MODESTO, Calif. 鈥 When made a bid for the bankrupt Madera Community Hospital last year, many local officials and others involved in trying to reopen the facility didn鈥檛 take the company seriously.
The 11-year-old firm, based in Modesto, was already running a handful of small, rural hospitals, but Madera had far larger and more prestigious suitors, including Trinity Health and then Adventist Health.
After those two entities had backed out, the bankruptcy judge tentatively greenlighted the AAM proposal. But a nonprofit community group later , citing concerns about AAM鈥檚 commitment to fully reopen the hospital and airing allegations of 鈥渄ishonesty, fraud, perjury, and maladministration.鈥
The Madera Coalition for Community Justice and other critics of the AAM deal hoped that Adventist and the University of California-San Francisco, which made a in February to take over the hospital, might get another look.
But Gov. Gavin Newsom all but ended the drama on April 8 by announcing the the AAM plan and would provide a $57 million loan from a fund for distressed hospitals to help reopen and operate the Madera facility.
The same day, AAM, along with the Madera hospital and its creditors, asked the court to from the record and for the judge to consider the motion. MCCJ pushed back with objecting to the request.
The closure of the hospital in left Madera County, home to 160,000 people, largely Hispanic agricultural workers, without a general acute care facility. Like many rural hospitals in California and around the country, the Madera hospital had suffered financial and demographic challenges, including a large proportion of patients on low-paying government insurance programs, low patient volumes, and difficulty attracting talent, in addition to pandemic-related pressures.
AAM has committed to pay to creditors and reopen the hospital as soon as late summer. The company has a portfolio of nine hospitals, many of them in underserved regions of California.
鈥淎merican Advanced Management has a proven track record of reopening closed hospitals in California and saving others from the brink of closure,鈥 said Matthew Beehler, the company鈥檚 chief strategy officer.
It remains uncertain whether AAM can make the Madera hospital financially viable. Reopening alone will cost millions, and many of the same constraints that led to the bankruptcy remain. In its final two years of operations, the Madera hospital lost $14 million.
Beehler said AAM would aim for 鈥渙perational efficiency鈥 through centralized administration and 鈥渆levate the quality of care鈥 to attract more patients. 鈥淭hese strategic investments and improvements are designed to stabilize the hospital’s financial footing and ensure its sustainability in the long term,鈥 he said.
According to a by the Pittsburgh-based Center for Healthcare Quality and Payment Reform, 30% of California’s 56 rural hospitals and the same percentage of rural hospitals nationwide are at risk of closing.
鈥淭he economics of small hospitals is such that it is unlikely they are going to be highly profitable,鈥 said Harold Miller, the center鈥檚 CEO.
The group objecting to AAM, along with many members of the community, are particularly worried that the company won鈥檛 reopen the Madera hospital鈥檚 labor and delivery department, where over in 2022.
Labor and delivery at many rural hospitals are among the first services new owners cut because they tend to lose money, said Ge Bai, professor of health policy and management at Johns Hopkins University鈥檚 Bloomberg School of Public Health.
Beehler said a reopened Madera would provide 鈥渕any of the ancillary services鈥 related to pregnancy and that AAM would 鈥渞egularly evaluate鈥 whether it makes financial and clinical sense to have a labor and delivery unit at the hospital.
鈥楽omeone Has to Take a Stand鈥
AAM is the brainchild of Gurpreet Singh Randhawa, who says he is its sole owner.
Singh, a gastroenterologist-turned-entrepreneur, has amassed hospitals and other health care-related companies, as well as numerous real estate holdings. dozens of businesses that are or have been associated with Singh.
After graduating from medical school in India in 2000, Singh completed further training in New York and New Jersey before moving to California in 2008. In an interview, Singh said he was inspired to open his first hospital after seeing a friend drive three hours round trip to the Sacramento area every day to visit his father in a long-term acute care hospital because Modesto didn鈥檛 have one of its own.
Singh said he thought 鈥溾榮omeone has to take a stand,鈥 so I took that stand.鈥 He said he spent $36 million to at the site of a shuttered facility in Modesto. It opened in mid-2013, marking the beginning of AAM.
Since then, AAM has acquired numerous hospitals and clinics in Northern California and the Central Valley, including Colusa Medical Center and Glenn Medical Center in 2017, Sonoma Specialty Hospital in 2019, and Coalinga Regional Medical Center in 2020.
In 2023, the firm took over management of the troubled Orchard Hospital in Gridley, California. Last September, AAM announced it had taken over operations of Kentfield Specialty Hospital, with locations in San Francisco and Marin County. It also owns a rehabilitation hospital in Amarillo, Texas.
AAM lost a combined $22.3 million in 2021 and 2022, state data shows. But Beehler said the company returned to profitability in 2023 and expects profit margins in the high single digits this year. He estimated that AAM鈥檚 total operating revenue will jump to approximately $400 million in 2024 from $290 million in 2023, mainly due to the addition of three hospitals.
The source of the funds to finance the company鈥檚 growth is not entirely clear. Singh cited family wealth and real estate, but he declined to discuss his family鈥檚 money. The firm鈥檚 agreement with the Madera hospital says AAM will have 鈥溾 to meet its obligations. The $57 million approved by the state this week will be a key source of funding.
Beehler said another source of cash to finance growth is AAM鈥檚 earnings on longer-term care. Central Valley Specialty Hospital has been profitable since its first full year of operations in 2014, posting cumulative earnings of over $66 million through 2022, according to data from the state鈥檚 Department of Health Care Access and Information. Coalinga Regional Medical Center has a 99-bed skilled nursing facility in addition to its acute care beds, and Sonoma Specialty Hospital recently added 21 beds, according to Beehler.
Acute vs. Long-Term Care
Critics fear AAM might take the Madera hospital in the direction of long-term care, depriving the community of a viable acute care facility. Cece Gallegos, who recently lost her bid for a seat on the Madera County Board of Supervisors, said in a campaign mailer that the firm would turn Madera into 鈥渁 glorified nursing home.鈥
Beehler rebuffed that notion, saying the company couldn鈥檛 do that even if it wanted to. He said the conditions imposed by the state attorney general 鈥渞equire an acute care hospital with fully functional ER and ancillary services.鈥 The , however, require AAM only to make 鈥渃ommercially reasonable efforts鈥 to provide those services.
Singh and his health care businesses have hit plenty of bumps as they鈥檝e grown.
In 2018, AAM took over management of Sonoma West Medical Center, a publicly owned hospital in the city of Sebastopol that had declared bankruptcy. In 2019, AAM acquired it outright and changed its name to Sonoma Specialty Hospital. Later that year, a bankruptcy trustee sued Singh, AAM, and the hospital for allegedly taking money that belonged to its predecessor, and the parties . Beehler said AAM did not retain any of the money but used it for hospital operations and became 鈥渁n unintended victim.鈥 The company chose to settle, he said, 鈥渢o bring finality to this complex issue.鈥
In 2021, the state fined AAM鈥檚 Pacific Gardens Medical Center $276,000 for that put patients in 鈥,鈥 including one in which inadequate training caused an intravenous to drip into a patient nearly seven times as rapidly as the doctor had ordered.
AAM had reopened the hospital in January 2021, about three years after buying it out of bankruptcy. Its license was suspended less than five months later, according to the California Department of Public Health. Beehler said the hospital had reopened as a pandemic surge hospital with support, including the provision of nurses and physicians, from the state鈥檚 Emergency Medical Services Authority. 鈥淏y its nature, a surge facility opening is temporary,鈥 he said.
The accelerated timeline for getting it open contributed to the patient-jeopardy situations, he said.
In 2022, the California Department of Health Care Services sued , Singh, and AAM, accusing them of illegitimately seeking, and accepting, $270,000 from a program that provides federal financing for certain public hospitals.
DHCS said it had told AAM that it wasn鈥檛 eligible for the money, because it was now a for-profit facility, but that the company refused to pay it back. In February, a Sonoma County . DHCS spokesperson Leah Myers said in an emailed statement that the state does not typically have to sue to recover money. Beehler said AAM 鈥渄isputes that there is any liability鈥 and is appealing the decision.
Another Singh venture was Advanced College, a private vocational school for health care professionals with three locations in central and Southern California. After receiving numerous complaints, state regulators in December 2022, alleging it had falsified records and test results, and 鈥渇ailed to provide documentation of sufficient financial resources.鈥
Joshua Maruca, the school鈥檚 custodian of records, said Advanced College disagreed with the state鈥檚 allegations but had already been planning to shut down for other reasons, so it did not contest them.
Bank of the West and several of his businesses for repeated defaults on over $4.7 million in loans, mostly related to the college. The lawsuit was settled, but one of the bank鈥檚 lawyers, Wayne Terry, said he could not discuss the settlement. Beehler said the loans were not part of AAM鈥檚 financials. The bank was 鈥減aid fully,鈥 he said.
The company鈥檚 critics say the state didn鈥檛 sufficiently scrutinize AAM before approving the loan and the operating plan this week.
鈥淭he state agencies and the Attorney General, all tasked here with protecting the public interest, have utterly failed to do the basic due diligence that would ensure Madera Community Hospital is resurrected as a viable going concern, under the stewardship of a reliable, trustworthy, and capable operator,鈥 the MCCJ said in the court filing opposing the challenge to its objection.
AAM said in a statement that it was 鈥済rateful鈥 to Newsom and the state for approving the deal, and 鈥渉onored to serve the Madera community.鈥 The bankruptcy court is likely to give its final blessing next week.
