“It is not ‘reasonable’ or ‘moderate’ to delay filing a liquidated claim if the information required by the district is provided in a timely manner,” the judge stated in his ruling. “Nor is it ‘fair or reasonable’ to delay two years after the claim period has expired before attempting to change a claim from ‘indefinite’ to $ 5.5 million.”
Health District CEO Sandra Ormonde said creditors had approved $ 5 million in payouts and she testified that any between 19.2% and 30.3% of the amounts owed through the Chapter 9 bankruptcy process would be repaid . If the late claim had been recognized by DHCS, the claims against other creditors would have been forced to claim 20% less and thus fall below the agreed minimum repayment.
“The ruling means the DCHS claim does not dilute what other creditors who filed their claims on time will receive under the plan,” Ormonde said.
The decision also means that the district owes nothing to the DHCS. TLHD bankruptcy attorney, Riley Walter of Wanger Jones Helsley of Fresno, denied the petition because he missed the deadline to submit an amount to be included in the repayment schedule. According to court documents, DHCS filed an unspecified amount on April 6, 2018, two days before the filing deadline, but waited an additional 13 months to file the actual amount of $ 5.6 million in May 2019. TLHD appealed the amount in July 2019 and the creditors approved the repayment plan on August 16, 2019.
“DHCS could have changed its claim prior to the statutory statute of limitations on state claims,” Jones wrote in a released statement last week. “DHCS did not do this, but waited until the Chapter 9 plan was confirmed and its entry into force had expired before submitting its application for change approval.”
Sheila Mendiola, director of provider payments and policies for DHCS, testified that the state agency had been reviewing records with the county for 13 years dating back to when TLHD participated in the program in fiscal 2002-2003. According to the California reimbursement plan, DHCS should annually compare the cost reports from TLHD with the audited cost reports. After reconciliation, any underpayment or overpayment is to be reflected annually in the additional payment from DHCS to the district. Mendiola said DHCS could not meet the deadline as the final reconciliations were still pending for all those years. The judge pointed out that TLHD submitted annual filings to DHCS in a timely manner and that all delays were caused by the state agency. DHCS admitted in court that during that sixteen year period it “had difficulty” because of: “difficulty extracting” [outpatient fee-for service] MMIS fees and income; ”“ Downsizing ”; and “Inefficiencies in workflow logistics, some of which lasted for years.”
“These issues are ultimately not the responsibility of the county or its creditors,” the court said.
Ormonde said the approved $ 5 million will be paid out to 190 creditors over five years from 2025. There are only a handful of outstanding claims left. In anticipation of these payouts, the district has stabilized its finances by selling assets, restructuring debt, and borrowing tax bonds to pay off its loan to the city of Tulare and other long-term debt. Ormonde said the longer-term bonds offered a more manageable payment at a lower interest rate to help secure cash flow for the district. Payouts for both bonds began in March and will be paid out over 23 years.