The city of Pharr closed a $1 million deal to buy Hidalgo County EMS ambulances and equipment on Monday.
After a two-week transition period, Hidalgo County EMS is scheduled to shut down on May 29.
Areas covered by Hidalgo County EMS ambulances — Sullivan City, Peñitas, Hidalgo County Precinct #3 and Hidalgo County Emergency Services District #2 — must contract with Pharr or find a new ambulance provider.
“All the 911 services are covered and will be covered through the end of the month,” said Hidalgo County EMS Chief Restructuring Officer Richard S. Schmidt.
Hidalgo County EMS, a privately owned ambulance company, responded to 911 calls in Hidalgo County, Jim Hogg County, Jim Wells County and Kleberg County. It competed with Med-Care EMS, another privately owned ambulance company that responds to 911 calls in McAllen and Mission.
Faced with financial problems, Med-Care EMS filed for Chapter 11 bankruptcy in November 2018. Hidalgo County EMS followed in October 2019.
Chapter 11 bankruptcy protects a business from creditors while the company attempts to reorganize.
Med-Care EMS submitted a reorganization plan and emerged from bankruptcy in less than six months. Hidalgo County EMS, though, languished in bankruptcy for more than 19 months and never submitted a reorganization plan.
Along the way, Hidalgo County EMS became embroiled in dispute with the U.S. Small Business Administration over a Paycheck Protection Program loan. CEO Kenneth B. Ponce pleaded guilty to conspiracy to commit bankruptcy fraud. And the company struggled to make payroll.
Both the U.S. Attorney’s Office for the Southern District of Texas, which represents the federal government, and the Office of the United States Trustee, which monitors bankruptcy cases, became extremely concerned about the management of Hidalgo County EMS.
In addition to Ponce, at least three other employees were accused of stealing from Hidalgo County EMS during the bankruptcy.
Hidalgo County EMS hired Schmidt in September. He concluded that reorganization wasn’t realistic and organized a bankruptcy auction.
Pharr submitted the only bid. Hidalgo County EMS canceled the auction and negotiated a deal with Pharr.
The city agreed to buy all Hidalgo County EMS assets, including ambulances, stretchers and other medical equipment, for $1 million. Pharr didn’t purchase any debt or accounts receivable.
U.S. Bankruptcy Judge David R. Jones approved the sale on April 28. The deal closed Monday.
Pharr, however, wasn’t ready to provide ambulance service outside city limits.
The city agreed to lease seven ambulances back to Hidalgo County EMS during a two-week transition period.
Pharr will charge about $4,000 for the ambulances and about $300 for four support units, according to documents filed with the bankruptcy court. Hidalgo County EMS will also pay for medical supplies.
“I do think that it makes sense as a stop-gap,” Jones said during a status conference Tuesday afternoon, when he approved the lease agreement. “And we hope that everything transitions in the interim.”