Just a couple months after Madera Community Hospital declared bankruptcy and closed its doors, a major hospital system in the south Valley could be next.
Kaweah Health’s financial situation is continuing to worsen with no end in sight, leading CEO Gary Herbst to seek help from Tulare County for the Visalia hospital.
The big picture: Herbst addressed the Tulare County Board of Supervisors at their meeting last Tuesday, with a major focus on how the hospital loses money on Medi-Cal and Medicare patients.
- Locally, Herbst is open to various forms of help – a sales tax measure, a parcel tax and American Rescue Plan Act funding to name a few of the ideas floated.
- Statewide, Herbst sent a letter to Gov. Gavin Newsom requesting an extension to the 2030 deadline for seismic compliance, which is estimated to cost the hospital $730 million.
- Before the pandemic, Kaweah Health was in a healthy financial position with over 140 days cash on hand. By the end of this January, Kaweah Health had only 73 days cash on hand, a number that will continue to trend down in lieu of any changes.
State of play: Herbst told the board that 73 percent of the patients that are treated at Kaweah Health are either part of Medi-Cal or Medicare. Kaweah Health is reimbursed by Medi-Cal at a rate of 74 cents per every dollar, and Medicare’s reimbursement rate is set at 75 cents per dollar, causing the hospital to incur a loss on the vast majority of its patients.
- With Medi-Cal patients making up about 60 percent of Kaweah Health’s intake, the hospital runs at an $8 million loss annually on the outpatient side for such patients. Revenue would increase by $30 million if the Medi-Cal costs were fully reimbursed.
- Kaweah Health has suffered $136 million in operating losses from March 2020 through December 2022 in large part due to the lacking Medi-Cal and Medicare reimbursements, rising labor expenses and rising pharmaceutical and medical supply expenses.
- The operating losses have resulted in Kaweah Health’s credit rating being downgraded to a non-investment grade, leading to the hospital being denied by over 50 banks for a credit line that is necessary to meet bond covenants.
- Over 130 employees have already been laid off with up to 100 more coming this month.
- Kaweah Health has also closed a skilled nursing unit, an outpatient neurosurgery clinic, a diabetes education clinic and limited elective surgeries for Medi-Cal patients.
What they’re saying: The layoffs and facility closures are part of the plan for the hospital’s attempt to turn around its bleak financial situation. But Herbst stressed that without outside help there is no guarantee that Kaweah Health can remain open.
- “We have developed a plan to help us recover from this financial condition,” Herbst said. “We obviously will not continue to exist if it continues going in that same direction. We will just become another one of those headlines.”
