Tahoe Forest board approves FY2026 budget, 5% rate increase and three‑year capital plan

The Tahoe Forest Hospital District Board of Directors on Oct. 26 approved the district’s fiscal year 2026 operating budget and a three‑year capital plan, and amended the budget to include a 5% increase to the system chargemaster rates effective August 2025.

CFO Crystal Felix presented the finance package and the board voted 4–0 to approve the budget and then to approve the three‑year capital plan (fiscal years 2027–2029). The board’s action also ratified an amendment to the budget to include a 5% rate increase; the amended motion passed on a second roll call, 4–0.

Why it matters: The budget and capital plan set near‑term rates, spending and multi‑year infrastructure priorities for Tahoe Forest as state and federal reimbursement policies — and related financial risks — remain unsettled. The finance team described the FY2026 plan as conservative on some revenue assumptions while preserving funds for planned construction and equipment purchases.

Felix told the board the FY2026 gross revenue projection is $765,400,000, with deductions (contractual adjustments, charity care and bad debt) of about $415,500,000, producing total operating revenue of roughly $374,300,000. Operating expenses are budgeted at $346,700,000 for an EBITDA (earnings before interest, depreciation and amortization) of $27,600,000 and a projected net income of $23,958,434 for the year. Felix said the net income represents a 7% return on equity and a 3.6% return on gross revenue.

The budget package includes: a proposed 5% adjustment to chargemaster rates (approved by the board as part of the final motion), a $66.2 million capital program budgeted for FY2026 with longer‑range capital spending shown in a 10‑year plan, and a planned allocation of about $1.5 million in property tax revenue for a “wellness neighborhood” initiative. Felix said roughly $5.6 million is budgeted for IT and EMR infrastructure and about $55.6 million for building projects and major construction in FY2026; other multi‑year projects — including imaging and seismic work and the Incline Village surgery project funded in part by a $3.6 million Duffield Foundation gift — appear elsewhere in the capital plan.

Board discussion focused on uncertainty in government payer programs and the decision to keep payer‑mix assumptions modest. Felix said the hospital’s payer mix assumptions for recent years used roughly 39.1% Medicare, about 16.6% Medi‑Cal (California Medicaid), and roughly 43.1% commercial insurance, with slight adjustments from FY2025. Felix told the board she kept charity care and bad‑debt estimates elevated in recognition of potential federal and state policy changes, and that if all the policy changes under discussion proceeded as currently drafted the impact could be “double‑digit” — she estimated a potential financial effect of $10 million or more in a worst‑case scenario.

Board members and senior leaders discussed how prior year volumes generated revenue above budget, and whether the FY2026 projections were too conservative. Anna (the district’s chief executive) and Felix said the budgeter’s approach was deliberately conservative for the operating year while the long‑range capital plan preserves cash to complete planned projects even if reimbursement trends worsen.

On capital and cash, Felix reported projected days cash on hand in the mid‑100s for FY2026 — inside financial benchmarks used for rating comparisons — and warned that carrying additional long‑term debt (she noted a potential additional municipal lease or bond authority) would improve near‑term cash but reduce long‑term ratio strength. The board approved the three‑year capital plan (FY2027–FY2029) by roll call vote, 4–0.

Votes at a glance: - Fiscal year 2026 budget (as presented, amended to include a 5% chargemaster increase effective August 2025): approved 4–0. Motion moved and later amended on the record; amendment and final approval passed on a re‑vote. Present board members recorded in roll call: Chair McGarry, Director Brown, Director Darzangovich and Director Wong. Director Chamblin was recorded as absent. - Three‑year capital plan (FY2027–FY2029): approved 4–0.

What was not decided or remains uncertain: Felix and other leaders emphasized that many federal and state policy items — including changes to supplemental payments and federal matching (FMAP) for certain populations — were unresolved, and the board did not adopt any specific contingency measures beyond keeping conservative revenue and expense assumptions in the FY2026 budget. Timing and exact financial impacts of policy changes were described as unknown and were not quantified beyond general scenarios discussed at the meeting.

The board adjourned the special meeting after voting and planned to reconvene in open session following a short break.