Esmeralda Soria

Existing law requires the Department of Health Care Access and Information to administer the Distressed Hospital Loan Program, until January 1, 2032, which provides loans to not-for-profit hospitals and public hospitals in significant financial distress or to governmental entities representing a closed hospital to prevent the closure of, or facilitate the reopening of, those hospitals. Existing law requires the department to develop a methodology to evaluate an at-risk hospital's potential eligibility for state assistance from the program, and authorizes the methodology for determining financial distress to consider the hospital's prior and projected performance on financial metrics, including, among other things, the amount of cash on hand. Existing law requires a hospital or a closed hospital applying for aid under this program to provide, among other things, the California Health Facilities Financing Authority and the department with financial information demonstrating the hospital's need for financial assistance due to financial hardship. Existing law requires the department to issue the loan award to a qualifying hospital as soon as reasonably practicable following its eligibility determination. Existing law prohibits not-for-profit hospitals and public hospitals that belong to integrated health care systems with more than 2 separately licensed hospital facilities from being eligible for state assistance under the program.

This bill would, if an appropriation is made for this purpose, make any hospital, regardless of ownership type or system affiliation, eligible for state assistance under the program for awards provided on or after the effective date of this act, as specified, if the hospital, and its associated entities, if applicable, meets the applicable criteria for significant financial distress as established by the department and the authority. The bill would, if an appropriation is made for this purpose, authorize the methodology for determining financial distress to additionally consider the hospital's prior and projected performance on financial metrics that include, among other things, credit rating and debt capacity, and would also require the projections that determine financial distress to account for impacts of federal and state policy changes affecting hospital reimbursement or health care coverage, including, but not limited to, the federal One Big Beautiful Bill Act.

 This bill would require the applicable criteria for a hospital to include the fiscal condition of the hospital, as specified, and would require the authority and the department to review financial reports from the hospital and consolidated financial statements from associated entities, if applicable. The bill would limit the eligibility for a hospital with associated entities, as defined, to when the hospital's associated entities are determined not to have capacity to provide sufficient financial resources to resolve the financial distress of the hospital. The bill would place other limitations on loans to hospitals with associated entities, including deducting from the loan amount any amount paid out to investors, shareholders, and management companies in the last 3 years.

Existing law requires the department to provide loan forgiveness or modification of loan terms to an applicant based upon criteria determined by the department and subject to the approval of the department and the authority. Existing law requires the department to establish the terms and conditions associated with accepting loan forgiveness or modification of loan terms, subject to approval of the Department of Finance.

This bill would, if an appropriation is made for this purpose, require the evaluation for loan forgiveness incorporate projections of future financial performance in addition to a hospital's point-in-time financial condition. The bill would, if an appropriation is made for this purpose, in place of the current criteria, require the department to provide loan forgiveness to any participant of the program who received a loan award before the effective date of this act, as specified, if the department and authority determine the participant has demonstrated a good faith effort to comply with program requirements through January 1, 2026, and the financial projections demonstrate that the participant will become financially distressed as a result of loan repayments under the program or other outside factors, including, but not limited to, the impacts of the federal One Big Beautiful Bill Act.

This bill would extend the program through January 1, 2035.

This bill would declare that it is to take effect immediately as an urgency statute.