The proposed consolidation of financially troubled Sequoia Community Health Centers in Fresno with Bakersfield-based Clinica Sierra Vista may be fast-tracked and could be completed in a few months if a proposal is approved in bankruptcy court.
However, the deal's success is hardly assured, leaving Sequoia's future -- including whether all or part of its clinics will survive -- up in the air.Should the merger fail, industry insiders say, it could spell disaster for other central San Joaquin Valley hospitals and clinics as they try to absorb Sequoia's nearly 40,000 low-income patients, who often have nowhere else to go for medical treatment.Sequoia, which operates eight clinics, employs 300 and is one of the central San Joaquin Valley's largest nonprofit clinic systems, has filed for Chapter 11 bankruptcy protection and last month announced its consolidation with Clinica Sierra Vista.However, those in the industry say that if the consolidation fails, there could be huge ramifications.At stake are health-care services in Fresno County for thousands of low-income patients on Medi-Cal, farmworkers and the uninsured. Sequoia is a critical piece of the area's health-care safety net supplying basic services -- from maternity care to routine checkups -- to patients who often lack a personal doctor.In the best case, Sequoia could get back on track through a bankruptcy-court-backed reorganization plan that would include the takeover by Clinica, which is prepared to add the Fresno sites to its 15-clinic system.In a worst-case scenario, Clinica would opt not to acquire Sequoia and its clinics could close, leaving many of Sequoia's patients to seek care in already crowded Valley emergency rooms.Clinica officials say they aren't promising anything.CEO Stephen Schilling said Clinica will do everything it can to help, but he couldn't say for sure whether Clinica will keep operating all of Sequoia's clinics."Is Sequoia going to be different at the end of it?" he asked. "Yeah, certainly. But I can't tell you how. It probably is going to be a bit smaller, leaner and meaner, and more efficient."Watching closely are officials at nearby Community Medical Centers, which could see its downtown emergency room and outpatient clinics receive much of that extra patient traffic."We are really concerned that they may close any of their clinics," said Community CEO Tim Joslin. "We certainly hope there is some type of remedy."Everyone involved is hoping for the best. So far, talks with Clinica are moving in a positive direction. But nothing is for certain. Schilling said Sequoia's financial problems are severe, and it will be a challenge to take over the troubled clinic system."It is financially millions of dollars apart from balancing its books and has debts as well," he said.But Clinica, he said, is committed to help.Clinica recently loaned Sequoia $1.1 million to meet expenses and payroll -- after Sequoia failed to pay all of its employees last month -- and is ready to loan more to help stabilize the clinics. At a bankruptcy court hearing Tuesday, Sequoia will ask the court to authorize more borrowing from Clinica, said Riley Walter, Sequoia's attorney.Walter said the clinic owes about $7.8 million to vendors and creditors, about $6 million of it secured debt. But with the loans from Clinica, Sequoia will owe closer to $9 million, he said. Sequoia had about $171,000 in cash when it filed for bankruptcy protection last month, he said.To secure its loan, Clinica received a secondary title to Sequoia's real estate.Schilling said Clinica has been fortunate to build its reserves but won't be able to bankroll Sequoia for long. "I've got so much money I can lend to this undertaking. We have to make the changes, see the fruits of our labor quickly," he said. "I'm not Microsoft here."He said he's hoping to fast-track the merger, getting it done in three months instead of six. The bankruptcy court must approve the deal. In the meantime, Clinica officials will continue to pore over Sequoia's books.Schilling said the clinics would do well under one umbrella and can cut down expenses under economies of scale. Clinica is nearly twice the size of Sequoia in number of clinics and employees and has a 38-year history in Kern County, 35 years under the directorship of Schilling.Sequoia's 30-year history has been marked by instability in management and finances. It has had three CEOs in eight years.Both operations' clinics receive the bulk of their funding from government health-care programs and grants.If the merger takes place, Clinica stands to become a much larger regional provider of health-care services stretching from the community of Shoshone near Death Valley, through Kern County and north to Fresno.Schilling said taking over Sequoia may be the best way to preserve its services. He is serving as a management consultant and, in recent weeks, recommended cutbacks to shore up Sequoia's finances. "I am trying to bring costs in line with the production level of Sequoia," he said.Twenty-two jobs were eliminated at Sequoia on July 3, saving about $1.4 million.Sequoia CEO Dr. John Maffeo said the cuts are part of the effort toward consolidation. He said the clinics also may consider reducing hours.Maffeo, CEO since 2005, discounts criticism, including from some of his own employees, that he grew the clinics too fast. Money was spent opening two new sites in recent years and expanding dental services."Two of the better-performing sites are newer," he said.Maffeo said Sequoia stayed true to its mission, increasing services when other health-care providers were cutting back.Maffeo said the state's recent decision to delay Medi-Cal payments to providers amounts to a $1.5 million funding shortage that Sequoia just wasn't able to withstand.He said he realizes that other clinics are struggling with the same Medi-Cal cuts without having to resort to bankruptcy and consolidation -- yet."We're just the first," he said.Schilling said that although most federally qualified health clinics routinely teeter on the financial brink, most aren't suffering as much as Sequoia. "My job is not to find fault," he said. "But, in a nutshell, Sequoia probably could have done a better job watching its finances."Clinica said it plans to continue operating Sequoia's clinics in Fresno. Schilling said the government funds Sequoia receives to provide health-care services to the underserved population have to remain in Fresno County under federal rules. Federal regulators have to approve of the merger.He said he understands people are nervous."It's a big undertaking. This is huge stuff for us and for Sequoia," he said. "Gobs and gobs of people have to bless this deal, and many of them are very excited and encouraged that someone is willing to come to Fresno and put their money on the line."