WOODLAND HILLS, Calif.-In an unusual gesture of goodwill between insurers and providers, Blue Cross of California recently came to the rescue of nearly a dozen California hospitals that had cash-flow problems because of a seven-week delay in Medicaid payments from the state of California.
The delay began June 30 when the state's fiscal year ended without a new budget plan in place for the subsequent fiscal year. Payments resumed on Aug. 18 when Gov. Pete Wilson signed a new budget into law.
Some $684 million in Medi-Cal payments were withheld during that period, according to officials. Figures for the 1998 Medi-Cal budget were not immediately available.
During the seven-week period, Blue Cross made up to $5 million available to hospitals through short-term loans.
Several hospitals were on the cusp of a severe budget crunch, said Gary Koehler, vice president of finance and managed care for the Hospital Council of Northern and Central California.
"A couple of them came close to missing payroll," Koehler said.
Neither the hospital council nor Blue Cross would identify the 11 hospitals that took the plan up on its offer.
The hospitals, all in the Blue Cross provider network, accepted 60-day loans ranging from $200,000 to $1.5 million. The loans went out in early August, with Blue Cross charging an annual interest rate of 6%.
In 1996 Blue Cross and its for-profit affiliate, WellPoint Health Networks, posted net income of $202 million on premium revenues of $3.9 billion. At the end of 1996, Blue Cross' cash reserves were $2.1 billion.
Koehler noted that most of the hospitals receiving loans are in rural areas, where they tend to contain more beds earmarked for skilled nursing and therefore are more dependent on Medi-Cal revenues than other hospitals.
"In some cases, up to 80% of their revenues come from Medi-Cal," Koehler said.
It's not the first time the Blues plan has loaned hospitals money during a government fiscal crisis. It also loaned money in 1992, when budget approval was delayed for more than two months.
"We have a long history with these hospitals and the hospital council. We value the relationship we maintain with the hospitals," said Ron Williams, president of the California Blue Cross.
Koehler said his organization approached Blue Cross for help, noting it has long held close ties, including a committee that serves as a direct liaison to the health plan.