Dozens of California hospitals at risk of closure, industry leaders warn amid call for state aid
Dozens of California hospitals — one out of every five — risk closure amid mounting financial challenges, the consulting firm Kaufman Hall stated in a report commissioned by the California Hospital Association.
Many hospitals have yet to recoup from COVID-19 losses, the consultants explained, but now they also have seen the cost of goods and services skyrocket even as reimbursements from Medi-Cal and Medicare have largely stagnated.
CHA President Carmela Coyle said that, for every dollar of care that California hospitals provide, they are receiving about 75 cents from the two big government payer. Speaking in a teleconference with news reporters, she urged state leaders to provide temporary relief of $1.5 billion to prevent hospital closures.
“It sounds like a lot. It is about 1% of California’s medical health budget,” she said, “so in context, it is a relatively small amount in terms of what we currently spend on the Medi-Cal program. It is desperately needed. It is far less expensive for us as a state to keep hospitals operating than it is to allow a hospital to close and try to bring that hospital back. “
The real crisis and concern is what such a high percentage of closures would mean in every community across the state of California, Coyle said
“Health care in those communities is eroding, slowly in some places, as we are losing certain services and hospitals try to make ends meet, whether that’s closing obstetrical care, behavioral health services or others. And in other communities, that services are being lost all at once,“ she said.
About four months ago, the 106-bed Madera Community Hospital and its three clinics closed after Trinity Health, which operates Fresno’s Saint Agnes Medical Center, backed out of plans for an acquisition. Trinity, which is based in Michigan, said it could not meet certain stipulations that the California Department of Justice wanted to impose on the deal, affecting pricing, language services and more.
The 51-year-old community hospital was the only facility offering emergency care to residents in rural Madera County.
“We have 160,000 people in that county without immediate access to care,” Coyle said. “They have to now go some 30 miles away to Fresno, but of course, we have to remember all of those for whom traveling 30 miles away is simply not possible.”
When considering how best to protect consumers, Coyle said, a big part of the equation should be the health consequences of leaving residents without emergency or acute-care services.
Hospitals in rural and underserved urban areas are particularly vulnerable since a high percentage of the patients they treat are uninsured or are covered by Medi-Cal or Medicare, according to hospital leaders who spoke during the CHA teleconference.
Dr. Elaine Batchlor, chief executive officer of MLK Community Healthcare, said her small hospital serving Compton, Watts and other neighborhoods in south Los Angeles has long operated one of the busiest emergency rooms in Los Angeles County. According to standards for doctor-patient ratios, she said, the community should have 1,500 more providers to serve residents.
“During the COVID pandemic, our community was among the hardest hit in the state,” Batchlor said. “Our small community hospital took care of more COVID patients per bed than large tertiary medical centers. The high volume of patients that we’re caring for has persisted, even though the COVID pandemic is now over. The number of patients that we’re seeing in our emergency department is higher than ever.”
There are days when the hospital runs 50% above the number of licensed beds filled largely by low-income Black and Latino residents with very basic untreated medical conditions like diabetes, high blood pressure, heart disease, and kidney disease, Batchlor said.
As a result of pandemic losses, surging inflation and low reimbursement rates, she said, her hospital is losing money.
“We began to lose money in 2021 and we’re continuing to lose money,” she said. “We’re now using our reserves, and we are seeking to borrow to help continue covering our costs. But eventually, we won’t be able to cover our costs through those sources.”
Her team has begun to weigh which services they will have to cut, she said. Labor and delivery, behavioral health care or disease management are all possibilities, Batchlor said, and the loss of any of these basic services would be devastating for a community that is already suffering from significant health disparities.
At Sierra View Medical Center in the foothills of Tulare County, CEO Donna Hefner said her team cannot afford to grow services because revenues are not keeping up with expenses. Rather, she said, they are trying to think of ways to preserve the emergency and acute care they already are providing. Roughly 46% of patients they care for are now covered by Medi-Cal, she said, up from 38% in 2007.
Medi-Cal and Medicare reimbursements make up 80% of the patient revenue for Sierra View, she said. Demand for emergency care is expected to grow to 40,000 patient visits this year, up from 30,000-32,000 before the pandemic, Hefner said during the conference call with media.
Patty Maysent, the CEO of UC San Diego Health, has the challenge of running hospital operations in both rural and urban environments. She’s at this moment leading a $2.5 billion rebuilding of its flagship medical center on the Hillcrest campus.
UCSD took over that hospital from the county in the 1960s, and to meet 2030 seismic retrofit standards, it must replace the facility. Operating margins are so tight, Maysent said, that she and her team are having a hard time finding a path to sustainability and are hoping that state leaders will offer some relief.
The academic health system also has been working closely with El Centro Medical Center in the Imperial Valley, Maysent said, but they have so far found no scenario where there are enough levers to pull to make that hospital sustainable long-term.
Ultimately, Maysent said, El Centro likely will have to somehow partner with Brawley-based Pioneers Memorial Hospital to gain some traction.
“The two hospitals out there need to come together,” she said. “They need to find scale for clinical program growth. They need relief for debt. They need support for reimbursement. All of those things need to come together in order to create a sustainable health system in Imperial Valley. The thought of those two hospitals not being able to function long term and the impact to that really quite sizable population base is devastating. We really can’t let that happen.”
There are hospitals all around the state, Maysent said, that are two, three or four months away from running out of cash. All the hospital leaders said that they pay doctors a fee over and above what Medicare and Medi-Cal pays because, if they didn’t, they would not have enough providers willing to practice in their communities.
Coyle said that the request for an injection of $1.5 billion is a short-term solution and that what is needed long-term is an increase in Medi-Cal and Medicare rates.
This story was originally published April 13, 2023 at 5:00 AM.
