Quick Take
Watsonville Community Hospital leadership says it has used up the entirety of a $10.6 million grant for the facility. The hospital’s chief financial officer tells Lookout that the money was meant to be spent quickly.
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Watsonville Community Hospital has used all $10.6 million it received from the state this summer to pay down outstanding debts and cover its ongoing operating shortfall, hospital officials say.
WCH was one of four financially distressed California facilities to receive emergency funding through Assembly Bill 108, which allocated nearly $25 million to help struggling hospitals.
According to the bill, the funding was intended to help stabilize hospitals that would otherwise be unable to pay their debts before July 1. Hospitals selected to receive funding had fewer than 10 days cash on hand, had exhausted other financial options, and had more than half of their patients either enrolled in public programs, such as Medi-Cal or Medicaid, or were uninsured.
The $25 million was split among four hospitals: Watsonville Community Hospital, Palo Verde Hospital in Riverside County, El Centro Regional Medical Center and Southern Inyo Healthcare District in Lone Pine.
Watsonville received the second-highest amount, $10.6 million, behind El Centro Medical Center, which received $11 million.
By Aug. 31, the hospital would have already spent all of the money, according to Chief Financial Officer Julie Peterson at a recent hospital board meeting.
Peterson told Lookout via email that the money was used “as intended by the state,” which included shaving off $3 million in outstanding balances it had owed to supply vendors (medications, surgical supplies and supplies for inpatient and emergency room care), critical service vendors (cybersecurity, payroll and electronic healthcare) and physicians.
She added that the remaining funds covered the hospital’s daily operating shortfall. On average, the hospital’s operating expenses exceed patient revenue by $2.5 million per month.
The money was meant to be spent immediately, Peterson said. The grant application required hospitals to outline how they would use the money over a 12-week period. In its application, Watsonville Community Hospital had indicated that it would use the money to pay off some of its debts and support operating expenses, she said.
Peterson said that WCH should be receiving additional funding from the Hospital Quality Assurance Fee program, which provides supplemental payments to hospitals that serve Medi-Cal or uninsured patients, sometime this fall.
She added that the hospital expects to receive $17.6 million in funding over the course of the year, but it does not completely cover the budget shortfall caused by very low reimbursement rates by “government payers” — those on Medi-Cal or Medicaid.
The hospital continues to make progress on increasing the number of services it offers, such as surgeries and getting its new MRI and CT machines online, to attract more patients and increase revenue.
But this also comes at a time where the facility is experiencing a change in leadership following the departure of former CEO Stephen Gray earlier this summer and staffing issues. Earlier this week, more than a dozen nurses rallied against an ongoing closure at the facility’s intensive care nursery due to short staffing in the labor and delivery unit.
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