The City Council last week approved an advance of more than $1.1 million from the General Fund to the local hospital. The money was an advance on Measure C Funds for the hospital.
The meeting was brief: The video is 22 minutes 30 seconds long. As of 12:56 p.m., Wednesday, July 30, the video had been viewed 77 times on YouTube.
There was no other item on the agenda.
No members of the public spoke during the public comment part of the meeting.
The vote was 4-1.
Councilmember Mary Schickling was absent.
The Catalina Island Medical Center, also known as Catalina Island Health, requested the advance so the hospital could participate in a Medicaid program that reportedly will increase the hospital’s funding.
The Avalon council held a special meeting on Thursday, July 24 (after the Islander’s deadline) to consider the request.
Assistant City Manager Jocelyn Francis gave the staff report.
City Attorney Scott Campbell, participating online, said four months earlier the council had authorized the city’s law firm to seek up to $3 million from the state for the loan program. Campbell said the state approved $1 million, or one third of what Avalon requested.
Attorney Leeann Habte, of Best, Best & Krieger, who heads the healthcare practice group at BB&K, explained the three actions the council was taking that night.
One: Approve the intergovernmental transfer agreement with the California Department of Health Care Services. She said this would obligate Avalon to transfer approximately $1,106,450 to DCHS.
Two: Approval of the transfer of the money to DCHS before Nov. 1.
Three: Approve the advanced payment agreement with CIMC. This would allow the transfer of the money along with attorney and administrative fees.
She said the agreement is for a term of 18 months. The repayment would start April 1, 2026, and continue until paid off.
Mayor Anni Marshall asked if the Finance director would like to make any comments.
Finance Director Matt Baker said the staff report laid out the facts and the information.
Chief Strategy Officer Tim Kielpinski of the CIMC thanked the council for supporting the loan in April or May and for considering it now. “I think I’m in support of this,” said Councilmember Lisa Lavelle.
“I think the move to do this right now, especially given the budget that’s come down from Washington recently, is worrisome for rural hospitals at best,” Lavelle said.
She said the hospital had received county funding as well. She hoped that would become an ongoing source of funding.
“I think that in doing this we’re reaching for funds that are available to help benefit the city prior to most hospitals even being able to understand what they are going to need,” Lavelle said.
Based on comments she had received from the public, Lavelle asked about the possibility of having a lien against the hospital property in case of insolvency.
Campbell said the agreement provides that the sales tax that the city passed 24 years ago is an ongoing sales tax. He said the city has the right to proceeds from the tax. “We believe that based upon the current sales tax, that that’ll be paid within 18 months,” Campbell said.
“If not, we can continue to collect the tax or the hospital can write us a check from other sources,” Campbell said.
He said the city automatically has a lien because of the city’s lease on the property. He said under the original lease the hospital has to seek the city’s approval if they are borrowing money against the property.
According to Lavell, there were concerns about how the funds would be spent.
Campbell said he believed that the federal government would match the funds by a multiplier and then the funds are for the general use of the hospital.
Leeann Habte said the intergovernmental transfer goes to the state, it’s matched by federal finds, then that increased dollar amount is provided to LA Care Health Plan because the Avalon hospital contracts with LA Care Plan to serve Medi-Cal members at CIMC. Habte said those additional dollars for LA Care Plan go back to CIMC.
She said those funds would go to patient care and administrative expenses at the hospital.
Tim Kielpinski of CIMC said this was just a repayment of lost finds that CIMC extended providing to Medi-Cal patients two years ago.
“So it has nothing to do with how we’re going to spend it going forward or anything,” Kielpinski said.
“So we’ve lost $2.8 million and they’re allowing us to spend up to $900,000, and match it and all the rest of the IGT,” he said. (He was referring to the intergovernmental transfer.)
Councilmember Yesenia De La Rosa asked if the hospital was going to do a risk assessment of the changes that will happen with Medi-Cal coverage.”
Kielpinski said the hospital’s biggest problem has been how low the hospital’s reimbursement has already been. Kielpinski said there were 36 critical care access hospitals in California, of which 16 are part of larger systems. They get overhead cost allocations. “The average overhead cost allocation statewide is $15 million, which they get maybe half of that back through Medicare,” he said.
“The other 16 hospitals are tax district hospitals and some of those hospitals of our size get anywhere from $6 to 49 million a year in supplemental funds,” he said.
He said they also get to do intergovernment transfers.
He said there were two hospitals in California that are not part of a system or part of a tax district. He said CIMC was used to not getting any of that reimbursement through overhead cost allocations or from supplemental programs.
“At the moment, we get four cents a dollar,” Kielpinski said.
He said the money from the advance would go to the emergency room for basic care.
He said from a financial standpoint the “big bill” was not going to change the hospital’s financial situation, apparently referring to the “Big Beautiful Bill”.
Marshall asked about whether the council could appoint someone to be on the hospital board of directors.
“One, I don’t know if the hospital would agree to that,” Campbell said.
He said they thought that could increase liability to the city and there could also be conflict of interest issues.
“Basically we do have veto rights on certain options if the hospital wants to do things,” Campbell said, “where an individual board member would not.”
“So this agreement actually gives the city greater protection than just a seat on the board, without exposing us to liability for being a board member” Campbell said.
