Loans tide over L.A. County health clinics

As the state budget stalemate holds up funds, they're also relying on lines of credit. Both mean paying interest.

September 12, 2010|By Molly Hennessy-Fiske, Los Angeles Times

Stung by a budget stalemate that is costing Los Angeles County community clinics more than $330,000 a day in reimbursements, many clinic managers have been forced to take out loans and contemplate cuts to staff and services.

Without the funds from Medi-Cal, the state insurance program for low-income patients, 41 clinics statewide have applied for loans from a fund created in response to the budget impasse. With $22 million available and $31 million in requests, organizers have approved only 27 loans, said Sean South, spokesman for the groups that created the fund.

"We still are really hoping the state can pass a budget that will allow our normal reimbursements to continue," said Bill Hobson, chief executive of Watts Health Center, which runs three clinics. "We are concerned that if the passing of a state budget is delayed too long, we will run into severe cash flow problems that will require furloughs of our staff or a reduction of our hours."

Watts Health Center was among seven Los Angeles-area clinics to receive $4.5 million in short-term loans recently to cover Medi-Cal reimbursements.

The loans were made from a $22-million fund created by the California Primary Care Assn., California Healthcare Foundation, Catholic Healthcare West, Mercy Investment Services, NCB Capital Impact and Sutter Health. Applicants must agree to repay the loans within a month once a budget is passed.

Other local clinics that received loans included East Valley Community Health Center, Los Angeles Christian Health Centers and St. John's Well Child and Family Center.

"This loan fund is providing a very important lifeline to these health centers in turbulent times," said Carmela Castellano-Garcia, the association's president. "Our clinics are still reeling from state budget cuts last year."

At Watts Health Center, about 40% of patients are covered by Medi-Cal, amounting to $600,000 a month in reimbursements, Hobson said. The health center has already nearly exhausted its $1-million line of credit, he said. The short-term loan of $1.5 million will last about two months.

Jim Mangia, St. John's chief executive, said that clinic receives about $350,000 monthly in Medi-Cal payments from the state and its loan will cover three months' payments. But St. John's and other clinics still have to pay interest on the loans and lines of credit.

"You wind up losing a significant amount of money even though the loan keeps your doors open," he said.

The budget crunch has been even more difficult for small or rural clinics that do not have large lines of credit or reserves to cover the shortfall, Castellano-Garcia said.

Last week, state Treasurer Bill Lockyer announced that the California Health Facilities Financing Authority would begin offering loans of up to $750,000 to rural clinics and hospitals to cover delayed Medi-Cal payments from a $9-million fund. Healthcare providers will be required to repay the loans within 45 days of the budget's passage. So far, eight loans have been approved, including $151,000 to Acacia Adult Day Services in Garden Grove and $130,192 to the George G. Glenner Alzheimer's Family Centers in San Diego.

Castellano-Garcia said the loan funds will help some clinics in the short term but cannot help all of the state's roughly 800 clinic sites.

"It's not enough," she said. "The rest of the clinics are relying on their relationships with banks in the communities and their meager reserves."

The crisis comes as many clinics are trying to strengthen their finances so they can score federal grants or other benefits under national health reform, said Louise McCarthy, vice president of governmental affairs at the Community Clinic Assn. of Los Angeles County.

"It's really getting down to the bone at this point," McCarthy said. "How can you show you're a strong and vibrant candidate for federal grants when you don't have cash flow?"

molly.hennessy-fiske@latimes.com

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