California lawmakers approve $25 million for distressed hospitals

SACRAMENTO, Calif. (CN) — The Legislature on Thursday passed a bill that will provide $25 million to distressed California hospitals facing imminent closure.

Assembly Bill 108, which swiftly moved through both legislative chambers, is seen by both parties as essential. The funds will offer grants to hospitals that meet certain criteria.

The issue has united Republicans and Democrats, as both have seen hospitals in their districts struggle in recent years. Republicans have pointed to a $25 minimum wage for certain health care workers, building requirements to meet earthquake standards and poor Medi-Cal reimbursement rates as key drivers of the problem.

Lawmakers hailed the bill’s passage. Governor Gavin Newsom signed it hours later.

“Today, the Legislature took an important step forward by passing AB 108 to help keep financially distressed hospitals open across California,” said Assemblymember Jeff Gonzalez, an Indio Republican, in a statement. “Quite frankly, if a hospital is in the position where they have to request this funding just to keep their doors open, they deserve our help. Rural families should not have to worry about whether emergency care will still exist in their community tomorrow.”

Gonzalez pointed to hospitals in his district that he called lifelines to their communities. Lawmakers across the state have expressed similar concerns.

Eligibility requirements include a hospital having under 10 days of money on hand, showing it’s tried all other options, having over 50% of its payer mix — revenue from various insurance sources — be government entities and uninsured patients, and be nonprofit or public.

Hospitals must also meet other criteria developed by the California Department of Health Care Access and Information. ‘

While the bill passed overwhelmingly Thursday — 36 to 0 in the Senate and 68 to 0 in the Assembly — state officials faced some bruising comments at a Senate Budget and Fiscal Review Committee hearing this week.

At that hearing, state Senator Shannon Grove, a Bakersfield Republican, appeared frustrated at times when she couldn’t elicit a clear answer to her questions. Other senators asked whether the higher minimum wage and earthquake construction requirements helped put hospitals in dire financial straits.

The higher wage came with the 2023 passage of Senate Bill 525. It implemented a tiered system with rollouts occurring over several years.

The rate of increase for qualifying workers depended on categories like an employer’s size, location and where they got their funding.

The California Hospital Association, a trade organization for hospitals, has often pointed to issues like seismic requirements and Medi-Cal reimbursement rates as hurting hospitals.

The association has said hospitals must meet a new tier of seismic requirements by January 2030, noting that hospitals which fail to meet that deadline must close and stop providing patient care.

Newsom has shown a strict adherence to the building requirements. In 2024, he vetoed a bill that would have allowed hospitals to apply for a five-year extension, pushing the deadline to 2035.

In his veto statement, the governor said hospitals have known for 30 years about the 2030 deadline.

“I encourage any hospitals at risk of noncompliance with the 2030 deadline to prioritize remaining work,” Newsom wrote at the time.

Gonzalez said he wants to ensure access to healthcare in rural California isn’t seen through a partisan lens.

“This is not a partisan issue,” he said. “Every Californian deserves access to quality healthcare close to home regardless of where they live. We cannot allow another rural hospital to close and leave our communities without options.”

The bill isn’t the only legislation that would help hospitals this year.

Assembly Bill 1923 would add $300 million to the state’s Distressed Hospital Loan Program and expand the types of hospitals that can tap into the funds.

It’s awaiting a vote in the Assembly Appropriations Committee.