Distressed Hospital Funding Programs

Distressed Hospital Grant Program (2026-2027) – Application Open#

The Distressed Hospital Grant Program helps preserve access to care by supporting not-for-profit and public hospitals in significant financial distress. It was established through Chapter 21, Statutes of 2026 (Senate Bill 111), which directs the California Department of Health Care Access and Information (HCAI) to provide grants to eligible hospitals.

The program ties funding to strategic initiatives with defined key performance indicators, helping hospitals drive measurable, sustainable improvements.

Funding:
SB 111 authorizes $85.5 million in grant funding, which may be augmented by up to an additional $50 million, subject to approval by the Department of Finance.

Eligibility:
To be eligible, a hospital must meet all of the following requirements under SB 111:

-Be a not-for-profit or public hospital.
-Operate as a standalone facility, or be part of an integrated health care system with not more than two separately licensed hospital facilities. (Hospitals in systems with more than two licensed facilities are not eligible.)
-Demonstrate a government and uninsured payor mix of at least 60% of gross revenue.
-Submit a viable Strategic Initiative Plan that includes financial projections, an explanation of how grant funds will be used, and the governing body’s strategies to regain financial viability and continue operating.
-Demonstrate best efforts to exhaust other financial options, including (but not limited to) resolving revenue-timing issues or requesting forgiveness or deferral of other short- and long-term debt.

How to Apply#

Submit electronically to dhsgp@hcai.ca.gov by 5:00 PM Pacific Time on November 9, 2026.

Applications that are incomplete or submitted after the deadline will not be considered.

Payor Mix:
When completing the application, Medicare includes both Fee-for-Service and Managed Care revenues, and Medi-Cal includes both Fee-for-Service and Managed Care revenues.

Evaluation Methodology#

The application evaluation methodology will apply equally to all hospitals, and all applications will be reviewed in aggregate after the application deadline.

Key Dates#

Program Activities	Due Date
Application Released	October 5, 2026
Applications due to HCAI	November 9, 2026 at 5:00pm Pacific Time
Grant Award Determinations Released	December 2026

How Funding is Disbursed #

Awards are disbursed in two payments: 

• 50% – Upon grant award determination.
• 50% – Six months post award, subject to progress of strategic initiatives.

Questions? #

For assistance with the application process, you may contact HCAI with any questions at dhsgp@hcai.ca.gov and we will respond to your request.

Distressed Hospital Small Grant Program (2026)#

The Distressed Hospital Small Grant Program was established through the Budget Act of 2025 (Assembly Bill 108). The legislation requires the Department of Health Care Access and Information (HCAI) to provide grants to hospitals in immediate and significant financial distress to help prevent closure of hospitals. 

The legislation authorizes up to $25 million in one-time grant funding to implement the Small Grant Program. HCAI developed a program application and criteria to make grant awards to financially distressed hospitals seeking assistance. Hospitals applying for grant funds must meet specific criteria as of April 15, 2026, including, but not limited to, the following: 

• The hospital has less than 10 days’ cash on hand, inclusive of all investments and liquid assets that can be used for operations, based on the internally prepared financial statements for the most recent closed month, and substantiated by the most recent available audited financial statements. 
• The hospital has demonstrated best efforts to exhaust other financial options, including but not limited to, resolving outstanding revenue timing issues or requesting forgiveness or deferral of other short- and long-term debt. 
• More than 50 percent of the hospital’s payor mix is composed of government payors and uninsured patients. 
• The hospital must be a not-for-profit or public hospital. 
• Any other criteria determined by HCAI, in consultation with the Department of Finance. 

Grant Awardees#

Hospital	Grant Award
Southern Inyo Healthcare District	$400,000
Palo Verde Hospital	$3,000,000
Watsonville Community Hospital	$10,600,000
El Centro Regional Medical Center	$11,000,000

About The Process#

HCAI received 11 applications; the hospitals listed above demonstrated the greatest financial distress and risk of imminent closure. Grant agreements were executed and funds distributed.

Evaluation Methodology #

The grant application evaluation methodology was applied equally to all hospitals, and all applications were reviewed in aggregate following the application deadline. Eligible applications were scored across five areas: Viability of Strategic Initiatives; Financial Ratios and Results; Partnerships and System-Level Access to Capital; Leadership Capabilities; and Community Need and Geographic Access.

Hospitals may contact HCAI at dhsgp@hcai.ca.gov regarding the program.

Distressed Hospital Loan Program (2023)#

The Distressed Hospital Loan Program (Program) was established through Chapter 6, Statutes of 2023 (Assembly Bill 112). The legislation requires the Department of Health Care Access and Information (HCAI) and the California Health Facilities Financing Authority (CHFFA) to collaboratively develop the Distressed Hospital Loan Program to offer interest-free, working capital loans to not-for-profit and publicly-operated financially distressed hospitals, including hospitals that belong to integrated health care systems with no more than two separately licensed hospitals in California that are facing a risk of closure, while they implement turnaround strategies to regain financial viability.

HCAI contracted with CHFFA through an Inter-Agency Agreement to administer the loan program. HCAI and CHFFA developed a loan application and criteria to make loans to financially distressed hospitals seeking assistance and issued loans to 16 hospitals (see table below).

Some details of the Program are as follows:

• The legislation authorizes up to $300 million in one-time funding to implement the Program, including administrative costs.
• Loans will be offered at zero-percent interest.
• Loans are repayable over 72-months, with an initial 18-month grace period at the beginning of the loan term.
• Lending parameters will be focused on financially distressed hospitals in areas where demand for services and service adequacy are of concern.
• The Program will sunset on December 31, 2031.
• Loans are secured using Medi-Cal checkwrite payments for participating hospitals.

The legislation also includes provisions for requiring hospitals to submit quarterly financial data to HCAI, for use in monitoring the financial health of hospitals throughout the state. This will enable HCAI to better prepare for and identify developing fiscal challenges at hospitals statewide.

Loan Awards Determination and Modification Status #

Evaluation Methodology#

The application evaluation methodology will apply equally to all hospitals and all applications will be reviewed in aggregate after the application deadline.

Payor Mix#

Please note that when completing the application, for payor mix, Medicare includes Medicare Fee-for-Service and Managed Care revenues, and Medi-Cal includes Medi-Cal Fee-for-Service and Managed Care revenues.

For assistance with the application process, you may contact HCAI at dhlp@hcai.ca.gov or CHFFA at chffa@treasurer.ca.gov and we will respond to your request.

Additional Resources#

• CHFFA website
• Distressed Hospital Loan Program Fact Sheet
• DHLP Draft Evaluation Methodology Webinar Slides
• HCAI Press Release

Presentations#

Distressed Hospital Loan Program – Application Technical Assistance Webinar Recording

Webinar: Distressed Hospital Loan Program Evaluation Methodology