CEO Message

CEO Message: A Summer Budget Slog

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It’s disappointing that the budget passed Monday by the state Legislature does not include a much-needed $1 billion cash infusion for hospitals to stem the financial challenges driven by the COVID-19 pandemic.

It’s also potentially dangerous.

As parts of California reopen businesses like movie theaters, gyms, and beauty salons, the number of COVID-19 cases and hospitalizations is not relenting. But without adequate financial support from the state, hospitals are left scrambling to pay for nurses, doctors, medical equipment, and more to care for COVID-19 patients as well as all other health needs.

The numbers are well-known. One study from the California Health Care Foundation and another from nationally renowned consulting firm Kaufman Hall state that California hospitals’ 2020 losses could be as much as $15 billion. This is an unprecedented loss for a health care system that must maintain readiness through COVID-19’s second wave, as schools reopen in a couple of months, and into the 2020 flu season.

Hospitals are a linchpin of the state’s reopening plan, so the lack of financial aid could jeopardize broader reopening activities as hospitals facing layoffs, service reductions, and other challenges could find themselves challenged to care for a fresh surge of patients.

There is one silver lining in this year’s plan worth noting: The Legislature has rejected an Administration proposal that would cut the amount Medi-Cal managed care plans pay for patient care by $500 million annually. In addition to the financial hit, this change would have eliminated incentives for health plans and hospitals to share risk and added considerable challenges for Medi-Cal managed care plans to maintain an adequate network.

This budget conversation, in which lawmakers are trying to close a projected $54 billion shortfall, is not over. Through the summer, as tax returns come in to the state, lawmakers expect to revisit the spending plan, and it’s imperative that they understand the need to support hospitals during this critical time.

~ Carmela