California hospitals seek a broad bailout, but they don't all need it
Published in Business News
SACRAMENTO, California — One of the country’s richest hospitals, which caters to Hollywood elites, accepted nearly $28 million last year from an unusual source: a charity that siphons money from other California hospitals, many of which serve the state’s poorest residents.
Cedars-Sinai Health System in Los Angeles secured the grant under California’s recession-era financing scheme that allows wealthy hospitals to take valuable health care tax money from poorer ones. Hospitals across the state agreed in 2009 to the arrangement in order to tap billions more per year in taxpayer dollars to support the state’s Medicaid program, called Medi-Cal.
Now, some of those hospitals serving a greater share of Medi-Cal patients are in dire financial need and face cutbacks and potential closures. But instead of asking for help for only those at greatest risk, California’s powerful hospital industry is putting the squeeze on Gov. Gavin Newsom and fellow Democratic lawmakers for an unprecedented bailout. And they are doing it even as the state faces a nearly $32 billion budget deficit.
Hospitals argue that to avert a crisis, they need an emergency infusion of $1.5 billion. They also want a steady annual stream of new health care tax money despite already having their own dedicated tax intended to support struggling facilities that serve a large percentage of the state’s low-income people, such as Madera Community Hospital in the Central Valley, which closed earlier this year.
Ads by the California Hospital Association paint a scary picture: “1 in 5 Hospitals are at risk of closure.” Yet another warns, “Health care that millions rely on is at risk.” Those claims are being repeated by state lawmakers as they debate financial rescue for hospitals.
But a KFF Health News analysis of state data revealed that despite increased labor costs and inflation, many California hospitals have been profitable in recent years. The industry earned roughly $131 billion last year in patient revenue, a key indicator of profitability — $7.3 billion more than the previous year. After factoring in rising costs, the industry still turned a profit of about $207 million last year. State figures show the industry reaped $9.2 billion in patient revenue in 2021, partly a reflection of big swings in the stock market.
Leading health care finance experts and former state officials are urging Newsom and lawmakers to resist the industry’s fear tactics, saying that, even though hospitals are still reeling from the covid-19 pandemic, many have plush financial reserves.
“They are big fans of these giant bailouts, where the relatively rich hospitals benefit as well as the ones who really need it,” said Glenn Melnick, a health economist at the University of Southern California. “A big chunk of the hospitals, even if they’re losing money, don’t need taxpayer money to help them through this crisis.”
Melnick and others who have analyzed the financial state of California hospitals say a sliver of California’s 368 general hospitals are in crisis and that relief should be given only to those that can show they are in immediate peril. Many hospitals in underserved and rural communities are struggling financially, in part because they have failed to attract enough patients with private insurance. And the cost of providing care to lower-income patients who rely on Medi-Cal hasn’t kept pace with government reimbursement rates.
But low Medi-Cal rates aren’t necessarily a predictor of financial disaster, according to a report released Thursday by the California Health Care Foundation. (KFF Health News publishes California Healthline, which is an editorially independent service of the California Health Care Foundation.)
©2023 KFF Health News. Distributed by Tribune Content Agency, LLC.