California lawmakers rush $25 million to hospitals without knowing who qualifies

A $25 million grant to cash-strapped hospitals became law less than a week after it was introduced — so fast that it caught some hospitals, their advocates, and even some lawmakers, off guard.

It also left a litany of unanswered questions: who came up with the narrow criteria, how many hospitals would qualify and whether the funding will be enough to prevent hospital closures in the near term.

Assembly Bill 108, signed into law last week, will provide grants to public and nonprofit hospitals that meet several criteria, including having less than 10 days of cash on hand and having more than half of their patients on government-funded insurance programs or uninsured. The goal is to tide eligible hospitals over until July 1, when the new fiscal year begins, said Sen. John Laird, a Santa Cruz Democrat who chairs the Senate Budget Committee and championed the funding bill.

The measure, put in print on May 4, flew through both legislative chambers in just three days before Gov. Gavin Newsom signed it within hours. By Monday, the program was up and running and hospitals had just a week to apply. The Department of Health Care Access and Information will announce recipients May 26.

“It is a rare occurrence for bills to go from the starting block to the finish line in just a few days,” said veteran lobbyist and Capitol watcher Chris Micheli, who said the speed reflects the urgent need of hospitals and a consensus among leaders.

Hospital leaders interested in applying said they were pleased the Legislature acted so quickly, though some are scrambling to meet the application deadline after learning about it just a week ago.

Laird told CalMatters that he knows of two to three hospitals that will likely qualify but declined to name them, arguing that doing so could scare off vendors and hospital staff.

When pressed, he acknowledged that potential recipients include Watsonville Community Hospital in his own district.

“This bill comes at a completely inopportune time in the budget process, and the time was not dictated by us,” Laird said during a budget hearing last Tuesday. “It was dictated by a few hospitals going under.”

The criteria are so narrow and the bill moved in such an “expedited fashion” that it seems tailored to the needs of a specific hospital, said Assembly Budget Committee Vice Chair David Tangipa, a Fresno Republican, who voted for the bill nonetheless.

“It says 10 days. Why not put it at 30 days?” he said. “They needed to make sure that even though it appears to be a general fund that all of these other hospitals could apply for, that probably only one hospital met all of those qualifications.”

Neither Laird nor the finance department staff was able to explain how they came up with the criteria, including why they picked 10 days — instead of any other number — of cash on hand to indicate a dire enough financial situation. Hospital administrators said the typical goal is at least 90 days of cash on hand.

The ambiguity frustrated some state lawmakers, who repeatedly pressed for clarity during the budget hearing. Sen. Chris Cabaldon, a Napa Democrat, called the lack of answers “profoundly disturbing.”

“It’s been one long ‘I said what I said’ hearing,” he said. Still, he voted for it.

Others lamented that the criteria, especially the 10-day threshold, should have been expanded to allow more hospitals to compete for the funding.

“Right now, it’s far too narrow, and really by this time the hospital has gone over the cliff,” Sen. Lola Smallwood-Cuevas, a Los Angeles Democrat, told CalMatters in an interview. She, too, voted for it. “We want to figure out who’s standing on the cliff, who’s a few feet from the cliffs, who’s a mile from the cliff.”

The $25 million grant comes as hospitals across California, particularly in rural areas, say they are at risk of dropping services or shutting their doors due to rising labor costs and federal Medi-Cal funding cuts.

The funding woes sparked calls for renewed funding for the state’s Distressed Hospital Loan Program, which in 2023 gave 16 financially distressed hospitals nearly $300 million. Of those, 15 have asked for more time to repay the debt, and nine of them have also applied for loan forgiveness, according to the California Health Facilities Financing Authority.

The California Hospital Association, which represents nearly 400 hospitals, is sponsoring a bill to put another $300 million into the loan program. Senate Democrats proposed $200 million in funding in mid-April but have not specified if the dollars would be a loan or a grant.

Newsom proposed up to $50 million toward hospitals in “immediate and significant financial distress” in 2026-27 in his budget revision Thursday.

A few hospitals plan to apply

Watsonville Community Hospital, which has publicly , reported having 8 days of cash on hand in the last quarter of 2025, according to the most recent financial records collected by the state. The hospital received an $8.3 million state loan in 2023 as part of the distressed hospital program lawmakers passed that year. When asked about the hospital, Laird said the hospital is “quite likely” to be eligible.

“This is critically important for the hospital as we navigate fiscal challenges brought on by funding delays and cutbacks at the federal level,” hospital spokesperson Jennifer Murray said in an email.

Hospitals in the Central Valley and rural Southern California also could benefit from the grant, according to Laird.

Madera Community Hospital told CalMatters it intends to apply for a slice of the grant money. The hospital reopened its doors in March 2025 after closing at the start of 2023. American Advanced Management, the company that took over the hospital, received $57 million from the state to reopen it. State data show the hospital ended 2025 with two days of cash on hand.

Delays in reimbursements and low patient volume in its outpatient clinics are contributing to Madera Community’s slower-than-expected recovery, said Matthew Beehler, a spokesperson for the hospital. He said Madera Community is still working on contracting with some insurers and is not yet receiving funds from the Hospital Quality Assurance Fee, a state-federal supplemental payment program for hospitals that serve a high number of Medi-Cal and uninsured patients. State data show that in 2022, before the hospital closed, it relied on more than $16 million in supplemental payments.

The $57 million from the state, Beehler said, helped cover the hospital’s first six months of operations. Beyond that, American Advanced Management has covered the shortfalls.

“I think that we are headed towards the path of real sustainability for the hospital,” Beehler said. “It just takes time to have all that sort of reach its state of equilibrium.”

In the Eastern Sierra, Dr. Kevin Flanigan, CEO of the Southern Inyo Healthcare District, said he, too, plans to apply for the state’s emergency grant. He said his hospital needs about $1 million to get through 2026. However, he does not know if his hospital will qualify given the 10 days of cash on hand criteria. He said Southern Inyo’s cash balance fluctuates anywhere between 18 to 20 days of cash to 8 to 10 days — grim in either case.

If his hospital doesn’t qualify for a grant? “Then God willing, we find money elsewhere. If not, we begin the process of closing certain things,” Flanigan said. Southern Inyo is a small hospital, with only four acute care beds, 30 skilled nursing beds and an outpatient clinic; there isn’t much to cut from, he said.

“We are clearly one of the most precarious hospitals in the state.”

Unanswered questions

Laird told CalMatters he is confident the $25 million will be enough to save hospitals facing the most imminent threat of closure.

But it’s unclear how he and the finance department arrived at the dollar amount. Department of Finance spokesperson H.D. Palmer said the figure represents the administration’s “best assessment of potential funding needs” and is partly based on the Distressed Hospital Loan Program, which gave 16 hospitals an average of $19 million each to keep them afloat for several years.

Laird said the amount was based on the number of hospitals legislators “informally” think would be eligible. Whatever is left untapped by June 30 would revert back to the state, he said, and legislators could add more funding if it runs out.

“It is what we think is necessary now,” Laird said.

The Department of Health Care Access and Information collects and publishes financial data from hospitals quarterly, but that data lags. Which hospitals qualify for the grant will depend largely on their self-reported finances as of April 15, the department said.

Many state lawmakers want more answers, too. Sen. Shannon Grove, a Bakersfield Republican, grilled finance department staff over the bill details.

“How long is this lifeline going to last? Is it even going to save the people who are in the 10-day timeframe?” she asked.

“That is the intent,” said Lupe Manriquez of the Department of Finance.

“I know it’s the intent. Is it going to save them?” Grove pressed.

“That’s the goal,” Manriquez answered.

Cabaldon told the staff he wouldn’t even bother asking about the criteria because “I already know what the answer is going to be.”

“It is incumbent on this committee to be able to have real answers to the questions that are posed about the why and the evidence,” Cabaldon said. “We are not having a conversation. We are asking questions of fulfilling our constitutional role in this process and getting zero answers.”

Palmer called the heat on his staff “undignified sniping and sarcasm,” noting that the bill originated from the same legislative chamber that’s now questioning it.

“They asked for our assistance in the expedited consideration of the bill outside of the regular budget process — and we complied and cooperated,” Palmer said in an email. “If members were either unable or unwilling to do some basic homework on their own bill that they wanted to be put on a fast track, then that’s a question that’s better posed to them — not us.”

How long a lifeline?

But throwing money at hospitals to keep them afloat is not the answer, some lawmakers argued.

“We can’t just keep giving $25 million handouts over 10 days where a hospital is looking to close,” Smallwood-Cuevas said, noting that President Donald Trump’s H.R. 1, which sharply reduces federal spending on Medicaid, could devastate hospitals.

“What is the state doing to identify and support vulnerable safety net hospitals before they reach the point of fiscal crisis? That is an answer I want to hear.”

Some hospital administrators also called for longer-term solutions. Katherine Burnworth, board president of the Imperial Valley Healthcare District, which oversees Imperial County’s two hospitals, told CalMatters that while she appreciates state action, $25 million statewide “is a drop in the bucket compared to the scale of the problem.”

“That may help a small number of hospitals avoid a near-term emergency, but it does not address the ongoing instability that communities like ours live with year after year,” Burnworth said.

While acknowledging the importance of emergency grants, Republicans on the committee argued that California has shortchanged hospitals’ Medi-Cal reimbursements. The California Hospital Association estimates that hospitals are reimbursed 74 cents for each dollar they spend on Medi-Cal patients. Hospitals that see a high share of Medi-Cal patients do get supplemental payments to help offset some of the gaps in reimbursement.

The GOP lawmakers also said that some state regulations, such as a minimum wage hike for health care workers and the requirement that all hospitals comply with new seismic safety requirements by 2030, will burden hospitals with high costs.

“We are throwing Band-Aids on everything, when really we need to just get together and fix the issues of what are the unfunded state mandates that are on our hospitals right now,” Tangipa said.

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This story was originally published by CalMatters and distributed through a partnership with The Associated Press.