The shuttered Madera Community Hospital is seen in this March 2023 photo by Ben Hensley

A trio of state lawmakers have announced a “major victory” in the effort to address the state’s hospital closure crisis.

SB/AB 112 would create the Distressed Hospital Loan Program, funded by up to $150 million for interest-free loans to nonprofit and public hospitals in “significant financial distress. It was approved in both the Senate and Assembly, and now awaits the signature of Gov. Gavin Newsom.

The legislation — passed under the leadership of Sen. Anna Caballero (D-Merced), Assemblymember Esmeralda Soria (D-Merced) and Assembly Speaker-Designate Robert Rivas (D-Salinas), according to a joint news release — came in response to the December 2022 closure of Madera Community Hospital.

The Department of Health Care Access and Information would oversee the Distressed Hospital Loan Program, which would require financially strapped hospitals to be more transparent about their financial condition, create more accountability and require state verification of financial plans before any loan approval, according to the release.

“Ensuring that our hospitals remain open and able to serve patients has been priority number one for me this year,” said Sen. Caballero in a statement. “The hospital closure in Madera and other looming closures would be catastrophic in both rural and urban communities. To ensure proper oversight of public funds, I will continue to seek more transparency and frankly more accountability on hospital operations to ensure California preserves health care access for all.”

According to a Senate analysis of the bill, loans would not be available to integrated health care systems with more than two separately licensed hospitals. Repayment would begin after 18 months and must be paid off within 72 months.

The program, which could aid Madera Community Hospital in a possible reopening, would sunset in 2032.

“Reopening Madera Community Hospital has been my top priority this year. That is why I introduced AB 412 to create the Distressed Hospital Loan Program to provide immediate financial assistance to help Madera Community Hospital re-open. I am grateful to the Governor for prioritizing state assistance to re-open Madera Community Hospital. AB 412 is now contained in AB/SB 112 which will expedite the process of the Distressed Hospital Loan Program coming into law,” stated Soria.

The governor was supportive in crafting the legislation, and the lawmakers involved are hopeful for his signature once it hits his desk in a couple days.

The funding could be a potential lifeline for financial distressed hospitals across California. A recent report found that one in five California hospitals are at risk of closure. Kaweah Health Medical Center in Visalia and Sierra View Medical Center in Porterville are among those facing financial troubles.

Another proposal by the California Hospital Association would appropriate $1.5 billion in one-time funding for California hospitals to be included in the fiscal year 2024 state budget. Kaweah Health could see $75 million in aid if such a line item made it into the budget.

“California certainly has more work to do to ensure the long-term viability of distressed hospitals, but today is an important step in the right direction,” Rivas stated.