Health leaders discussed financial support available to hospitals at the 2024 Northern California State of Reform Health Policy Conference last month, including the Distressed Hospital Loan Program. Since the onset of the COVID-19 pandemic, hospitals have experienced significant strain due to provider burnout and financial challenges.
Carolyn Aboubechara, executive director of the California Health Facilities Financing Authority (CHFFA) at the California Treasurer’s Office, said the group’s mission is to increase access to healthcare by providing financial assistance to nonprofits and hospitals with its nine financing programs.
“A few of our programs are permanent programs and some of them are one-time general fund allocations the legislature gives us to try and pilot a program and see how it can assist health authorities,” Aboubechara said.
Two CHFFA financing programs are permanent. Hospitals mostly engage with the Bond Financing Program, according to Aboubechara. CHFFA acts as a conduit issuer: if a hospital needs to obtain funds to develop a building, for example, it reaches out to CHFFA to access capital markets and receive low, competitive rates. Aboubechara said the hospital will receive a credit rating, then bonds are issued for the facility’s total capital gains.
The HELP II Loan Program is also permanent, and assists small and rural health facilities and district hospitals.
“We offer two or three percent interest rate loans for up to $2 million,” Aboubechara said. “So, not much money but it helps the smaller district hospitals and the smaller clinics throughout the state.”
Aboubechara said the rates are competitive since interest rates typically sit between six and seven percent, and CHFFA may increase its interest rates due to the high utilization of the program.
“The nice thing about this program is that it’s a revolving program and so we give out a loan, they pay it back, (and) we give it to someone else,” Aboubechara said.
J.P. Marion, deputy director of the California Department of Health Care Access and Information (HCAI), discussed the Cal-Mortgage Loan Insurance program, which was created in 1968 to offer loan insurance to nonprofits and public health facilities for the development and expansion of healthcare services. Marion said the state has provided over $9 billion in loan financing insurance for the state’s healthcare infrastructure.
While taking loan applications and reviewing hospital financials, HCAI saw common themes, like facilities exhausting all outside options for working capital, like obtaining credit lines and loans from banking partners. And all experienced staffing challenges from provider burnout and the inability to compete with higher wage offers.
“Almost every hospital had some sort of extraordinary or one-off situation that was specifically affecting their hospital. We saw all sorts of things—things like unexpected leadership changes,” Marion said, adding that experienced CEOs and CFOs are hard to come by in rapid turnaround situations.
Ben Johnson, vice president of policy at the California Hospital Association, said that at the end of 2022, 50 percent of hospitals had operating margins within the ‘red zone,’ which puts dozens at risk of closure. Johnson is confident California would have seen more hospital closures without the Distressed Hospital Loan Program.
“This program has provided a lifeline, especially in the short-term, but there are some longer-term challenges hospitals are facing.”
— Johnson
Workforce sustainability is needed within Medi-Cal and Medicare, Johnson said. He is working with the Department of Health Care Services on a $2.7 billion investment to support Medi-Cal providers and patients. Johnson expects to see increased reimbursements for hospitals beginning in 2025.
“We really can’t go another decade without any sort of reimbursement in Medi-Cal,” Johnson said.