Calif. hospital seeks Chapter 11 protection

Downey (Calif.) Regional Medical Center has filed for Chapter 11 bankruptcy protection, but officials said all services will stay open and they hope to reorganize within a year. The 181-bed hospital has had no cash reserves since March 2008, and lost about $20 million annually over the past five years.

A new management team took over the facility two years ago and in January began converting money-losing HMO and medical group contracts to PPO contracts, a spokesman said. The hospital had about 32,000 capitated members in managed-care plans with five insurers, with a monthly fixed fee from all plans of more than $3.5 million in 2008. The hospital incurred a $25 million one-time charge to exit the capitation contracts. The 87-year-old community not-for-profit hospital has about 71,000 patient visits a year.

“Today's necessary actions will allow us to clean up the remainder of the financial morass that the current management team inherited that was over a decade in the making, and that we have been working to fix for two years,” said Kenneth Strople, president and CEO of Downey Regional Medical Center, in a news release.

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