State proposes $50M distressed‑hospital grants as hospitals say need may be larger

Elizabeth Landsberg of the Department of Health Care Access and Information told the committee that HCAI has received 10 applications for the distressed hospital small‑grant program requesting $118.5 million and that the May Revision proposes up to $50 million in a new competitive grant round to prevent imminent closures.

Landsberg explained the program is intended to provide short‑term bridge funding to hospitals at immediate risk of closure and that HCAI used available financial reporting to triage awards. She noted statutory reporting lags: only hospitals that have filed required quarterly data are included in the most recent analysis, and HCAI's most recent complete data runs through Dec. 31, 2025.

Legislative Analyst Office staff recommended that if the Legislature expands funding, it should add clearer statutory eligibility parameters (for example, cash‑on‑hand ratios, payer mix, requirement to submit a turnaround plan) to ensure one‑time grants lead to durable stability. Assembly members also asked why the administration used grants rather than loans; HCAI and DOF said grants can be faster to deploy and are aimed at immediate cash needs, whereas the loan program remains available for longer‑term financing.

Hospital associations and district hospital leaders urged the subcommittee to add more funding; the California Hospital Association asked the Legislature to consider an additional $300 million for distressed hospitals. Committee members said they were sympathetic but want clear accountability and turnaround planning attached to grant awards.

The subcommittee did not adopt final allocations; HCAI said it will continue scoring applications and return with recommended awards and suggested statutory refinements.