Bay Area Hospital in Coos Bay, Ore., may receive up to $44 million in state-backed financing under legislation aimed at stabilizing rural hospitals and preventing service reductions, according to local NBC affiliate KMTR.
Oregon lawmakers recently approved House Bill 4075, which allows the state treasurer to use up to 20% of the state’s unclaimed property and estates fund to provide stabilization loans to qualifying rural hospitals. The bill is awaiting the governor’s signature.
Once signed into law, the measure would enable the state to back a refinanced loan for Bay Area Hospital after the facility defaulted on a $44 million loan, according to the report. Refinancing would allow the hospital to avoid downgrading to a Type B hospital under state criteria — a change that would reduce its capacity by more than 50 beds.
“HB 4075 was carefully targeted to specifically address an upcoming balloon payment that would have otherwise driven the hospital to shrink its licensed beds,” Bay Area Hospital CFO Patrick Banks said in a statement provided to Becker’s. “This would have provided for cost-based reimbursement from state Medicaid to be able to make the payment but would have required abandoning our mission as a regional referral center. By acting as a guarantor in support of a refinance that eliminates the balloon payment, the state is allowing the hospital to continue its regional mission.”
The legislation comes at a critical time as the hospital works through a financial recovery plan.
While the bill would not directly pay off the hospital’s debt, it would allow the state to serve as a co-signer on a new loan, helping the organization refinance the obligation and maintain its current level of services, according to KMTR.
Last fall, the hospital implemented a turnaround plan to address about $24 million in losses. The plan included aligning operational costs with revenue, eliminating about 80 full-time positions and reducing certain contracts.
In October, Brentwood, Tenn.-based Quorum Health also pulled out of a proposed deal to acquire the hospital after completing due diligence on the facility, leaving the organization to pursue other options to stabilize its finances.
“We are deeply grateful for the legislative support to guarantee a loan refinance, which will help stabilize the hospital and support its recovery,” Bay Area Hospital CEO Gretchen Nichols said in a statement provided to Becker’s. “Over the past six months, the organization executed an aggressive turnaround plan with great success, achieving breakeven status. This legislation allows us to refinance our debt while continuing to carry out our mission as a regional referral center for the Southern Oregon Coast.”
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