California passed Assembly Bill 112 – the Distressed Hospital Loan Program – as an emergency statute in May 2023. The program provides interest-free loans to not-for-profit and public hospitals in significant financial distress, as well as to governmental entities representing a closed hospital. The goal of the program is to prevent hospital closures and to help hospitals stay afloat while they work to improve their financial health. The law appropriated $150 million for the loan program.

Legislators and hospital administrators have acknowledged a loan program is only a stop-gap for a number of hospitals that for months have warned of their precarious fiscal situations. Legislators fast-tracked action following the closure of Madera Community Hospital at the start of this year, which left San Joaquin Valley county of 160,000 people without a local emergency room.

Since then, another hospital, Beverly Hospital in the city of Montebello, has filed for bankruptcy.

In legislative hearings leading to passage of this program, lawmakers asked why the state wasn’t conducting its own analysis of hospitals’ current situation so that the Legislature knows exactly which hospitals are in immediate need of relief.

“We don’t know how many hospitals, we don’t know which hospitals. We don’t know which areas those hospitals are (in), we don’t know anything. And now we’re asked to approve $150 million to be doled out without access to plans, without access to the finances that would give us the evidence to feel comfortable with this,” said Sen. Maria Elena Durazo, a Los Angeles Democrat, during a Senate budget committee hearing

According to a report by Inewsource.com sixteen facilities have applied so far for the newly created Loan Program which has a deadline for applications by the end of July.

The Madera Community Hospital, which shut down earlier this year but could reopen under new owners, has requested $80 million alone.

El Centro Regional Medical Center, Imperial County’s largest hospital, is seeking a $40 million state loan in its latest attempt to keep it’s doors open. El Centro Regional board members voted to apply for the program late last month. CEO Pablo Velez, who took over the hospital in April, confirmed to inewsource last week that its application remains under review.

A city-owned, 161-bed facility, El Centro Regional has been struggling with rising costs and declining revenues since the COVID-19 pandemic. The hospital already received a separate $5 million loan from the state earlier this year, and its latest audit raised “substantial doubt” about whether it can continue operating because it lacked recurring income sufficient to meet operating costs and its debt payments.

Board members also delayed adopting a new budget, saying it needed to “confirm the applicability of the current budget” before passing a new spending plan. The latest proposed budget, set to be considered this week, projects a nearly $10 million net deficit. The latest finance report showed El Centro Regional had fewer than 20 days cash on hand.

Officials have hinted at dire consequences if either of the two hospitals in Imperial County were to close. Pioneers Memorial in Brawley has also faced financial problems, though not as severe as that of El Centro Regional. Residents in the county, one of the poorest in the state, would be forced to travel some two hours away if those facilities weren’t available.

A report commissioned by the California Hospital Association earlier this year found that one-in-five hospitals is at risk of closing. More than half are operating at a loss.

These include: Kaweah Health Medical Center in Visalia, MLK Jr. Community Hospital in Los Angeles, Hazel Hawkins Memorial Hospital in Hollister, Sierra View Medical Center in Porterville and Mad River Community Hospital in Humboldt County, all of which have reports of financial stress.

With eyes on the upcoming fiscal year, the California Hospital Association has asked the state for $1.5 billion in one-time relief, a tough request in a deficit year. But Senate Democrats are in support, proposing that hospitals get $400 million annually for four years that would come with requirements and conditions, according to their budget proposal that is to be finalized this summer.