Health

Friday, Aug 09 2013 09:00 PM

KMC asks for big $154 million loan cap

  1. 1 of 1

    By Casey Christie / The Californian

    Kern Medical Center.

    click to expand click to collapse
BY RACHEL COOK Californian staff writer rcook@bakersfield.com

Kern Medical Center's CEO is asking county leaders to hike to a 'staggering' $154 million the maximum amount of money the county general fund can loan the hospital to help keep it afloat.

The increase would more than double the current $70 million cap. Paul Hensler, chief executive of the county-owned hospital, said he's asking the board for the money because "an unusual set of things are coming together."

Related Info

LOAN CAP TIMELINE

Aug. 14, 2012 - The Kern County Board of Supervisors approves an $8 million temporary increase, bringing the maximum balance of the county's general fund loan to KMC to $78 million.

Sept. 25, 2012 - Supervisors OK a retroactive temporary increase of $8.5 million, bringing the loan's max to $86.5 million. KMC CEO Paul Hensler says the hospital needs the money "to meet payroll and accounts payable obligations" for September through October.

Nov. 12, 2012 -- The hospital gets a temporary increase of $6 million. The loan's maximum balance is $84 million.

Jan. 14, 2013 -- Supervisors agree to a temporary increase that brings the loan cap to $88 million.

Feb. 5, 2013 -- Supervisors approve a $9 million retroactive increase, bringing the loan maximum balance to $97 million.

April 16, 2013 -- Supervisors approve a retroactive temporary increase allowing the loan to top out at $117 million. KMC went over the loan limit of $97 million by $2.9 million on April 4. An anticipated federal payment came in on April 8, four days short of when payroll was due, Hensler told the board.

June 10, 2013 -- Supervisors approve a retroactive temporary increase, bolstering the maximum loan balance to $102 million.

Aug. 8, 2013 -- A meeting agenda shows Hensler will ask the board for a retroactive temporary increase that would bring the loan's maximum balance to $154 million. The proposal will be considered 2 p.m. Monday at KMC, 1700 Mount Vernon Ave.

It's a cash-flow problem, as usual.

For one, October is a three-pay-date month for KMC. And the public hospital will owe the state about $31 million between September and October, money to draw down federal matching funds.

"We won't know exactly what those amounts are until the state sends us a bill for them," Hensler said.

The request will go before the Board of Supervisors Monday afternoon at KMC.

A TOUCHY SUBJECT

The ballooning general fund loan to the hospital has been a prickly issue.

Last August, the hospital was thrown into temporary panic when it seemed the Board of Supervisors had denied a request to increase the loan, which the hospital relies on to cover costs while it waits for state and federal payments.

The board's decision was soon reversed on procedural grounds. The board then approved a policy for granting temporary increases to the loan's maximum balance.

Supervisors bemoaned the situation last summer, but have raised the limit six times since for sums ranging from $4 million to $32 million. Kern County's auditor-controller is authorized to give KMC cash advances of up to $70 million, but the board must approve any amount greater than that.

Most recently, the board approved a $102 million maximum balance for the loan in June, which expired July 31.

In a letter to the board, County Administrative Officer John Nilon pointed out that the operating loan balance was $91.15 million on July 31, $23.5 million more than last year. On Thursday, Hensler said the loan balance sat at $93 million.

If approved, the new maximum loan balance would be the highest ever, Nilon confirmed.

"Obviously we're concerned about" the rising amount of the loan, Hensler said.

Hensler said the hospital is expected to receive about $60 million in payments in November and administrators anticipate the loan will come down to $103 million by the end of that month.

KMC's woes are not unique. Public hospitals inherently face financial struggles, said Melissa Stafford Jones, president and CEO of the California Association of Public Hospitals and Health Systems.

Public hospitals' primary source of reimbursement is the state and federal government because most of their patients are uninsured or on Medi-Cal, California's version of Medicaid. Those payments are made on different schedules and are often delayed.

"Financing for (public hospitals) is both limited and complex," Stafford Jones said.

 

FINDING SOLUTIONS

A county supervisor and taxpayer advocate both said Friday that KMC serves a vital purpose -- caring for Kern's indigent population -- and the county is obligated to sustain it.

Nevertheless, something needs to change, they said.

Michael Turnipseed, executive director of the Kern County Taxpayers Association, said the proposed loan increase is "staggering."

But he added that the loan is "a long-term problem."

"The board's going to have to step up and start working on a plan to get control of what's going on," Turnipseed said. "There needs to be a big discussion about the future of health care in this county and our dependency on the state."

Hensler said the same, calling for a conversation about how to handle the situation. The hospital has brought in a consulting company to get a clear understanding of what KMC is owed and to project what future revenues could look like.

"Once we have all of the facts, then there needs to be an open public session with all of the board" to discuss what the county's responsibility needs to be going forward, Hensler said.

On Friday afternoon, Supervisor Mick Gleason had his own idea: have the hospital's chief financial officer report directly to the supervisors. He said he thinks the change would give supervisors a clear understanding of what's going on at KMC.

"We're not optimally structured for the overall management of that hospital... I introduced that idea about two or three weeks ago," he said. "I think it's got some weight."

Supervisors David Couch, Zack Scrivner and Mike Maggard did not return calls Friday afternoon. Supervisor Leticia Perez referred questions to the County Administrative Office.

Have something to share? Comment on this story

Bakersfield.com Daily Deal!

Self Serve Pet Spa

Daily Deal

$5 for $10 worth of service or product from Self Serve Pet Spa

Value
$10
% Off
50%
You Save
$5
0 Bought
Buy Now! See more deals
What do you think?