Kaweah Health looks for lifeline with state loan program

California Senate, Assembly unanimously pass $150 million Distressed Hospital Loan Program, providing opportunity for struggling hospitals to receive help

VISALIA – A glimmer of hope was restored for California hospitals as a piece of legislation stands to offer a sliver of help to those in dire need.

On May 4, both the California State Assembly and Senate unanimously approved Senate Bill (SB/ Assembly Bill (AB) 112 which created the Distressed Hospital Loan Program. This program will make $150 million available via a loan each year until 2032 to hospitals who have recently closed or are in dire need of financial assistance.

Though Kaweah Health would need a minimum of $50 million to get themselves back into a better financial position, chief executive officer (CEO) Gary Herbst said he is grateful for the legislative movement regardless.

“We are not closing, we are not filing bankruptcy, we’re not being taken over by Adventest Health or Community Regional. We are going through very, very difficult times, but we’re getting back on our feet,” Herbst said. “And it’s just gonna take us a little bit of time. Everything that the state can do to help us is just going to accelerate that recovery.”

Herbst explained that according to the Kaufman Hall report, more than 50% of California hospitals are operating in the red right now with many on the brink of collapse. This Distressed Hospital Loan program does not have all the kinks worked out quite yet. Hospitals will have to send in their financial documents and it will be determined from there which hospitals need the funding the most. Being that Kaweah is one of the largest MediCal providing hospitals in the state, Herbst said he is confident Kaweah Health will receive funding from this bill.

“We have to submit a lot of our financial information, audited financial statements, current financial reports, to demonstrate just how distressed we are,” Herbst said. “They’ll see that we’re one of the largest MediCal providers in the state. Tulare County ranks number one in terms of the MediCal enrollment [with] 60% of our residents are on MediCal.”

Kaweah Health has had a tough few years and their current fiscal health has suffered as a result. Though they are not at the level of disparity as the Medera Hospital, they are not in a comfortable place. Kaweah is currently sitting at 72 days cash on hand, which is how many days the hospital could cover daily operating costs before running out of cash. In order to operate where they should be, the company should never drop below 90 days cash on hand. Herbst told Senator Shannon Grove (R- Bakersfield) that the hospital needed $50 million because that is the amount needed to get them back to 90 days cash on hand.

“We’ll get back on our feet. It’s a fine line that I walk here, I want our legislators to know how dire the situation is in California, not just for Kaweah,” Herbst said. “But at the same time I don’t want to panic my community, I don’t want to scare my employees away.”

Herbst said he wishes this would have been more of a grant program rather than a loan program, however any help is better than none. He also said the legislature is not done yet as the California Association of Hospitals is working closely with the Governor and legislature to appropriate a $1.5 billion line item in next year’s budget. That would not be in the form of a loan, but a relief grant similar to the CARES Act which was distributed to hospitals at the height of the pandemic.

“We’re very grateful, don’t get me wrong, very grateful to the legislature and that the governor for passing this bill, providing this funding and recognizing the state of the California Hospital industry,” Herbst said.

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