A shuttered California hospital gets a federal bailout, but no funds

from Ana B. IbarraCalMatters

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A shuttered Northern California hospital is getting a bailout from Congress, but it’s not coming with money to reopen and serve patients.

New federal law will restore the “critical access” designation for Glenn Medical Center, the only hospital in Glenn County. As a result, once it reopens, the hospital is eligible for full Medicare reimbursement, a key source of revenue.

Separately this week, a California lawmaker introduced a bill to create state loans for distressed patients, which could help the medical facility find the money it needs to reopen.

For now, Glenn Medical Center says it needs $40 million to $50 million to restart operations and bring back staff.

Glenn Melnyk, a health economist at the University of Southern California, said since a federal decision led to the hospital’s closure, it would make sense for the federal government to provide funds to reopen the hospital.

“In an ideal world, this (Congress) bill would restore their status and make them whole, right?” he said. “But if you fail, you’ll have to go to the state.”

Restore Critical Access Status

The problem with Glenn Medical Center, according to the American Centers for Medicare and Medicaid Services, is the distance.

Critical access hospitals must be at least 35 miles from the next closest facility, and a review showed that Glenn Medical is only 32 miles from a Colusa County hospital. Hospital officials appealed arguing that the hospital’s location had not changed since it qualified for the designation a quarter of a century earlier, but their appeals were unsuccessful and the hospital closed last fall.

The critical access designation brings hospitals regulatory flexibility and increased reimbursement for Medicare patients. Without the revenue that comes from the critical access status, operations at Glenn Medical would be unsustainable, hospital management previously told CalMatters.

The closing meant the county of 28,000 people no longer had a local emergency department.

Last fall, Democratic Sen. Adam Schiff and the late Republican Doug LaMalfa introduced efforts in Congress for recovery The name of Glenn Medical. The deal it ended up being signed into law directs the federal health agency to rescind the distance requirement for any critical access hospital that had this designation as of January 1, 2024, and that received a notification of noncompliance before January 1, 2026.

“Reinstating the (critical access) designation is a great step, but it doesn’t solve the problem,” said Matthew Beeler, a spokesman for American Advanced Management, the company that owns and operates Glenn Medical Center.

“We’re trying to be realistic about how much money it’s going to take to reopen because it’s going to take a significant recruiting effort,” he said.

Problem hospital loans 2.0

In Sacramento, a state bill could now pave the way for the financial help Glenn Medical is seeking.

Assemblywoman Esmeralda Soria, D-Fresno, introduced Thursday a continuation of a 2023 law that created the state’s Hardship Hospital Loan Program. That fund is out of money after distributing about $300 million to hospitals. Soria’s new proposal, 1923 Assembly Billis seeking a new $300 million round for struggling hospitals. If the bill makes it to the Legislature and wins the support of Gov. Gavin Newsom, then hospitals can apply for the loans.

This previous loan program provided the then-closed Madera Community Hospital $57 million, allowing it to reopen in March 2025. It is the only hospital in Madera County.

American Advanced Management took over and reopened Madera Community; also owns Glenn Medical.

“Realistically, we’re going to have to find funding from the state, like Madera did,” said American Advanced Management’s Beehler. “As we saw in Madera … we have to cover the costs for about a year before you get reimbursed.”

The continuing challenges of rural hospitals

Glenn Medical’s bureaucratic challenges are unique, brought on by a reinterpretation of a long-standing federal rule. But like many rural and community hospitals, it had been operating in the red for years. This precarious financial situation makes these hospitals particularly vulnerable to any changes.

“Here’s the thing, most of these rural hospitals are low cost,” Melnyk said. And especially independent hospitals, those that aren’t part of a larger health system, “right now they’re living year-to-year.”

The first round of distressed hospital loans, due in 2023, comes as several hospitals have warned they are on the brink – which they say is a result of higher labor costs and low reimbursement rates. In announcing the bill, Soria said he was trying again in part because of the federal budget bill signed by President Trump last year which makes radical cuts and changes to the country’s safety net programs.

this law say expertswill starve hospitals in rural and underserved areas of tens of billions of dollars over the next decade. “Dozens of hospitals are facing a financial cliff right now, thanks to the largest federal health care cuts in history arriving with this new federal administration in 2025,” Soria said.

In an effort to cushion that blow, Congress created the $50 billion Rural Health Transformation Project. California will get $233 million from that fund this yearwith more expected over the next five years. But experts note that this federal project only constitutes about a third of the expected losses in rural areas. It’s not yet clear whether Glenn Medical could qualify for some of that money.

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a cost they can afford. Visit www.chcf.org to learn more.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.