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Money Quickly Running Out for Community Clinics

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(Sacramento, CA.)
Monday, September 13, 2010


A 22 million dollar loan fund for community health clinics to weather Sacramento's budget storm has been lent out, and there's still a demand for more.

The fund was established by a consortium of health care foundations, including the California Healthcare Foundation, and providers like Catholic Healthcare West and Sutter Health. The loans were provided as a bridge while lawmakers passed a state budget.

That money went to about 30 clinics around the state during the past four weeks.

From July 1st to August 19th, clinics around the state operated on two billion dollars set aside by the state and federal governments.

Two other funds totaling about 20 million dollars have loaned out about half to struggling clinics. Those funds can only loan money out until November 1st.   

A seven million dollar fund administered by Health Net of California and the Health Net Foundation is still loaning money, mainly to Central Valley institutions, although that could change soon. Health Net spokesman Brad Kieffer says that money is dwindling.

"If the budget stalemate last much longer, we will likely meet our loan caps," Kieffer says.

A small clinic could need 150,000 dollars per week to operate, while a large urban clinic could require upwards of a million dollars per week. Medi-Cal patients account for anywhere between 40%-80% of the clinics service load. With purposed loan funds drying up, some administrators have been able to secure capital from private institutions.  But that's not an option for all clinics.

Most likely to be denied are community care facilities relying on vouchers, issued by the state, as a promise of repayment to the banks. The state issues the vouchers promising Medi-Cal treatment will be reimbursed once the state has a budget in place.

And some banks are denying those loans because of the state's poor credit ratings.

A large, Los Angeles based clinic was denied a loan by Wells Fargo, which cited the state's dismal short and long term ratings, according to California Primary Care Association President Carmela Castellano-Garcia.  She says continued delays on a budget could hurt patients.

"I'm concerned that [patients] are going to be losing access because clinics either have to scale back hours or close the doors because the politicians have not been able to come together on the budget. That is absolutely devastating to California," Castellano-Garcia says.

Because of existing Medi-Cal regulations and laws, payments to doctors and hospitals are continuing while the state operates without a budget.  For clinic administrators, this has been a routine drill since 2007. However, more administrators are expressing concern this year that furloughs, layoffs and closures could occur as the state continues without a budget plan passed.

"It's another real world consequence of not having a budget in place," says H.D. Palmer of the California Department of Finance. He says the longer the budget impasse lasts, the harder it could be for clinics to secure loans with those Medi-Cal vouchers. "California's credit ratings are low. That's another reason we want to pass the budget and avoid the Controller issuing IOU's, because it causes further downgrades."

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