Laguna Honda Hospital finances remain under pressure; public commenters urge accountability for decertification and recovery costs

Department of Public Health financial staff told the Health Commission on March 3 that Laguna Honda Hospital (LHH) continues to face a multi‑million dollar shortfall in patient revenue, and several public commenters used the commission meeting to demand additional accountability and faster admissions to recover lost reimbursements.

Chief Financial Officer Drew Merrill said the LHH patient‑revenue deficit is driven by a lower patient census following the facility’s April 2022 decertification. Merrill reported a roughly $48 million patient‑revenue shortfall offset in part by a one‑time distinct‑part nursing facility (DPNF/DPNIF) payment; when that payment is included the net projected revenue shortfall for LHH was described in the presentation as approximately $28.6 million for the year.

Merrill and other finance presenters attributed the overall departmental revenue picture to a mix of program‑specific factors: improved billing and managed‑care receipts in behavioral health, higher pharmacy (340B) program revenues, and a one‑time state recoupment related to prior‑year settlements affecting other hospital revenue lines. Merrill said personnel‑cost savings tied to vacancies remained a major contributor to projected expenditure savings across DPH.

Public comment during the financial‑report item included repeated criticism of the pace of LHH admissions since recertification. A remote commenter asserted that admissions resumed in July 2024 but the hospital’s census had increased only modestly and that the slow pace of admissions was costing the city tens of millions in Medi‑Cal revenue. Another public commenter urged the commission to press the City Attorney to settle a five‑year‑old class‑action lawsuit tied to the 2019 patient‑abuse scandal, warning continuing litigation would further increase costs.

Commissioners asked staff for additional context on complex state funding streams and timing (including waiver‑related and Medi‑Cal reconciliation issues) and requested follow‑up reporting to clarify how federal and state payment changes could affect future revenue. Commissioners also sought additional background on the drivers of LHH admissions and any operational barriers to increasing census.

No formal policy decision was made during the item; commissioner questions focused on getting more detail in future financial briefings. Public commenters pressed for audits of patient share‑of‑cost revenue and stronger accountability for past management decisions.

Source: DPH second‑quarter financial report presentation by Drew Merrill and public comments at the March 3, 2025 Health Commission meeting.