Bankrupt and facing criminal probe, Borrego Health plans to sell its clinics to Palm Springs-based provider
The selection of DAP Health, which still needs a bankruptcy court’s approval, comes more than two years after federal agents raided Borrego Health clinics and offices.
Directors of the Borrego Community Health Foundation, who have been struggling to reorganize in the wake of a criminal investigation and declaration of bankruptcy, have voted to sell the organization’s remaining clinics to a nonprofit healthcare provider in Riverside County.
The organization known as Borrego Health, which until 2020 was among the largest and best-funded federally qualified health centers in the nation, has selected DAP Health as the buyer in an auction of its remaining assets.
Founded in 1984 as the Desert AIDS Project, DAP Health is a separate federally funded healthcare provider based in Palm Springs that delivers medical, dental and other services to thousands of poor and needy patients.
Federal lawsuit alleges widespread fraud, cronyism, excessive pay and blatant self-dealing
Borrego Health officials said the selection would benefit its patients and staff.
“I am confident in DAP Health’s commitment to ensure our patients continue receiving culturally competent care from clinicians and support staff with local experience,” Borrego Health Chief Executive Officer Rose MacIsaac said in an announcement.
“I am looking forward to now collaborating with this alliance of well-respected providers to shape a smooth transition that does not interrupt patient care or team members’ careers,” she said.
The selection, which remains to be approved by federal bankruptcy court, comes more than two years after scores of state and federal agents executed search warrants at multiple Borrego Health clinics and offices.
Although no criminal charges have been filed, the organization publicly said that former Borrego Health trustees, executives and vendors engaged in a sweeping fraud.
Records show explosive growth in dental program at formerly tiny nonprofit now under criminal investigation
Among other things, they approved and participated in schemes that included excessive rental payments for office space, inflated salaries and falsified records in order to collect federal reimbursements to which they were not entitled, the nonprofit charged in a 2021 lawsuit.
A revised Borrego Health board of directors voted last year to seek protection from creditors in bankruptcy court. Late last year, they proposed selling off the organization’s remaining assets, including clinics in San Diego and Riverside counties.
“We began this process because the communities we serve need that care to continue,” MacIsaac said.
DAP Health Chief Executive Officer David Brinkman said he is grateful his organization was chosen by the Borrego Health leadership team.
“We entered this process with one goal — to ensure that people who receive care today will find the doors to that care open tomorrow,” Brinkman said. “It is with great humility, and with Borrego Health’s patients in mind, that we await a final decision.”
Federal lawsuit alleges widespread fraud, cronyism, excessive pay and blatant self-dealing
According to its most recent federal tax filing, DAP Health collected $75 million in the year ended June 30, 2021.
It reported a patient caseload of almost 7,000 people and a staff of nearly 300. At the end of the fiscal year, it reported some $13 million more in revenue than annual spending and closed the year with $48 million in net assets.
Under the agreement announced last week, DAP Health will assume control of all the Borrego Health clinics. But the Palm Springs-based agency will receive administrative and operational support from two other providers, Innercare and Neighborhood Healthcare.
“This alliance allows us to expand our quality, compassionate, whole-person care to more people, regardless of their circumstance,” said Dr. Rakesh Patel, the Innercare CEO. “We’re excited to be working with DAP Health.”
In addition to approval from a bankruptcy judge, the decision also requires sign-off from the Health Resources and Services Administration, an agency of the U.S. Department of Health and Human Services.
The Chapter 11 filing marks a stunning decline for the once-mighty nonprofit health provider, weeks after state regulators suspended all Medi-Cal reimbursements
Borrego Health was founded in the 1980s as a single medical clinic aimed at serving the tiny community of Borrego Springs in northeast San Diego County. It grew to a network of dozens of clinics serving more than 90,000 patients in San Diego, Riverside and San Bernardino counties.
By 2020, the Borrego Health budget had grown to more than $340 million, making it one of the largest federally funded healthcare providers in the country.
But the organization’s operations have struggled since the FBI raid in October 2020. Prior to the bankruptcy declaration, the group sold several clinics in Riverside County and replaced most of its executive team and board of directors.
Borrego Health also remains mired in litigation with former vendors and landlords, including El Cajon developer and businessman Daryl Priest, whose offices also were searched by the FBI in late 2020.
A bankruptcy court hearing to consider the transaction is scheduled early next month.
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