California lawmakers have agreed to loan $150 million to financially distressed hospitals.
SACRAMENTO -- Alarmed by the closure of a rural hospital earlier this year, California lawmakers on Thursday voted to loan $150 million to struggling medical centers in the hope of preventing a cascade of similar failures across the state.
California lawmakers typically don't approve new spending until June following months of debate and negotiations with the governor's office. But the crisis is so severe that legislative leaders and Gov. Gavin Newsom agreed to go ahead and spend this money now, pledging to do more later in the year when the budget is finished.
In California, the problem has been compounded by an increase in the number of people who get their health care costs paid for by the government. The state's Medicaid rolls increased dramatically during the pandemic, a combination of emergency rules to make the program more accessible and a decision by Democrats to make all low-income adults eligible for the program regardless of their immigration status.
Before the pandemic, the hospital would turn a modest profit of 3% or so each year, according to CEO Gary Herbst. But since 2020, Herbst said the hospital has lost $138 million. It has about $218 million in debt that a credit ratings agency recently downgraded to"junk" status.The hospital is supposed to have at least 90 days of operating cash on hand at any time. Before the pandemic, the lowest it ever got was 110 days. At the end of March, it dropped to just 62 days.
The state will give out the $150 million in the form of interest-free loans to nonprofit or public hospitals that meet certain conditions. The state will prioritize loans for medical centers in rural areas and those that have a disproportionate number of patients on Medicaid, the joint state and federal government health insurance program for the poor and the disabled.
"This is just a beginning. It's antiseptic ointment on the cut. We haven't even started with the Band-Aid," said state Sen. Anna Caballero, a Democrat whose district includes the Madera Community Hospital that closed.
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