Santa Clara County hospitals threatened by Medi-Cal cuts

When it comes to Northern California’s largest public hospital system, Santa Clara County leaders fear they’re building a sandcastle at low tide.

The county’s largest stream of federal money and funding source for its public hospitals will be washed away if Congress follows through on its proposed $880 billion in spending cuts to Medicaid, known as Medi-Cal in California. The decision threatens to undo decades of progress made to ensure the region’s poorest residents get the health care they need. This comes as county officials work to expand the system significantly.

Next month, the county will restore trauma, heart attack and stroke services at Regional Medical Center in East San Jose, the long-depleted private hospital it recently purchased. It was a much-applauded addition to the public hospital network despite the county’s $250 million budget deficit.

But if Medi-Cal money from Washington, D.C. stops flowing west, the task of absorbing an even worse budget crisis than the pandemic would fall on County Executive James Williams, who promises the restoration of Regional Medical Center will happen on April 1 no matter what.

“It’s the right thing to do for the community,” Williams told San José Spotlight. “The real issue is not about Regional or any other specific hospital. It’s about the entire system.”

Medi-Cal represents roughly $1.9 billion in funding received by Santa Clara County this year alone. The county receives that money through Medi-Cal reimbursements for patient care at county hospitals. And it costs the county $4 billion, or $33%, from its $12 billion budget to run the hospitals.

Half of the county hospital system’s patients pay through Medi-Cal. The rest pay through a mix of other means and Medicare, a separate federal program serving patients 65 and older and patients of all ages with certain disabilities.

The county’s hospital costs, driven mostly by payroll and supplies, routinely outpace revenue by hundreds of millions of dollars. That requires the county to make up the difference every year out of its general fund, the county’s largest discretionary fund fed by taxpayer dollars. This year the county had to come in with nearly $600 million in taxpayer money. This investment allows the county system to provide services beyond those offered through a traditional health care system, such as the Child Advocacy Center, a sexual assault forensic examiner, the Valley Homeless Health Care Program and the Saludos Clinic migrant farmworker health program.

“The health of the entire system and therefore the health and well-being of every family in the county is in jeopardy,” Williams told San José Spotlight.

The purchase of Regional Medical Center has been a massive undertaking that will cost more than $500 million, according to the county’s mid-year budget report. That’s just to restore services cut by the hospital’s previous private owner, HCA Healthcare, to improve the corporation’s bottom line. The county still plans to reinstate other services HCA took from East San Jose, such as labor and delivery and newborn care.

Community outcry over HCA’s downgrades at Regional highlighted the chaos unfolding in the county’s public hospital waiting rooms. County doctors at public hearings last year protested HCA’s cuts over fears it would send a deluge of patients to their already overburdened emergency departments. The county’s restoration of Regional’s trauma services are expected to alleviate those fears. But Allan Kamara, an emergency department nurse at Valley Medical Center, said long-term federal budget cuts could bring those threats right back around.

“What would the federal budget cuts mean? It means patients will have longer wait times and the county may start cutting corners and right now we’re short-staffed,” Kamara told San José Spotlight, adding he still supports the county’s Regional purchase. “I haven’t seen a single health care union that doesn’t support the county’s decision.”
Hanging over the situation is a massive structural shortfall that forced officials to close a $250 million gap last year. The issue fueled intense wage disputes between public health care worker unions and county leaders. The unions called for better pay raise proposals and worker safety measures. It culminated in a major nurse strike last April.

County officials warn they could easily find themselves $100 million to $500 million short next fiscal year as a result of congressional spending decisions. The following year would likely get even worse as the gap between costs and revenues continues to widen.

Bob Brownstein, a strategic advisor with Working Partnerships USA who helped coordinate Medi-Cal patient enrollment outreach for the county last year, said the thought of relying on philanthropy for public hospital care brings him chills. But he said he’s already having those conversations with the Valley Health Foundation — the county hospitals’ fundraising arm.

“We’re talking about philanthropy on a scale that’s never been attempted before. There’s massive uncertainty as to what could actually be accomplished,” Brownstein told San José Spotlight. “We’re talking about human life, the prevention of human suffering on a massive scale.”

Contact Brandon Pho at [email protected] or @brandonphooo on X.