul De La Cerda, vice president of instruction at Cabrillo College, was charged with overbilling his former employer for trips he took.

De La Cerda, 47, was charged with one felony count each of misappropriation of government funds and embezzlement of government funds, according to a press release issued by Los Angeles County District Attorney George Gascón.

De La Cerda is expected to be arraigned on Jan. 7 in Department 30 of the Foltz Criminal Justice Center in Los Angeles.

He is accused of overbilling East Los Angeles College, where he was dean, about $1,575 for several hotel stays between March 2017 and 2019. He allegedly forged documents he submitted for reimbursement, according to Gascón.

The case remains under investigation

by the Los Angeles County Sheriff’s Department, Fraud and Cyber Crimes. De La Cerda joined Cabrillo in June of this year. Cabrillo spokeswoman Kristin Fabos said via email, “We cannot discuss details due to the fact that it is a confidential personnel matter.” She provided a statement on behalf of the college: “The Cabrillo Community College District is actively engaged in Paul De La Cerda working on this matter. We take this development very seriously and recognize this is creating concern among employees, students, and the community. We acknowledge that concern, but are restricted in what we can publicly share as this is a confidential personnel matter. Please know that this has our full attention and that we will share additional details as we are able. The best interests of the College, its students and employees, and our community continue to be paramount.” n

The Cabrillo Community College Governing Board meets virtually Monday, Dec. 13, at 6:15 p.m. To attend, here is the Zoom link: https://cccconfer.zoom.us/j/92614254891