Newsom Signs Bill to Provide Aid to Struggling California Hospitals

A lab technician works in the Emergency Department at Providence St. Mary Medical Center in Apple Valley, Calif., on March 11, 2022. Mario Tama/Getty Images

Gov. Gavin Newsom, alongside members of the California Legislature, signed the Distressed Hospital Loan Program bill into law on May 15, which will provide aid to struggling California hospitals.

The $150 million program provides zero-interest loans to nonprofit or public hospitals experiencing extreme financial distress and will help struggling hospitals remain open or assist hospitals that have closed to reopen their doors.

The Department of Health Care Access and Information, in coordination with the California Health Facilities Financing Authority, will create eligibility criteria, with priority given to hospitals with a high proportion of Medi-Cal patients.

California Gov. Gavin Newsom announces a proposed 2024 ballot initiative to treat people at risk of homelessness at Alvarado Hospital in San Diego on March 19, 2023. Courtesy of Office of Governor Gavin Newsom

“This new program will help hospitals in extreme financial distress get the assistance they need as quickly as possible,” Newsom said in a statement. “My administration has been working closely with hospitals across the state, and we will continue to do all we can to ensure communities can continue to access the care and services they need without disruption.”

Qualifying hospitals would be required to submit a plan detailing how the hospitals will return to financial viability and continue to operate long term.

Democrat Assemblymember Eduardo Garcia, who was at the signing ceremony for the bill, supports the financial aid program to help get hospitals back on their feet.

“We jumped in to support the Distressed Hospital Loan Program to ensure an eligible source of relief for our district’s urgent healthcare concerns. This legislation would open up $150 million in critical loan resources to prevent the closures of financially distressed hospitals, like those in our district struggling to keep their doors open,” Garcia said in a statement.

Democrat state Sen. Anna Caballero says the new relief program helps hospitals in rural communities stay open despite limited resources.

In a statement about the new loan program, Caballero mentioned the closure of Madera Community Hospital in Madera, California, in January after the hospital filed for bankruptcy. Three rural health clinics were also forced to close, and over 700 people lost their jobs, she said.

“Our healthcare system is in crisis,” Caballero said. “We need to continue working to ensure that there is a process to evaluate the healthcare services provided to the community by our struggling hospitals, analyze fiscal stability and oversight by hospital boards, and ensure that these hospitals have a viable plan to avoid bankruptcy.”

The COVID-19 pandemic forced many hospitals to use their reserve funds as the cost of prescriptions increased and supplies became more expensive.

Hospitals were also forced to hire traveling nurses after hundreds of nurses left the profession during the pandemic.

California Senate Minority Leader Brian Jones praised the governor after the signing of AB 112.

“Good news! Governor Newsom listened to our calls and signed AB 112! This is a step forward in ensuring all Californians have access to quality medical care by keeping our hospitals open,“ Jones wrote on Twitter.

Democrat state Assemblymember Esmeralda Soria said the funding program is critical to restoring emergency health care for Californians.

“I am grateful to the Governor for prioritizing state assistance so Madera Community Hospital, and other struggling hospitals, have access to emergency funding,“ Soria said in a statement. ”Reopening Madera Community Hospital has been my top priority this year and today’s action gives me hope towards restoring emergency health care, labor and delivery services, and preventative care access that is critical to the community.”