This article was produced by Capital & Main. It is published here with permission.
Once a week, Rena Salamacha meets with her executive team inside the Mee Memorial Healthcare System’s medical center in King City to figure out how to stretch a dollar. Never in the nearly six years that Salamacha has been CEO of the health care system has this been an uncomplicated task, but lately it’s gotten worse. They’re having trouble even finding the dollar.
“We don’t have services to cut,” Salamacha said. “Where maybe some of the larger hospitals or health systems can cut some services, we in rural communities are really providing a lot of primary care, not specialty care. This is bread-and-butter family care, and we’re already thin-staffed and resource-strapped.”
The hospital’s patient area includes about 80,000 people. Salamacha described the population of King City and southern Monterey County as vulnerable and underserved, with a significant immigrant community working in agriculture. It was the state’s expansion of Medi-Cal services over the past several years that allowed many families in the area to even see a doctor — and it provided a way for Mee Memorial to recoup at least a bit of what it spends to treat them via Medicaid reimbursement. (Medi-Cal is the state’s version of Medicaid.)
That’s in jeopardy now. If key parts of Gov. Gavin Newsom’s proposed 2025-26 budget are adopted, eligibility cutbacks and monthly premium obligations will run thousands of Mee’s patients off of Medi-Cal — and those are in addition to whatever steep federal funding cuts lie ahead. Meanwhile, Newsom’s idea to use some health tax money to pay down the budget deficit rather than increase rates paid to doctors and hospitals for the care they provide, as voters intended when they passed Proposition 35 last fall, will further erode Mee’s shaky finances.
“It’s hard to be strategic,” Salamacha said. “Everything could change with the flip of a coin. We surely are on an island of our own.”
Losing money
California’s rural health care system has been financially precarious for years. The state has always paid below-average Medicaid reimbursement rates relative to the rest of the U.S., and generally, the collection of 60-odd hospitals and clinics that serve California’s estimated 2.3 million rural residents just barely stay in the black — or don’t.
The California Hospital Association, a powerful lobbying organization representing facilities across the state, claims that nearly 60% of California’s rural community hospitals lose money caring for patients. That figure rises to nearly 75% for the state’s 38 critical access hospitals, a designation reserved for the most remote or isolated care centers that are at least 35 miles from any other facility.
Mee Memorial is one of those. With no other facility for 50 miles in any direction, the stakes are high to keep the hospital open and well-staffed — but fierce budget constraints and trouble hiring workers to such a remote location have taken their toll. Salamacha said the facility closed its labor and delivery services in 2019, meaning people in the area have to drive at least an hour to find a hospital that can deliver their child.
Rural hospitals often have a high percentage of lower-income patients, many of whom rely on Medi-Cal to afford to see a doctor. For the fiscal period ending Sept. 30, 2023, the most recent data available, nearly 60% of Mee Memorial Hospital’s outpatient revenue was Medi-Cal-related, according to the California Department of Health Care Access and Information. That figure is far higher than the state average of about 28% over the same period.
A reduction in federal Medicaid funding will hit hospitals like Mee hard. And Newsom’s proposal for California’s budget will add a one-two punch: It would discontinue Medi-Cal enrollment for adult undocumented immigrants beginning in 2026 while imposing a $100 monthly premium on undocumented adults starting in 2027.
The governor also wants to skim $1.6 billion in funds from a tax on managed care organizations like Kaiser Permanente and Anthem Blue Cross to address the budget deficit. Such tax money has been used this way in the past, but voters last November approved a measure directing the state to spend it instead on improving payments to doctors and hospitals such as Mee Memorial. (Newsom believes the measure allows him the latitude to do what he’s doing.)
The net effect? “A lot of patients will just become uninsured,” Salamacha said. They’ll then wait until their health conditions become serious, and finally go straight to Mee’s emergency department, where by law they cannot be turned away even if they can’t pay anything. The hospital absorbs the cost.
Closing doors
Mee Memorial is hardly alone. Bing Lum, executive vice president of the struggling Colorado River Medical Center in Needles, said he was putting the finishing touches on a letter to his congressman, U.S. Rep. Raul Ruiz, a Democrat. Lum wrote Ruiz that Congress’ current budget proposals “would almost certainly lead to the closure” of the critical access hospital.
Lum said that the Colorado River facility, located in eastern San Bernardino County, serves a patient population whose payer mix is roughly 50% Medicare and 50% Medi-Cal. A small portion of its revenue derives from Medicaid patients in nearby towns in Nevada and Arizona, which Lum said “underpay just like all Medicaid programs.” Still, steep federal cuts to Medicaid or tightened state restrictions on eligibility would decimate the hospital’s finances, Lum said. The nearest hospital serving Medi-Cal patients is in Blythe, about 100 miles to the south.
Asked for comment, a spokesperson for Ruiz referred Capital & Main to the representative’s recent plea to Newsom for emergency funding for the Blythe facility, Palo Verde Hospital, which itself is facing imminent threat of closure. “This is a public emergency,” Ruiz said. “The closure of this hospital puts lives at risk. … Patients will suffer. Patients will die.”
The Democratic-controlled California State Legislature has pushed back on many of Newsom’s proposed cuts, and negotiations are likely to continue well past the June 15 target date to have a budget in place for 2025-26. But the Medi-Cal freeze on undocumented immigrants appears to have support, as does the notion of siphoning off some Prop. 35 money — meaning that rural hospitals are likely to continue to scratch and claw to find ways to stay open.
It fits a pattern. From January 2013 to February 2020, more than 100 rural hospitals closed across the country, according to the U.S. Government Accountability Office. In California, the Corcoran District Hospital in the San Joaquin Valley shuttered in 2013, and Madera Community Hospital closed and filed for bankruptcy in 2023 before reopening in March at a reduced level, with no maternity services.
Salamacha is determined that Mee Memorial not be the next to close. She and her team are exploring potential grant funds and ways to apply for charity care for certain patients. They’ve written letters to everyone they can think of, including local, state and federal legislators. And they know that, in the end, they’re a small part of a very big picture.
“The hardest hit, I believe, will be the rural hospitals,” she said. “These people have nowhere else to go.”
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