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Deal to save struggling hospital collapsed over funding for uninsured patients

A struggling Hawaiian Gardens hospital will close because it could not find a buyer willing to set aside a state-mandated level of funding for uninsured patients who can’t afford treatment.

Gardens Regional Hospital & Medical Center found an interested buyer in a bankruptcy auction in July, according to court documents, but the state attorney general’s office said in November that it would approve the $19.5-million sale to Strategic Global Management Inc. only if, among other things, the new operator agreed to provide $2.25 million a year in charity care for six years.

Last week, the attorney general’s office denied a request to lower the amount of required charity care. As a result, the deal fell apart and lawyers representing the hospital filed a motion in U.S. Bankruptcy Court in Los Angeles on Tuesday to close the facility.

Several factors led to the hospital’s financial struggles, including revenue shortfalls, ongoing litigation, mismanagement of operations, increasing operating costs and a reduction in federal funds that helped the hospital pay for Medi-Cal and uninsured patients, according to a report commissioned by the state attorney general’s office.

Before the passage of the Affordable Care Act in 2010, hospitals that treated a disproportionate share of patients who could not pay for care received federal funds to help fill the gap, said Jen Flory, a policy advocate for the Western Center on Law and Poverty.

Because of the possible repeal of the federal healthcare law, experts predict more hospitals will be at risk of closure if Americans lose health insurance and federal funding for uninsured patients doesn’t make up the difference.

“Hospitals will have a large amount of uncompensated care and will have a very hard time balancing the books,” Flory said.