Catalina Island Health, the nonprofit that runs the 12-bed Catalina Island Medical Center in Avalon, will soon be getting a new chief executive to steer the hospital through its continued financial challenges.

Current chief Jason Paret announced in June that he will be stepping down at the end of September. He said in an interview that he wants to pursue new challenges, including launching his own health care-related business.

Paret will be replaced on Oct. 1 by Tim Kielpinski, Catalina Island Health’s current chief strategy officer who joined the nonprofit 18 months ago. A West Point graduate who served eight years in the U.S. Army, Kielpinski most recently was chief operating officer of the Catalina Island Conservancy.

Catalina Island Medical Center is the only hospital on Catalina Island. While the island has about 4,000 permanent residents – mostly in Avalon – more than 1 million tourists each year flock to the island via ferries, private boats or aircraft, according to the Love Catalina Island Tourism Authority’s website. With the exception of the city of Avalon, it is unincorporated territory.

For more than a century, there has been only one functioning hospital or hospital-like facility on the island, providing emergency care to visitors and both scheduled procedures and emergency care to permanent residents.

Low reimbursement rates and high costs

Like many rural hospital operators throughout the state, Catalina Island Health has encountered financial woes in recent years. That’s due to a combination of sharply rising labor and drug costs and low government reimbursement rates for care, especially for the large proportion of patients in the state’s Medi-Cal program for low-income residents.

According to chief executive Paret, the hospital only receives about 4 cents on the dollar from Medi-Cal. Over the past five years, this “under-reimbursement” has totaled about $14.5 million.

Paret noted a “silver lining” of sorts from this meager level of Medi-Cal funding. Recently-enacted cuts to the federal Medicaid program – and by extension to Medi-Cal – won’t have much impact.

“If we get only 4 cents on the dollar now, it doesn’t make a huge difference in the grand scheme of things for us whether that goes down to 2 cents,” he said.

On the other side of the ledger, costs have soared. All supplies – including pharmaceuticals – must either be flown in or come by boat, adding to the already high prices most hospitals pay.

The hospital also faces state requirements for minimum staffing levels, even if there are not enough patients at any given point in time to justify those levels. Paret noted that hiring staff isn’t easy.

“Finding doctors, nurses, and health care workers willing to live full-time on an isolated island is tough and costly,” he said.

Funding lifelines

Last year, a near-brush with closure was averted through a $2 million emergency grant from downtown Los Angeles-based L.A. Care, the nation’s largest publicly operated health plan. This spring, the Los Angeles County Board of Supervisors approved another $3 million in Measure B funds to keep Catalina Island Medical Center’s doors open.

Besides all these near-term financial challenges, Kielpinski will also have to raise funds for the construction of a replacement hospital. The current facility is more than 60 years old and cannot be upgraded to meet the state’s 2030 mandate that all hospitals be able to continue operating after a major earthquake.

Paret said the replacement hospital will be roughly three times the size of the current 15,000-square-foot facility. It is projected to cost about $220 million.

He added that as a rural hospital, Catalina Island Medical Center will likely qualify for a recently enacted three-year extension on the state seismic mandate deadline for distressed rural hospitals.