California Gov. Gavin Newsom’s revised 2026-2027 state budget proposal includes some emergency relief for financially distressed hospitals, but Scripps Health President and CEO Chris Van Gorder said it falls short of addressing broader financial pressures hospitals face from HR 1.
The proposed budget includes up to $50 million to provide short-term support for hospitals experiencing immediate and significant financial challenges, according to the fact sheet. The proposal builds upon recently enacted legislation that provides up to $25 million in grants to nonprofit and public hospitals facing immediate risk of closure.
To be eligible, hospitals must have fewer than 10 days cash on hand, have exhausted other financial options and serve patient populations where more than half of patients are enrolled in government payers or are uninsured.
But Mr. Van Gorder told Becker’s the proposal does not adequately address reimbursement challenges providers expect from HR 1. California hospitals are also still awaiting state and federal approval of the provider fee program for 2025 and 2026, he said.
“All these financial challenges are sure to increase uninsured and underinsured patients’ use of emergency departments, increase hospital write-offs due to bad debt or charity care, and lead to more program closures and even hospital closures,” he said.
Mr. Van Gorder also warned hospitals could face increased patient boarding as downstream providers, such as skilled nursing facilities, struggle to absorb uninsured or underinsured patients.
“That creates a back-up for hospital beds, increases hospital costs and creates access problems for everyone,” he said.
He added that he remains concerned state leaders “continue to ignore the cost burden placed on hospitals through unfunded mandates,” such as seismic requirements for buildings.
In a fact sheet analyzing the proposal, the California Hospital Association said Mr. Newsom’s May 14 budget avoids sweeping cuts to core healthcare programs but includes targeted Medi-Cal eligibility and cost-containment changes tied to anticipated Medicaid impacts from HR 1.
The proposal assumes reduced federal funding, Medicaid work requirements beginning in January 2027 and more frequent eligibility redeterminations, according to the association.
Under the proposed budget, those with unsatisfactory immigration status will transition from managed care to fee-for-service on Jan. 1, 2027. Those with unsatisfactory immigration status will also see their premiums increase from $30 to $50 per month. The proposal would also delay the transition of certain qualified noncitizens to restricted-scope Medi-Cal until July 1, 2027.
The budget also calls for $300 million to expand state premium subsidies for ACA marketplace enrollees up to 200% of the federal poverty level.
The CHA said in a May 14 statement that the proposed budget includes important commitments to coverage. The organization said that the plan to limit coverage losses is commendable and also noted that the proposal to provide $50 million to at-risk hospitals is a “strong starting point.”
“Healthcare is a fundamental human need, and this budget proposal recognizes the importance of coverage,” CHA President and CEO Carmela Coyle said. “To preserve access to care for California’s most vulnerable, additional resources are needed.”
The California Legislature must now pass a legislative budget package by June 15, according to the CHA. Then, the Senate, Assembly and governor must agree on a final budget for the fiscal year, which begins July 1.
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