Granada Hills Community Hospital, a fixture in the San Fernando Valley since 1965, is closing its doors.
Struggling with its own poor financial health, the hospital filed for bankruptcy in November. Last week, the nonprofit organization couldn't pay its staff members.
Amid accusations of mismanagement and possible financial misconduct, the hospital was ordered by a Bankruptcy Court judge Monday to "wind down" its activities. The 53 patients still under its care are being transferred to nearby medical facilities.
On Tuesday, the hospital closed its emergency room and began turning away people.
"The situation at Granada Hills Community Hospital is ... very sad and unfortunate," said David Gottlieb, the U.S. Bankruptcy Court trustee now in charge of the 155-bed facility. "This hospital is a very valuable asset to the community."
Once renowned for being the site of the first open-heart surgery in the Valley, the hospital will shut down over the next several weeks. If the hospital isn't sold, its assets will be liquidated.
After a staff meeting Tuesday explaining the events, longtime employees hugged one another and sobbed. Others wondered when they might be paid and whether their retirement benefits were safe.
"I'm very angry and very sad," said Angelita Lucas, a nurse who is in charge of the critical-care unit and has worked at the hospital for more than 30 years. "I feel like we were violated by a burglar who came into our home and took everything."
Bernice Steinfeld, a hospital volunteer, said: "To think of all these people losing their jobs. I could burst into tears."
Staff members said they knew the hospital was having financial difficulty when it filed for bankruptcy and an outside management team, Tampa, Fla.-based Healthcare Resource Specialists Inc., was brought in to turn things around.
About six weeks ago, an administrator assured doctors and nurses that the hospital was on the road to recovery and might emerge from bankruptcy as early as September, staff members said.
But three weeks ago, the hospital's board of directors fired Bay Management, a limited liability corporation that owns Healthcare Resource Specialists.
Gottlieb is investigating allegations that the outside management team committed fraud or other financial misdeeds. He said he plans to ask U.S. Bankruptcy Court Judge Arthur Greenwald today to "disgorge" $1.2 million to $1.4 million from Bay.
Chad Bowen, an attorney representing Bay and its properties, denied wrongdoing by his client.
The company "has been pegged as a scapegoat in this situation," Bowen said. "HCRS believes that the allegations will ultimately demonstrate to be untrue."
It may take weeks or months to unravel the hospital's finances and determine what happened, lawyers say.
The hospital's financial troubles begin in 1998 as a result of reduced reimbursements from the state and federal governments and insurance companies, said John Weitcamp, first vice chairman of the hospital's board of directors, whose authority was supplanted by Gottlieb's appointment last week.
"I don't see any way it's not going to close in its current position," Weitcamp said.
Granada Hills has about $300,000 in the bank and about $6 million in outstanding bills, including $2 million in unpaid payroll taxes and $850,000 in unpaid payroll, according to those familiar with the hospital's finances.
The hospital had relied on financing from National Century Financial Enterprises, an Ohio company. After National Century filed for bankruptcy protection last fall, it stopped making payments to Granada Hills, as well as other hospitals across the country, causing a cascade of bankruptcy filings, those familiar with the situation say.
Gottlieb said his utmost priority for the time being was ensuring that patients continued to receive good care, and he hopes that the facility's 500 employees as well as its suppliers eventually get paid.
A few employees carried boxes -- filled with uniforms, family photos and other personal belongings -- out of the building and said they don't plan to return.
"I'm looking for a new job," said a woman carrying a carton, who declined to give her name.
But others said that, pay or no pay, they will continue reporting for duty until the last patient leaves.
"We all will be in here until they put a padlock on the door and the patients are moved to a safe place where they can ... be cared for," said Rose Hlaing, a critical-care technician who has worked at the hospital for 23 years.