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Calif. budget crisis pressures providers

SACRAMENTO, CA – A record delay in passing a budget in California last month has begun to affect providers’ ability to provide services, with some saying they would not continue to operate much longer.

The budget stalemate in the state’s Legislature is affecting a variety of payments to healthcare providers, primarily payments through Medi-Cal, the state’s Medicaid program.

As of press time, legislators were pursuing a compromise that would use a combination of reduced spending, increased taxes and accelerated payments to the state by individuals and businesses. Leaders acknowledged that advanced collections likely would only exacerbate the crisis next year.

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California faces particular pressure because of mandates that its government have a balanced budget. Estimates early this year suggested that the state budget is $15 billion short of being balanced. The budget process has been stuck for  weeks because of ideological differences between Republicans and Democrats, and the fact that budget bills must be passed by a two-thirds majority.

Even with the prospects of a compromise on a budget bill, political observers in the state said there is no assurance that Republican Gov. Arnold Schwarzenegger would sign off on the solution.

Providers and other groups dependent on state payments have focused their efforts on emergency appropriation bills that would enable the state to pay for healthcare and other social services. Californians receive services through a variety of not-for-profit regional entities, which contract with providers or agencies.

Such agencies draw on lines of credit and bank loans, but in mid-September several said they were exhausting their borrowing ability, and a few reported that they were planning to suspend or curtail operations.

One of those agencies, Westside Regional Center in Culver City, mailed letters to clients in early September saying it expected to run out of money on September 10 and would no longer be able to pay bills, vendors or staff. The letter asked vendors to continue to provide services and promised payment of all invoices that were submitted.

“Because of the budget situation, we’ve already had one regional center run out of money and the one serving San Diego had posted notice that it was reaching the end of its line of credit and that it would be giving notices to their staff and vendors,” said Bill Bowman, CEO for the Regional Center of Orange County. On September 10, the group held a rally with more than 300 people with developmental disabilities, family members and service providers.

Bowman said he had also heard reports that renal dialysis centers and some emergency departments were at risk of closing. Borrowing funds to continue operations only exacerbated problems because agencies and providers also had to pay interest to access lines of credit, he noted.

A spokesperson for the office of State Sen. Jeff Denham, who was trying to champion a bill to enable emergency authorization of as much as $12 billion in payments for services, said his office was aware of provider closings because they could no longer borrow to sustain operations. Denham said the bailout was being stymied by Democrats in the state senate.