State Hospitals Hopeful for Funding Shot in Arm

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Officials at Daughters of Charity Health System last week were keeping a nervous eye on Gov. Arnold Schwarzenegger as he decides whether to sign legislation that could boost Medi-Cal payments to hospitals around the state.

When statewide health care reform was being considered a few years ago, the California Hospital Association convinced most of its members to pay a new fee that would help the state qualify for an increase in federal Medicaid matching funds.

While the statewide reform package fell victim to the state budget deficit, the provider fee idea didn’t die. Assemblyman Dave Jones, D-Sacramento, resurrected the idea this year with his AB 1383, which passed both houses of the Legislature and is awaiting action by the governor.

Daughters of Charity, a Catholic hospital system based in Los Altos Hills that operates downtown L.A.’s St. Vincent Medical Center and South L.A.’s St. Francis Medical Center, is co-sponsoring the bill. The other sponsors are the CHA and the California Children’s Hospital Association.

California ranks last in the nation in per-capita Medicaid payments to hospitals; last year, the state’s hospitals estimated they lost more than $4.2 billion in unpaid Medi-Cal costs. For the nine months ended March 31, St. Francis reported losses related to Medi-Cal services of $8.2 million; St. Vincent reported losses of $5 million.

While AB 1383 would only result in a $2 billion net benefit to hospitals given the new fee they will have to pay, Conway Collis, Daughters of Charity’s Pasadena-based government relations director, said that cutting the deficit in half could keep some hospitals from reducing services to Medi-Cal recipients. Daughters of Charity is expected to see a $44.5 million net gain annually in Medi-Cal payments to its five hospitals.

“We think national health care reform will get passed and regardless of the version, it eventually will be a positive for California hospital as more people are insured,” Collis said. “But a lot of hospitals are in a life-and-death situation now, and this is legislation that can help them a lot quicker.”


Higher Profile for St. John’s

Last week’s announcement that billionaire biotech entrepreneur Dr. Patrick Soon-Shiong would locate his new family foundation and several medical institutes at St. John’s Health Center was a further boost to the hospital’s reputation.

Previously, Soon-Shiong, the founder of West L.A. cancer drug developer Abraxis BioScience Inc., and his wife, Michele Chan, donated more than $35 million to complete the reconstruction of the Santa Monica hospital to meet new earthquake codes. The gift, the hospital’s largest single donation, also funded a new research and clinical care facility reflecting Soon-Shiong’s interest bringing cutting-edge treatments to patients sooner.

Now, the original plans for the Chan Soon-Shiong Translational Research Institute have expanded to include four additional institutes, plus the offices of the Chan Soon-Shiong Family Foundation. Plans are for a health informatics center that will seek more effectively to disseminate medical research, a center for clinical trials and related activities, and a center for neuroscience research and brain tumor care. The foundation has made a $100 million grant to St. John’s to support the work of the centers.

Soon-Shiong ranked No. 1 this year on the Business Journal’s Wealthiest Angelenos list with an estimated net worth of $6 billion. He said he was attracted to St. John’s not only by its proximity to his Westside companies, but by the welcoming attitude of the facility’s management and its owner, the Sisters of Charity of Leavenworth, a Catholic order.

“This is a faith-based community hospital that was interested, as I am, in having health care focus less on bureaucracy and more on the patient, with the science developing from that,” said Soon-Shiong in an interview before last week’s dedication of the Chan Soon-Shiong Life Sciences Center.


Hospital Gets Financing

Downey Regional Medical Center Hospital received an assist last week from El Segundo’s London & Pacific Healthcare Inc., enabling the hospital to obtain $10 million in debtor-in-possession financing as it reorganizes.

The 199-bed hospital serving Southeast Los Angeles filed for Chapter 11 bankruptcy last month, citing rising costs and poor reimbursement rates. It hopes to exit Chapter 11 within a year.

London & Pacific Capital Advisors served as a placement agent and financial adviser in the deal with Healthcare Finance Group, a specialty lender targeting small companies and institutions. London & Pacific Healthcare is a private equity and corporate finance firm targeting the health care, hospitality and financial services sectors.


Staff reporter Deborah Crowe can be reached [email protected] or at (323) 549-5225, ext. 232.

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