After more than 19 months in bankruptcy, Hidalgo County EMS may shut down next week.
The decision to shut down Hidalgo County EMS before Pharr EMS is fully operational, though, could force western Hidalgo County and the Delta to rely on a regional emergency plan for ambulance service.
U.S. District Judge David R. Jones discussed the transition with attorneys for Hidalgo County EMS, the city of Pharr and the federal government during a hearing on Monday.
Pharr agreed to pay $1 million for Hidalgo County EMS ambulances, equipment and other assets during a bankruptcy sale. The transaction is scheduled to close on May 17.
“I don’t want the lack of a transition to get in the way of the closing,” Jones said. “Because we’ll never get to a transition if we can’t close.”
Hidalgo County EMS — a privately owned ambulance company that responded to emergency calls in Pharr, Edinburg, Peñitas, Sullivan City, rural parts of western Hidalgo County, the city of Taft, Jim Hogg County, Jim Wells County and Kleberg County — filed for Chapter 11 bankruptcy in October 2019.
The company had serious cash flow problems, hadn’t filed tax returns for several years and owed $2.6 million to the IRS.
Hidalgo County EMS hired Government Asset Services, a company owned by Peñitas City Manager Omar Romero, to serve as chief restructuring officer.
Chapter 11 bankruptcy protects a business from creditors during the reorganization process. Hidalgo County EMS, however, never filed a reorganization plan.
Five months after the company filed for bankruptcy, the coronavirus pandemic struck. The number of ambulance calls plummeted as people avoided hospitals. Hidalgo County EMS, which already had financial problems, struggled to stay afloat.
The company also clashed with the U.S. Attorney’s Office for the Southern District of Texas, which represented the federal government in the bankruptcy case.
It accused Hidalgo County EMS of fraudulently obtaining a Paycheck Protection Program loan in the midst of a lawsuit with the U.S. Small Business Administration, which had excluded businesses in bankruptcy from the program.
Hidalgo County EMS replaced Romero with Richard S. Schmidt, a retired bankruptcy judge, in September.
He concluded that Hidalgo County EMS couldn’t reorganize and started to plan a bankruptcy auction.
Pharr submitted the only bid for “substantially all” Hidalgo County EMS assets. With court approval, Schmidt canceled the sale and negotiated with Pharr.
The city agreed to pay $1 million for Hidalgo County EMS ambulances, equipment and other assets.
After they reached an agreement in principle, Hidalgo County EMS transferred an ambulance to Pharr, according to documents filed in the bankruptcy case. Hidalgo County EMS transferred three more ambulances to Pharr in late April and four more in early May.
The city plans to launch Pharr EMS on Saturday. It will start by responding to calls within city limits.
Hidalgo County EMS, meanwhile, kept 12 ambulances to cover Pharr, western Hidalgo County and the Delta. To prevent any disruption in ambulance service, Hidalgo County EMS planned to transfer the remaining 12 ambulances and rural service areas to Pharr EMS in phases.
Attorney Christopher Franz, who represents Pharr in the bankruptcy case, proposed an alternative on Monday.
Franz said that Pharr wants to take possession of the remaining 12 ambulances after the bankruptcy sale closes on Monday.
“There’s going to be some period of time where neither one of us can cover those areas because there is going to be a transition time for us,” Franz said.
During the two-week transition period, Franz said western Hidalgo County and the Delta could be covered by a regional emergency plan.
Pharr also needs to negotiate agreements with Sullivan City, Peñitas and other jurisdictions served by Hidalgo County EMS.
“We’ve given what we believe to be the cost to these areas and there’s just a lot of, I guess you could say, sticker shock amongst these other governmental entities that apparently have been getting, if not free service, almost free service,” Franz said. “And they just don’t like the idea that they have to pay.”
Franz said the transition period could push cities to contract with Pharr.
“If we had that two-week period, that could be some leverage or a deadline we could give to these governments to let them know: ‘Look, if you want to have service to your area, we’ve got to get our interlocal agreement done by this time,’” Franz said.
The Rio Grande Valley Trauma Regional Advisory Council created the emergency plan after Hidalgo County EMS declared bankruptcy. It’s a backup plan designed to prevent a total collapse of ambulance service if Hidalgo County EMS abruptly shut down.
Schmidt said the plan concerned him.
“That’s the issue: Are we going to take the sure bet in the hand or are we going to hope the state can do it?” Schmidt said.
The proposal also caught Frank Torres, the chairman of the regional advisory council, by surprise.
“That’s the first I hear about that,” Torres said Monday.
Assistant U.S. Attorney Richard A. Kincheloe, who represents the government, said he supported the plan to shut down Hidalgo County EMS and rely on the regional emergency plan.
“I’ve really tried to hold my tongue for a long time — I know at various points in this case I’ve let it go a little bit — but at this point I’ve seen enough,” Kincheloe said.
Leaving the current Hidalgo County EMS management in place is “really problematic,” Kincheloe said.
Hidalgo County EMS owner Kenneth B. Ponce pleaded guilty to conspiracy to commit bankruptcy fraud in March. Two other Hidalgo County EMS employees were also accused of embezzling money from the company.
The alleged embezzlement, which hasn’t resulted in any criminal charges, took place before Schmidt became chief restructuring officer. He isn’t accused of any wrongdoing.
“I’m very concerned that the state — it’ll be difficult for the state to take over those areas next week,” Schmidt said. “If they can, well, I’m more than happy to be out of a job.”