Amid bankruptcy and investigation, Borrego Health plans to liquidate

Barely two months after going to bankruptcy court to protect itself from millions of dollars owed to creditors, the Borrego Community Health Foundation plans to sell its remaining assets to the highest bidder.

The nonprofit healthcare provider known as Borrego Health has informed a bankruptcy judge that it intends to liquidate its assets in an auction to be held among qualified bidders as soon as January.

Officials said the decision was in the best interest of the organisation, its creditors, its patients and other stakeholders.

“This announcement is the first step in a careful, deliberate process that is expected to take several months to complete, pending bankruptcy court and regulatory approvals,” said Sandra Hunsberger, Borrego Health’s chairman of the board.

“We are confident in our ability to pursue the right path forward to advance our mission and ensure that our patients continue to have access to Borrego Health Care and the caregivers they know and trust. are,” she said.

The request came just after Borrego Health agreed to an arbitration process to try and resolve debts of up to $100 million. It also comes as a criminal investigation by the state and federal agents move forward.

Judge Laura Taylor must sign off on the sale before any auction can proceed. Creditors and others will also be invited to consider the option before any final decision is taken.

Borrego Health still operates more than a dozen health clinics in San Diego and Riverside counties that treat approximately 94,000 patients a year. It also has property and equipment worth millions of dollars.

It’s unclear what would happen to the nonprofit founded decades ago if all or most of its assets are sold. A spokeswoman said the proposed sale would allow the board to decide at a later date whether to dissolve the organization.

“The bidding process proposal allows the Borrego Health Board of Trustees to evaluate all of its options,” said spokesman Daniel Kramer. “If a decision is made to relocate the clinics, the board will consider what role Borrego Health will continue to play.”

Under the schedule proposed by Borrego Health, the hearing will take place on November 28.

If the judge agrees, a formal process will be followed, and potential buyers will have until December 12 to indicate their interest in bidding on the property. The deadline for receiving qualified bids will be December 22 and the auction will take place on January 13.

A follow-up hearing will be scheduled for later in January, and federal regulators will have an estimated six months to approve the transfers.

Borrego Health said it has already set up a “data room” where approved bidders can access proprietary information to submit viable purchase proposals. But so far no one has been allowed to review the internal document, the organization said.

“To be clear, as of the date of the filing of this offer, no prospective buyer has yet obtained access to the data room,” Borrego Health attorneys said in the filing.

Officials with the California Department of Health Care Services declined to comment on the proposed auction, citing the ongoing bankruptcy.

But lawyers representing state regulators filed a motion last week opposing the proposed sale because the taxpayers may not be able to collect their dues.

“For the intended assumption and assignment to occur, either Borrego must pay off all outstanding Medi-Cal debt incurred prior to the closing of the sale, or any outstanding debt on Borrego’s Medi-Cal accounts shall be paid by Buyer, combined and several.” be done by means of liability,” the filing said.

Regulators previously worked to transfer Borrego Health’s patients to other clinics, saying they were no longer satisfied that the federally qualified health center, or FQHC, was able to effectively meet regulatory requirements.

FQHCs are designated entities that collect higher Medi-Cal and Medicaid reimbursements to provide medical, dental and mental health services to rural and poor patients in need.

In late 2020, the State Department of Health Care Services suspended reimbursement to Borrego Health after the FBI and state agents executed search warrants at several clinics and administrative offices in San Diego and Riverside counties. Some reimbursements later resumed, but the state put them on hold again in August.

A bankruptcy judge later ruled that the state’s payments should be reinstated when the bankruptcy process came to an end.

An attorney representing a committee of creditors to whom Borrego Health owes money agrees with the proposed strategy.

“The committee believes strongly in the value and importance of Borrego Health’s facilities and clinics and supports a restructuring that ensures the strongest future financial position for the organization,” said Jeffrey Pomerantz, attorney for the creditors.

“The committee looks forward to working closely with Borrego Health to ensure seamless care for patients and communities,” he added.

The potential liquidation is the latest in a series of unlikely developments for the nonprofit health care provider. Just two years ago, the provider was one of the nation’s largest FQHCs, reporting annual revenues of more than $340 million.

But in October 2020, dozens of FBI and state agents executed search warrants at the original clinic and administrative offices in Borrego Springs, as well as locations in San Diego and Riverside County.

According to a civil lawsuit later filed by the reconstituted board of directors earlier this year, the state and federal governments are investigating a sweeping criminal scheme that largely involved falsified patient records and reimbursements at Dental Services.

The probe was probing inflated rental payments and billing practices, exorbitant salaries as well as nepotism within the senior leadership.

The lawsuit states, “While Borrego Health was attempting to fulfill its mission, to provide healthcare services to communities, both inside and outside of Borrego Health, certain individuals and entities siphoned money from Borrego Health.” , which should have benefited that community.”

According to a September bankruptcy filing, Borrego Health has between $50 million and $100 million in both debt and assets. The nonprofit has spent millions of dollars on bankruptcy proceedings in recent months, court filings show.

State and federal investigators have declined to discuss the investigation beyond confirming its presence on the day the search warrant was executed.

It is unclear how the liquidation or possible dissolution of assets will affect the criminal investigation.

It’s also unclear how the auction may affect the health provider’s ability to move forward with civil litigation.

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