The Riverside Local Agency Formation Commission on Sept. 25 accepted a municipal service review of the Palo Verde Healthcare District that found the Blythe-area hospital near insolvency and directed county staff to lead a working group to identify a successor agency and near-term stabilization steps.

The MSR — prepared under Government Code Section 56430 and presented by LAFCO staff — concluded that Palo Verde Hospital had suspended surgical, inpatient and childbirth services earlier in 2025 and had reached a critically low cash position. Gary Thompson, LAFCO executive officer, summarized the district’s financial condition and the statutory determinations the commission must make. “The MSR process did not require LAFCOs to initiate any changes of organization based on any of the findings in the MSR,” Thompson said, adding that the commission must still adopt the determinations required by the code.

Why it matters: Palo Verde Hospital is the only acute-care hospital serving large parts of eastern Riverside County and adjacent desert communities. Riverside County emergency management data presented at the meeting showed the district’s service zone serves roughly 18,000 people and that emergency transports to alternative hospitals would add hours to travel times for high-acuity patients.

Staff findings and options

LAFCO staff and district officials told the commission the hospital had only days of operating cash on hand, had suspended multiple services in May 2025 and faced both revenue and operational problems, including billing and revenue-cycle breakdowns and turnover among finance staff. Lena Wade, general counsel for Palo Verde Healthcare District, said the district “recently sought authority to file chapter 9. We have not yet done so.” Michael Rose, interim chief financial officer for the district, said a Chapter 9 filing had become “the most probable option” given the current cash position.

The MSR listed a range of possible responses available to the district and affected agencies: immediate state or county funding to restore operations; property-tax augmentations; commercial lending (with county or state guarantees); leasing the facility to another provider; a joint-powers authority; consolidation with Desert Healthcare District; sale of the hospital to a private provider; or filing for Chapter 9 bankruptcy. Staff emphasized each option has complex legal, fiscal and timing details.

Public comment and local perspective

District counsel, interim finance staff, clinicians, the Blythe mayor and residents urged rapid action. Lena Wade said a $4,000,000 infusion would allow the district to balance payroll and operations in the short term, and described an intergovernmental transfer (IGT) mechanism that would require roughly $3,000,000 upfront “prior to Thanksgiving” and could return roughly $6,400,000 if it proceeds as expected. Wade also said the district expected approximately $2,000,000 from Medicare reimbursements within 15–30 days but did not have that cash in hand.

Michael Rose told the commission the district had been operating “paycheck to paycheck” since May 2025 after a line-of-credit sweep and a cyber incident. Local clinicians and the hospital’s former ER director described the hospital as clinically important to the region, with one former ER director saying, “Time is tissue,” when describing the consequences of long transports for cardiac and stroke patients.

County and regional response

Jeff Van Wagonen, executive officer for Riverside County, and Riverside University Health System Executive Director Michelle DeArmond described multi-agency efforts already underway to support the Blythe community, including workforce and supportive-services work groups and coordination of patient transport and preventive services. Dan Bates, director of emergency management and representative of the Riverside County EMS Agency, said roughly 70% of local 911 transports currently go to Palo Verde Hospital and that, if the hospital closed, transport times to the nearest specialty hospitals would increase from minutes to hours for many patients.

“The county has been taking action, boots on the ground,” Van Wagonen said, but he cautioned that the county does not presently have a standing hospital-operations team ready to operate a rural 50-bed hospital and that assuming long-term responsibility would have general-fund implications across the county.

Commission action and next steps

The commission took two formal steps. First it accepted the MSR report and made the statutorily required determinations (roll call: unanimous aye among commissioners present). Second, after debate, the commission approved a motion to begin the process of pursuing dissolution of the Palo Verde Healthcare District while requesting that Riverside County act as a temporary successor agency pending identification of a permanent successor (motion passed: Corona, Sanchez, Perez, Ayola, Gutierrez and Chair Vargas — aye; Commissioner Underwood — no).

LAFCO staff will return with a report on next steps at the commission’s October meeting; county staff said they would immediately begin convening a multi-stakeholder working group to assess capacity, funding and potential successor agencies, and to seek commitments from entities willing to operate or otherwise stabilize hospital services. Jeff Van Wagonen said the county would attempt to coordinate quickly but cautioned that any county role would require Board of Supervisors direction and careful review of budgetary consequences.

Votes at a glance

- Adopt MSR determinations and receive and file the MSR: approved (unanimous among commissioners present). Action: adopt required determinations under Government Code Section 56430 and receive/file the MSR. (See actions[] for full roll call.)
- Direction to initiate process toward dissolution and to have Riverside County act as temporary successor agency while staff identifies a permanent successor agency and funding plan: approved (6–1: Underwood opposed).
- Approval of minutes (July 24): approved (roll call affirmative).
- Monthly expenditure review (consent): approved (roll call affirmative).
- Revised credit card policy A5 (increase single-card limit from $10,000 to $25,000): approved.
- Change October LAFCO meeting date to Oct. 16, 2025: approved.
- Fiscal year 2024–25 end-of-year budget report (unaudited): received and filed.

What remains uncertain

No successor agency had formally agreed at the meeting to accept permanent responsibility for the district’s obligations. Desert Healthcare District’s CEO had made limited, noncommittal comments to staff, and county leaders said any county role would be temporary and contingent on Board of Supervisors approval and identification of an operational partner. LAFCO legal staff noted unresolved questions about whether a dissolution process could proceed if the district were in active bankruptcy; staff said they would seek further legal analysis.

The commission directed staff and county partners to return with more detailed timelines, legal analysis and an implementation plan at the October meeting so the commission and stakeholders can evaluate dissolution, annexation, or other stabilization paths.

Ending

Commissioners and dozens of public speakers from Blythe and surrounding communities pressed for rapid action to preserve local emergency care. The commission’s vote to accept the MSR and begin work toward a possible dissolution formalizes that sense of urgency; the next public milestone will be the commission’s October update and the county-led stakeholder convening that staff said would begin immediately.