Financial Outlook for California Hospitals Improves, Despite Plummeting Investment Income

Cheryl Clark, for HealthLeaders Media , October 23, 2009

There also have been significant increases in the number of uninsured and Medi-Cal (Medicaid) patients, for whom government reimbursement dollars do not come near to matching costs, and a decrease in volume for elective procedures. "Consumers are making a choice to not get care because they don't want to pay deductibles or because they lost their job and lost their coverage," McLeod says.

"Based on those elements, we anticipate not seeing a very good picture when the annual reports finally come out," McLeod emphasizes.

In July, the CHA issued a report, "California Hospitals and the Economy — Ongoing Credit Crisis Jeopardizes Seismic Compliance Mandate," which called the recession's impact on hospitals "unprecedented."

"More than a quarter of hospitals statewide (28%) have seen interest expenses increase in the first quarter of 2009, while many others have been frozen out of the credit market entirely. As a result, hospitals across the Golden State are faced with limited access to capital and increased cost of borrowing," it says.

What's worse for hospitals in California is that many of them will soon be forced by state laws to make seismic improvements—some even rebuilding their entire hospitals—by 2013 or 2020 or 2030 or else shut down. The Rand Corporation estimates the price tag for seismic hospital retrofit is $110 billion, not including financing costs.

In summary, McLeod says, "California hospitals are taking hit from all sides."

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