US governor approves USD 150M loan to help financially struggling hospitals

California Governor Gavin Newsom approved $150 million in interest-free loans to help financially struggling hospitals, as he seeks to revive a multi billion dollar tax on health care providers, also intended to bolster hospitals.

The decision follows the December closing of the only hospital in Madera County in the Central Valley, which has left the region’s 160,000 residents without reliable access to essential hospital services.

Across the state, hospitals have been grappling with worsening financial conditions due to rising labor and inflationary costs, coupled with stagnant Medicaid reimbursement rates, according to Carmela Coyle, president of the California Hospital Association. A study commissioned by the association found that 20% of the state’s 400 hospitals are at risk of closing down.

“This new program will help hospitals in extreme financial distress get the assistance they need as quickly as possible,” Newsom said in a statement.

Coyle said the cash injection is welcome, but cautioned that it would only serve as a short-term solution for a handful of nonprofit or public centers. “We have dozens of hospitals that are barely hanging on,” she said.

Tax revival
Newsom’s administration is also pushing for a more sustainable resolution to hospitals woes: the revival of a tax on managed care organizations, MCO, such as Anthem Blue Cross, which administer Medicaid plans.

Under the plan, the MCO tax revenue is expected to unlock more federal Medicaid dollars amounting to a total of $5 billion annually from taxes and federal funding. The tax, which expired last year, previously generated $2 billion for the state.

Health care providers will recoup a large share of tax payments through higher Medicaid reimbursement rates taking effect next year, according to California’s finance department.

Scott Graves, research director of research at the California Budget and Policy Center, called a renewed MCO tax a “no brainer” for state coffers because it targets billions in federal dollars that would otherwise be left on the table.

The Centers for Medicare & Medicaid Services must approve the MCO’s renewal. It rejected California’s previous proposal in 2020 on a technicality. Bloomberg