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Santa Clara Valley Healthcare, the county’s public health care system, is preparing to eliminate 218 positions, maximize reimbursement from insurers to increase revenue, and consolidate patient care such as cardiac services as part of a strategy for dealing with massive federal cuts.
Santa Clara county officials project a $1 billion reduction in revenue from federal and state sources as a result of H.R. 1. Paul Lorenz, CEO of Santa Clara Valley Healthcare, told the Board of Supervisors on Jan. 27 that the funding cuts are an “extraordinary fiscal emergency” for the health care system. In addition to a $200 million shortfall this fiscal year, SCVH would also face losses of $160 million in fiscal year 2026-2027 and $260 million in 2027-2028 fiscal year as the full range of H.R.1 provisions are phased in.
In an informational presentation to the Board, Lorenz said that SCVH serves one in four county residents. He said that 84% of its patients are on either Medicaid or Medi-Cal and 50% of patients are Hispanic or Latino. But Lorenz emphasized that the system is a safety net for everyone, not just those on Medicaid or people who are uninsured.
Lorenz noted that the four hospitals of SCVH provide services for half of the county’s emergency room visits, at least 75% of trauma care in the county and a nationally-recognized burn care and rehab facility. It also provides public health programs like a child advocay program for victims of sexual assault, gender-affirming care, immunizations and treatment for sexually transmitted infections.
“It is up to us to figure out how we balance access care and these fiscal challenges to ensure that everyone in our community has access to health care,” Lorenz said in his presentation. “We have evolved into a health care system that just is not a safety net, but is the backbone of health care in this county.”
The county already took one major step toward addressing the funding shortfall when it asked voters to approve a sales tax increase to help fill the void. Measure A, which raised taxes by 0.625% for five years, is expected to generate about $330 million annually. While the measure was a general tax increase, county officials indicated that they plan to spend most of these funds to bolster the health care system.
A variety of federal and state policy changes will contribute to the reduction in funding over the next few years, Lorenz told Supervisors at the Jan. 27 hearing. Under H.R. 1, new administrative requirements and tighter eligibility rules make it harder for people to maintain Medi-Cal coverage, contributing to projected losses for SCVH. With the expiration of Enhanced Premium Tax Credits last year, rising healthcare premiums are expected to push people out of commercial coverage through Covered California, the state’s official health insurance marketplace, which will increase demand on SCVH. Amid these policy changes, labor costs and operating expenses continue to rise.
SCVH is countering the funding cuts with three main strategies. The system is using Measure A funds to fill part of the funding gap left by federal cuts. SCVH is also lobbying the state to support public hospitals.
“Public hospitals make up 6% of the hospitals in the state of California, but we provide for 30% of the Medicaid services,” Lorenz said in the presentation. “This is a state program, and we believe the state should be stepping up to support public hospitals.”
The third way SCVH plans to manage the funding reduction is by improving operational efficiency. It aims to increase revenue by seeing more patients, maximizing reimbursement from insurers, and maintaining a low level of uninsured patients.
It also aims to cut costs by restructuring service lines and deleting more than 218 positions from payroll from staff who have departed while minimizing the possibility of layoffs, according to the presentation. Williams said the staffing adjustments will account for about 20% of the $200 million shortfall, or $40 million.
“Health care is also a statement of community values,” Williams said during the meeting. “We have had a decades-long commitment in this community to keeping our doors open to all and we will remain absolutely steadfast in that commitment.”
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