Saving lives during the COVID-19 pandemic was expensive, and district hospitals in California are now facing difficult, if-not-impossible, financial situations.
“Please dedicate one-time funding to help assist district hospitals in their financial recovery efforts and reform Medi-Cal reimbursement so that we can avoid disparities in the care of your poorest Californians.” — Kaweah Health CEO Gary Herbst, in a letter to Gov. Gavin Newsom
This is the message Kaweah Health CEO Gary Herbst sent to Gov. Gavin Newsom in an open letter published Thursday, Nov. 10, by Gannett’s Visalia Times-Delta.
“The COVID-19 pandemic, and its aftermath, have brought district hospitals to the brink of financial collapse,” Herbst wrote.
“Without your help, it will soon be virtually impossible for Medi-Cal patients to receive anything but emergency medical care in the State of California.”
Kaweah is the largest of 33 district hospitals in California. It is a community-owned, 613-bed hospital and health system headquartered in Visalia. Nearly 60% of Tulare County residents are enrolled in Medi-Cal.
(Hospital districts are a political subdivision of the state and are governed by publicly elected boards.)
$29 Million in Losses in Three Months
Kaweah Health lost $29 million in the first three months of its fiscal year, and its cash reserves fell from 130 days cash on hand at the start of the pandemic to 84 days cash on hand, Herbst said in the letter.
“Sadly, with virtually no hope for further COVID relief funds from either the federal or state government, we are faced with no choice but to begin laying off staff (likely in the hundreds), closing services (we just announced to staff that we are closing our skilled nursing unit and our neurosciences clinic), stopping elective surgeries and procedures that are provided at a loss (largely affecting the Medi-Cal population), and taking any and all other steps necessary to stem our losses,” Herbst told the governor. “It is gut-wrenching and agonizing, to say the least.
“As a further result of our current financial crisis, our plans to achieve the State’s mandated seismic compliance by 2030 have evaporated. We do not have the funds to build the $730 million, 10-story patient tower to replace over 200 non-compliant acute care inpatient beds, surgical suites, and our pharmacy, dietary/cafeteria, and PACU, all located downtown Visalia in a building built in 1969.”
Reimbursement Rates Don’t Cover Pandemic Costs
Among the factors cited by Herbst for Kaweah Health’s financial crisis:
- The care and treatment of thousands of severely-sick COVID-19 patients with virtually zero increase in reimbursement rates from Medicare, Medi-Cal, or commercial payers (at one time, Kaweah Health had more COVID-19 inpatients in its hospital than any other hospital in the state);
- An unprecedented dependence on highly-expensive contract labor to fill hundreds of workforce vacancies ($81 million spent since March 2020.)
- Tens of millions of dollars on overtime and extra-shift bonuses;
- Skyrocketing costs for drugs, supplies, food, energy, and resources vital to patient care.
A Final Plea for Help
“I implore you please remember the ‘good soldiers’ of your State’s district hospitals,” Herbst wrote in closing. “In appreciation of their selflessness, please dedicate one-time funding to help assist district hospitals in their financial recovery efforts and reform Medi-Cal reimbursement so that we can avoid disparities in the care of your poorest Californians.”