Bill Text: CA AB412 | 2023-2024 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Distressed Hospital Loan Program.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Engrossed) 2023-06-14 - Referred to Com. on HEALTH. [AB412 Detail]

Download: California-2023-AB412-Amended.html

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Amended  IN  Assembly  April 12, 2023

Amended  IN  Assembly  March 13, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill

No. 412

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Introduced by Assembly Member Soria Members Soria and Wood
(Principal coauthor: Senator Caballero)

February 02, 2023

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An act to amend Section 15438 of, and to add and repeal Section 15438.11 of, the Government Code, An act to amend Section 128740 of, and to add and repeal Chapter 4 (commencing with Section 129380) of Part 6 of Division 107 of, the Health and Safety Code, relating to health facilities, and making an appropriation therefor.

LEGISLATIVE COUNSEL'S DIGEST

AB 412, as amended, Soria. Hospital Emergency Loan Program. Distressed Hospital Loan Program.

The California Health Facilities Financing Authority Act authorizes the California Health Facilities Financing Authority to, among other things, make loans from the continuously appropriated California Health Facilities Financing Authority Fund to participating health institutions, as defined, for financing or refinancing the acquisition, construction, or remodeling of health facilities.

This bill would create the Hospital Emergency Loan Program, until January 1, 2029, for the purpose of providing loans to prevent the closure of a hospital, as defined, or facilitate the reopening of a closed hospital, as defined. The bill would permit the authority to provide secured loans to certain hospitals at risk of closure, or governmental entities trying to facilitate the reopening of a hospital that meets specified criteria. The bill would require a hospital or a closed hospital to provide the authority with financial information, in a format determined by the authority, demonstrating the hospital’s need for assistance due to financial hardship. The bill would specify that, in administering this loan program, the authority is exempt from rulemaking provisions of the Administrative Procedure Act. The bill would also exempt the authority from the rulemaking provisions of the Administrative Procedure Act for guidelines made pursuant to its general authority to make loans from the California Health Facilities Financing Authority Fund.

This bill would create the Hospital Emergency Loan Program Fund, a continuously appropriated fund, for use by the authority to administer the loan program. The bill would authorize the Treasurer to invest moneys in the fund that are not required for its current needs in eligible securities, and to transfer moneys in the fund to the Surplus Money Investment Fund for investment, as specified. By creating a continuously appropriated fund, the bill would make an appropriation.

This bill would create the Distressed Hospital Loan Program, until January 1, 2032, for the purpose of providing loans to not-for-profit hospitals and public hospitals, as defined, in significant financial distress or to governmental entities representing a closed hospital to prevent the closure or facilitate the reopening of a closed hospital. The bill would require, subject to an appropriation by the Legislature, the Department of Health Care Access and Information to administer the program and would require the department to enter into an interagency agreement with the authority to implement this program. The bill would require the department, in collaboration with the State Department of Health Care Services, the Department of Managed Health Care, and the State Department of Public Health, to develop a methodology to evaluate an at-risk hospital’s potential eligibility for state assistance from the program, as specified. The bill would require a hospital or a closed hospital to provide the authority and the department with financial information, in a format determined by the authority, demonstrating the hospital’s need for assistance due to financial hardship. The bill would additionally require that the department, in consultation with the authority, develop a loan forgiveness application and approval process, as specified. The bill would specify that the authority and the department may implement these provisions by information notices or other similar instructions, without taking any further regulatory action.

This bill would create the Distressed Hospital Loan Program Fund, a continuously appropriated fund, for use by the department and the authority to administer the loan program, as specified. The bill would authorize both the authority and the department to recover administrative costs from the fund, as specified. By creating a continuously appropriated fund, the bill would make an appropriation.

Existing law generally requires a health care facility to report specified data to the department, including total inpatient and outpatient revenues by payer, including Medicare and Medi-Cal. Existing law requires the department to adopt regulations regarding the identification and reporting of charity care services, and specifies various obligations to provide hard copies of hospital data reports submitted pursuant to these provisions.

This bill would additionally require data for total inpatient and outpatient revenues by payer to include commercial coverage payers. The bill would require a hospital subject to these data reporting requirements to submit a balance sheet detailing the assets, liabilities, and net worth at the end of the quarter as specified by the department. The bill would also remove the provisions regarding regulations related to charity care services and obligations to provide hard copies of hospital data reports.

Digest Key

Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Chapter 4 (commencing with Section 129380) is added to Part 6 of Division 107 of the Health and Safety Code, to read:

CHAPTER  4. Distressed Hospital Loan Program

129380.

 (a) This chapter shall be known and may be cited as the Distressed Hospital Loan Program.

(b) The purpose of this program is to provide interest-free cashflow loans to not-for-profit hospitals and public hospitals in significant financial distress or to governmental entities representing a closed hospital, except as otherwise provided, to prevent the closure of, or facilitate the reopening of, those hospitals.

129381.

 For the purposes of this chapter, the following definitions apply:

(a) “Authority” means the California Health Facilities Financing Authority.

(b) “Closed hospital” means a hospital that closed after January 1, 2022.

(c) “Department” means the Department of Health Care Access and Information.

(d) “Integrated healthcare system” means a group of healthcare organizations, for example physician practices, hospitals, and skilled nursing facilities, that are jointly owned.

(e) “Not-for-profit hospital” means the same as a general acute care hospital described in paragraph (1) of subdivision (d) of Section 15432 of the Government Code that is organized as a not-for-profit entity.

(f) “Program” means the Distressed Hospital Loan Program.

(g) “Public Hospital” means a hospital that is licensed to a county, a city, a city and county, a local health care district, or a local health authority.

129382.

 (a) The department shall administer the program, subject to an appropriation for the purposes of this chapter.

(b) The department shall enter into an interagency agreement with the authority to implement this chapter.

129383.

 (a) In collaboration with the State Department of Health Care Services, the Department of Managed Health Care, and the State Department of Public Health, the department shall develop a methodology to evaluate an at-risk hospital’s potential eligibility for state assistance from the program.

(1) The methodology shall consider factors, including, but not limited to, whether the hospital is in financial distress, as solely determined by the department, whether the hospital is small, rural, a critical access hospital, a trauma center, or serving a rural catchment area, whether closure of the hospital would significantly impact access to services in the region, and whether the hospital is publicly owned.

(2) The methodology shall also be used for identification and ongoing monitoring of hospitals at risk of financial distress.

(b) A hospital or a closed hospital applying for aid under this program shall provide the authority and the department with financial information, in a format determined by the authority and the department, demonstrating the hospital’s need for financial assistance due to financial hardship.

(c) Before receiving state assistance under this program, an eligible hospital shall submit a plan to the authority, which it shall share with the department, with projections detailing the uses of the proposed loan and strategies proposed by the hospital’s governing body to regain financial viability and continue to operate.

(d) Not-for-profit hospitals and public hospitals that belong to integrated healthcare systems shall be ineligible for state assistance under the program.

(e) The department shall, in consultation with the authority, determine the application process, underwriting review, and methodology for approval and distribution of the loans under the program.

(f) The department shall have the authority to determine network adequacy and service provision requirements in approving, and for the duration of, loans to eligible hospitals.

129384.

 (a) Notwithstanding Sections 15432 and 15451.5 of the Government Code, unless subdivision (c) applies, a hospital shall be required to begin making monthly repayments of the loan after the first 18 months and shall discharge the loan within 72 months of the date of the loan.

(b) Notwithstanding any other law and to the extent permissible under federal rules, security for the cashflow loans in this chapter shall be Medi-Cal reimbursements due to the hospital from the State Department of Health Care Services. The department’s or authority’s recoupment of these cashflow loans shall not exceed 20 percent of the hospital’s respective Medi-Cal checkwrite payments until the loan amount has been satisfied.

(c) (1) The department, in consultation with the authority, shall develop a loan forgiveness application and approval process that shall include, but is not limited to, eligibility criteria for an applicant for loan forgiveness, including which portion of a loan may be forgiven.

(2) The department shall provide loan forgiveness to an applicant based upon criteria determined by the department and subject to the approval of the department and the authority.

(3) The department shall also establish the terms and conditions associated with accepting loan forgiveness.

129385.

 (a) The Distressed Hospital Loan Program Fund is hereby established in the Treasury. The fund shall be administered by the department consistent with this chapter.

(b) Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated, without regard to fiscal years, for the department and the authority to implement this chapter.

(c) The authority shall make secured loans from the Distressed Hospital Loan Program Fund to a hospital or to a governmental entity representing a closed hospital, for purposes of preventing the closure, or facilitating the reopening, of the hospital.

(d) The department may allocate an amount not to exceed 5 percent of total program funds to administer the program, including, but not limited to, administrative costs to the authority. Any funds transferred shall be available for encumbrance or expenditure until June 30, 2026.

(e) All moneys accruing to the authority and the department under this chapter from any source shall be deposited into the fund.

(f) The Treasurer may invest moneys in the fund that are not required for its current needs in eligible securities specified in Section 16430 of the Government Code and may transfer moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code.

(g) Notwithstanding Section 16305.7 of the Government Code, all interest or other increment resulting from the investment or deposit of moneys from the fund shall be deposited in the fund.

(h) Moneys in the fund shall not be subject to transfer to any other funds pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, except to the Surplus Money Investment Fund.

129386.

 (a) Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the authority and the department may implement, interpret, or make specific this chapter, in whole or in part, by means of information notices or other similar instructions, without taking any further regulatory action.

(b) For purposes of implementing this chapter, the authority and the department may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this provision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and the State Administrative Manual, and shall be exempt from the review or approval of any division of the Department of General Services.

129387.

 This chapter shall remain in effect only until January 1, 2032, and as of that date is repealed.

SEC. 2.

 Section 128740 of the Health and Safety Code is amended to read:

128740.

 (a) The following summary financial and utilization data shall be reported to the department by a hospital within 45 days of the end of a calendar quarter. Adjusted reports reflecting changes as a result of audited financial statements may be filed within four months of the close of the hospital’s fiscal or calendar year. The quarterly summary financial and utilization data shall conform to the uniform description of accounts as contained in the Accounting and Reporting Manual for California Hospitals and shall include all of the following:

(1) Number of licensed beds.

(2) Average number of available beds.

(3) Average number of staffed beds.

(4) Number of discharges.

(5) Number of inpatient days.

(6) Number of outpatient visits.

(7) Total operating expenses.

(8) Total inpatient gross revenues by payer, including including, but not limited to, Medicare, Medi-Cal, county indigent programs, commercial coverage, other third parties, and other payers.

(9) Total outpatient gross revenues by payer, including including, but not limited to, Medicare, Medi-Cal, county indigent programs, commercial coverage, other third parties, and other payers.

(10) Deductions from revenue in total and by component, including the following: Medicare contractual adjustments, Medi-Cal contractual adjustments, and county indigent program contractual adjustments, other contractual adjustments, bad debts, charity care, restricted donations and subsidies for indigents, support for clinical teaching, teaching allowances, and other deductions.

(11) Total capital expenditures.

(12) Total net fixed assets.

(13) Total number of inpatient days, outpatient visits, and discharges by payer, including including, but not limited to, Medicare, Medi-Cal, county indigent programs, commercial coverage, other third parties, self-pay, charity, and other payers.

(14) Total net patient revenues by payer payer, including Medicare, Medi-Cal, county indigent programs, commercial coverage, other third parties, and other payers.

(15) Other operating revenue.

(16)  Nonoperating revenue net of nonoperating expenses.

(b)The department shall make available at cost, to any person, a hard copy of any hospital report made pursuant to this section and in addition to hard copies, shall make available at cost, a computer tape of all reports made pursuant to this section within 105 days of the end of every calendar quarter.

(c)The department shall adopt by regulation guidelines for the identification, assessment, and reporting of charity care services. In establishing the guidelines, the department shall consider the principles and practices recommended by professional health care industry accounting associations for differentiating between charity services and bad debts. The department shall further conduct the onsite validations of health facility accounting and reporting procedures and records as are necessary to assure that reported data are consistent with regulatory guidelines.

(17) (A) A balance sheet detailing the assets, liabilities, and net worth at the end of the quarter as specified by the department.

(B) The department shall allow and provide for, in accordance with appropriate regulations, additions or deletions to the summary financial and utilization data to meet the purposes of this chapter.

(b) The department may adopt regulations, including emergency regulations, necessary to implement this section.

SECTION 1.Section 15438 of the Government Code is amended to read:

15438.

The authority may do any of the following:

(a)Adopt bylaws for the regulation of its affairs and the conduct of its business.

(b)Adopt an official seal.

(c)Sue and be sued in its own name.

(d)Receive and accept from any agency of the United States, any agency of the state, or any municipality, county, or other political subdivision thereof, or from any individual, association, or corporation gifts, grants, or donations of moneys for achieving any of the purposes of this chapter.

(e)Engage the services of private consultants to render professional and technical assistance and advice in carrying out the purposes of this part.

(f)Determine the location and character of any project to be financed under this part, and to acquire, construct, enlarge, remodel, renovate, alter, improve, furnish, equip, fund, finance, own, maintain, manage, repair, operate, lease as lessee or lessor, and regulate the same, to enter into contracts for any or all of those purposes, to enter into contracts for the management and operation of a project or other health facilities owned by the authority, and to designate a participating health institution as its agent to determine the location and character of a project undertaken by that participating health institution under this chapter and as the agent of the authority, to acquire, construct, enlarge, remodel, renovate, alter, improve, furnish, equip, own, maintain, manage, repair, operate, lease as lessee or lessor, and regulate the same, and as the agent of the authority, to enter into contracts for any or all of those purposes, including contracts for the management and operation of that project or other health facilities owned by the authority.

(g)Acquire, directly or by and through a participating health institution as its agent, by purchase solely from funds provided under the authority of this part, or by gift or devise, and to sell, by installment sale or otherwise, any lands, structures, real or personal property, rights, rights-of-way, franchises, easements, and other interests in lands, including lands lying under water and riparian rights, that are located within the state that the authority determines necessary or convenient for the acquisition, construction, or financing of a health facility or the acquisition, construction, financing, or operation of a project, upon the terms and at the prices considered by the authority to be reasonable and that can be agreed upon between the authority and the owner thereof, and to take title thereto in the name of the authority or in the name of a participating health institution as its agent.

(h)Receive and accept from any source loans, contributions, or grants for, or in aid of, the construction, financing, or refinancing of a project or any portion of a project in money, property, labor, or other things of value.

(i)Make secured or unsecured loans to, or purchase secured or unsecured loans of, any participating health institution in connection with the financing of a project or working capital in accordance with an agreement between the authority and the participating health institution. However, no loan to finance a project shall exceed the total cost of the project, as determined by the participating health institution and approved by the authority. Funds for secured loans may be provided from the California Health Facilities Financing Authority Fund pursuant to subdivision (b) of Section 15439 to small or rural health facilities pursuant to authority guidelines. The authority may adopt guidelines to implement the loan programs authorized by this subdivision. Any such guidelines shall not be subject to the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2).

(j)(1)Make secured or unsecured loans to, or purchase secured or unsecured loans of, any participating health institution in accordance with an agreement between the authority and the participating health institution to refinance indebtedness incurred by that participating health institution or a participating health institution that controls or manages, is controlled or managed by, is under common control or management with, or is affiliated with that participating health institution, in connection with projects undertaken or for health facilities acquired or for working capital.

(2)Make secured or unsecured loans to, or purchase secured or unsecured loans of, any participating health institution in accordance with an agreement between the authority and the participating health institution to refinance indebtedness incurred by that participating health institution or a participating health institution that controls or manages, is controlled or managed by, is under common control or management with, or is affiliated with that participating health institution, payable to the authority or assigned or pledged to authority issued bonds.

(3)Funds for secured loans may be provided from the California Health Facilities Financing Authority Fund pursuant to subdivision (b) of Section 15439 to small or rural health facilities pursuant to authority guidelines.

(4)The authority may adopt guidelines to implement the loan programs authorized by this subdivision. Any such guidelines shall not be subject to the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2).

(k)Mortgage all or any portion of interest of the authority in a project or other health facilities and the property on which that project or other health facilities are located, whether owned or thereafter acquired, including the granting of a security interest in any property, tangible or intangible, and to assign or pledge all or any portion of the interests of the authority in mortgages, deeds of trust, indentures of mortgage or trust, or similar instruments, notes, and security interests in property, tangible or intangible, of participating health institutions to which the authority has made loans, and the revenues therefrom, including payments or income from any thereof owned or held by the authority, for the benefit of the holders of bonds issued to finance the project or health facilities or issued to refund or refinance outstanding indebtedness of participating health institutions as permitted by this part.

(l)Lease to a participating health institution the project being financed or other health facilities conveyed to the authority in connection with that financing, upon the terms and conditions the authority determines proper, charge and collect rents therefor, terminate the lease upon the failure of the lessee to comply with any of the obligations of the lease, and include in that lease, if desired, provisions granting the lessee options to renew the term of the lease for the period or periods and at the rent, as determined by the authority, purchase any or all of the health facilities or that upon payment of all of the indebtedness incurred by the authority for the financing of that project or health facilities or for refunding outstanding indebtedness of a participating health institution, then the authority may convey any or all of the project or the other health facilities to the lessee or lessees thereof with or without consideration.

(m)Charge and equitably apportion among participating health institutions, the administrative costs and expenses incurred by the authority in the exercise of the powers and duties conferred by this part.

(n)Obtain, or aid in obtaining, from any department or agency of the United States or of the state, any private company, or any insurance or guarantee as to, of, or for the payment or repayment of, interest or principal, or both, or any part thereof, on any loan, lease, or obligation, or any instrument evidencing or securing the loan, lease, or obligation, made or entered into pursuant to this part; and notwithstanding any other provisions of this part, to enter into any agreement, contract, or any other instrument whatsoever with respect to that insurance or guarantee, to accept payment in the manner and form as provided therein in the event of default by a participating health institution, and to assign that insurance or guarantee as security for the authority’s bonds.

(o)Enter into any and all agreements or contracts, including agreements for liquidity or credit enhancement, bond exchange agreements, interest rate swaps or hedges, execute any and all instruments, and do and perform any and all acts or things necessary, convenient, or desirable for the purposes of the authority or to carry out any power expressly granted by this part.

(p)Invest any moneys held in reserve or sinking funds or any moneys not required for immediate use or disbursement, at the discretion of the authority, in any obligations authorized by the resolution authorizing the issuance of the bonds secured thereof or authorized by law for the investment of trust funds in the custody of the Treasurer.

(q)Award grants to any eligible clinic pursuant to Section 15438.6.

(r)Award grants to any eligible health facility pursuant to Section 15438.7.

(s)Award grants pursuant to Section 15438.10.

SEC. 2.Section 15438.11 is added to the Government Code, to read:

15438.11.

(a)The authority shall establish the Hospital Emergency Loan Program for the purpose of providing loans to prevent the closure of a hospital, as defined in subdivision (b), or facilitating the reopening of a closed hospital, as defined in subdivision (c).

(b)For purposes of this subdivision, “hospital” means a general acute care hospital, as defined in paragraph (1) of subdivision (d) of Section 15432, that meets all of the following criteria, as of January 1, 2023:

(1)It has fewer than 85 general acute care beds.

(2)It has a distinct part skilled nursing facility with fewer than 130 beds.

(3)It has been determined by the authority to be at risk of closure.

(c)For purposes of this subdivision, a closed hospital eligible to be reopened includes both of the following:

(A)A general acute care hospital, as defined in paragraph (1) of subdivision (d) of Section 15432 that has closed between January 1, 2023, and March 1, 2023.

(B)A hospital, as defined in subdivision (b) that has closed between January 1, 2023, and December 31, 2023.

(d)The Hospital Emergency Loan Program Fund is hereby created in the State Treasury. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to the authority, without regard to fiscal year, for the purposes of this section. All moneys accruing to the authority pursuant to this section from any source shall be deposited into the fund. The Treasurer may invest moneys in the fund that are not required for its current needs in eligible securities specified in Section 16430 of the Government Code, and may transfer moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. Notwithstanding Section 16305.7 of the Government Code, all interest or other increment resulting from the investment or deposit of moneys from the fund shall be deposited in the fund. Moneys in the fund shall not be subject to transfer to any other funds pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, except to the Surplus Money Investment Fund.

(e)The authority shall only make secured loans from the Hospital Emergency Loan Program Fund to a hospital, or to a governmental entity representing a closed hospital, for purposes of preventing the closure of, or facilitating the reopening of, those hospitals.

(f)A hospital or a closed hospital shall provide the authority with financial information, in a format determined by the authority, demonstrating the hospital’s need for assistance due to financial hardship.

(g)The authority may make deductions from the Hospital Emergency Loan Program Fund to cover its own administrative expenses. Administrative expenditures shall be limited to 5 percent of the initial appropriation, plus 5 percent of all moneys recaptured.

(h)In administering the loan program pursuant to this section, the authority shall not be subject to the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2).

(i)This section shall remain in effect only until January 1, 2029, and as of that date is repealed.