Mariposa County will help John C. Fremont Healthcare District with an intergovernmental transfer that will ultimately net the hospital about $1 million. The county did so by making a preliminary agreement to loan the district $1.7 million.

At Tuesday’s afternoon session, the board formally considered the request. County Administrative Officer Rick Benson explained the complex structure of the transfer to the board. He said it was an “extra opportunity for JCF to avail itself of some federal dollars.”

The transfer process pools money from JCF with other district hospitals in the state to garner some Medicaid funds from the federal government. What will start as $1.7 million will come back to the district $1.62 million higher in four to six months. Benson said the transfer is considered “somewhat routine” especially among public hospitals.

The large amount did cause some concern for the CAO and some board members. Benson called the $1.7 million a “substantial sum” for the county, but said it wouldn’t be an issue if the money comes back from the state in a timely manner. The healthcare district would pay interest on the loan.

JCF Chief Operating Officer Chuck Bill called the transfer “a tremendous opportunity” for the hospital to bring $1 million back into the community. He said his organization had the same concerns about getting the money back to Mariposa County quickly.

County Counsel Steve Dahlem called the transaction between the County and healthcare district “highly unusual if not unprecedented” in that the proposal didn’t require any collateral. “This is essentially a handshake deal,” Dahlem said. The county could, however, go after the hospital’s tax revenue if it defaulted on the loan.

Bill said the process is not unprecedented statewide. “In reality, there’s almost no opportunity for your $1.7 million to not get back to you in a timely manner,” he told the board.

Bill also told the board that this loan is not necessary to keep the doors open at the hospital. “We are not in a doomsday situation,” he said. “We don’t want to give the impression that we would fail,” in the absence of the loan. Bill called his district “an economic engine” for the community. The healthcare district employs 225 people.

The idea behind the transfer is for the hospital to start building a contingency fund. “This is definitely the right move,” Bill said. “It would help us get out of the hole we dug. It’s helping us meet our potential to meet the needs of the community.”

Supervisor Jim Allen was the first skeptic. “If something’s too good, it’s probably not legitimate,” he said. “I’m very concerned.” Allen asked why the hospital was coming to the County and not a bank.

Bill said the hospital’s credit rating and the state’s involvement made lenders leery. “Our organization has struggled,” Bill said of the hospital’s financial future. “We lose money on every Medi-Cal patient we see. The way we survive is the taxes that support this organization.”

Allen likened the government program to a legal “Ponzi scheme.” Supervisor Janet Bibby was equally worried about the fallout if the state didn’t repay the loan quickly or at all. “The community will not only hold us accountable, but will hold you and your organization accountable,” she told Bill.

Auditor Chris Ebie said things are very tight for the County right now, especially in light of the fact that property tax delinquencies are increasing by hundreds of thousands of dollars in the past several years. Ebie said the County does have the ability to make the loan, provided it comes back quickly. “We’re kind of sharing the risk and the struggle with the hospital,” he said. Ebie did say he would feel more comfortable if there were some kind of guarantee. “It’s difficult because I don’t have a crystal ball,” he said.

JCF Board of Directors Chairman Mike McCreary said the supervisors’ concerns were echoes of those of his own board. “We decided to approach the board because you are our default partners,” he said. “I don’t want to do anything to put this county or its residents in jeopardy.”

Ultimately, the board voted 5-0 to loan the hospital the $1.7 million after the district secures a bond that will guarantee the County will get its money back.