Health Department seeks $6.5 million, converts clinics to shore up finances

County Health Department officials told the Board of Supervisors on April 29 that Clinic Services finished fiscal year 2023–24 with a deficit of about $15.7 million and projected a roughly $20.5 million deficit for fiscal year 2024–25. Finance staff said the gap results from rising operating costs while the federally qualified health center (FQHC) prospective payment system (PPS) visit rates have not kept pace with expenses.

Nut graf: Staff presented an interim strategy to convert several on-campus standalone clinics into intermittent clinics tied to a parent clinic with a stronger PPS rate, and asked the board to approve a $6.5 million general-fund support advance to stabilize operations while the rate changes are processed.

Prashant Shinde, bureau chief for Clinic Services, described the FQHC reimbursement model: nearly 86–90% of the bureau’s revenue comes from Medicare or Medi-Cal PPS visit payments, which are cost-based but reset infrequently. Mel Garcia, finance manager, told the board that Clinic Services finished FY 2023–24 with a $15.7 million shortfall and estimated a $20.5 million deficit for FY 2024–25 without corrective action. Garcia said the PPS per-visit rate was about $228 while cost-per-visit was approximately $415 for the year cited.

Shinde explained a faster path to a higher PPS rate: converting certain standalone clinics on the Laurel campus into intermittent clinics assigned to a parent clinic that already has a higher PPS rate. He said the process is shorter than a full rate-setting audit and could take three to six months; the state’s provider master file would then reflect the updated rate and allow retroactive billing for Medi-Cal visits held during the transition. Staff estimated the proposed conversion could yield about $20 million in additional revenue from roughly 70,000 visits at the campus clinics, and would eliminate an annual reconciliation liability the bureau has been required to repay to the state (roughly $3.5–4.5 million historically).

The staff recommendations were: receive the financial report; approve a request for $6.5 million in general-fund support (a 4/5s action); and direct staff to provide ongoing updates. The board approved the actions on a 4–0 vote (Supervisor Daniels absent). Supervisors asked for regular updates and placement of the item with the budget committee for oversight.

Ending: County staff said conversions and the requested bridge funding would stabilize Clinic Services while higher PPS rates take effect; the board directed staff to return with quarterly updates.