Valencia Hospital Seeks Protection From Creditors

Saddled with more than $10 million of debt, the only hospital in the Santa Clarita Valley has filed for Chapter 11 bankruptcy protection after failing to reach a partial-payment agreement with creditors.

Henry Mayo Newhall Memorial Hospital in Valencia will remain open, with no change in services, President Roger Seaver said Wednesday. He said the bankruptcy filing will help the 217-bed hospital continue a financial turnaround that began earlier this year.

“Clearly, the crisis is in the past, not in the future,� Seaver said.

In recent months, the nonprofit hospital had been trying to persuade creditors to accept 22 1/2 cents on the dollar for unpaid bills. The hospital filed for Chapter 11 protection Monday after several creditors refused the terms, hospital spokeswoman Andie Bogdan said.

“We told our creditors exactly what our situation was, and what the numbers look like, then we extended the deadline for as long as we could,� said C.R. Hudson, the hospital’s chief financial officer.

Among the largest creditors are UCLA Medical Center, Northridge Hospital Medical Center and Providence Holy Cross Medical Center in Mission Hills.

The hospital has $75 million in assets, Bogdan said.

Throughout the 1990s, debts plagued the hospital, even as demand for medical care surged in the fast-growing Santa Clarita area, Bogdan said. She said the hospital could not overcome a few major setbacks. The 1994 Northridge earthquake, for example, caused $35 million in damage to the hospital, which later received just $23 million in federal funds and insurance payments to rebuild, Bogdan said. She said cuts in Medicare payments also have cost the hospital $7 million since 1997.

This year, Bogdan said, a new management team slashed costs by laying off 110 of 900 workers, canceling unfavorable contracts and shutting down satellite physical therapy clinics. No additional layoffs are planned, she said.

“We almost climbed out of the hole--that’s what was so exciting,� she said.

Despite the bankruptcy, a desperately needed expansion of the hospital emergency room will take place, Bogdan said. The emergency room was built in 1975 to serve 15,000 patients a year, but now sees 33,000.

The first $1.2 million for the $6-million expansion came from community donations, she said.