Plan To Draw Additional Medi-Cal Funding Might Strain Smaller Hospitals

A law requiring California hospitals to pay extra fees in order to draw more Medi-Cal matching funds from the federal government could prove to be a substantial burden on smaller hospitals that might have trouble finding the additional money, Payers & Providers reports.

Medi-Cal is California's Medicaid program.

Background

The law (AB 1383), signed by Gov. Arnold Schwarzenegger (R) in 2009, requires that hospitals pay, in total, about $2 billion in fees later this year, based on the volume of Medi-Cal patients treated at each facility.

State hospitals would pay an average of about $5 million each, which when combined would draw an additional $2.5 billion from the federal government (Payers & Providers, 8/19).

The state plans to use the new funds to increase Medi-Cal payments to hospitals and support children's health insurance programs (California Healthline, 3/16).

Questions Surrounding the Plan

However, experts say that smaller community hospitals that serve large Medi-Cal populations and have tight operating budgets might have trouble paying the fees. Such facilities might have to resort to borrowing the funds.

Shane Passarelli -- senior vice president of Healthcare Finance Group, a hospital financing firm -- noted that certain facilities have previous agreements to send certain assets to lenders, which would make it more difficult to secure additional lending.

Published reports have found that as many as 20% of the state's 430 hospitals could end up paying more in fees than what they would receive from the additional matching funds (Payers & Providers, 8/19).