It was shocking news for a small Santa Barbara County hospital that serves about 30,000 patients a year. In January of 2025, a federal agency notified Santa Ynez Valley Cottage Hospital that, because of a technicality, it would lose millions of dollars in funding.
"About a year ago, we received a letter letting us know that our designation as a critical access hospital was being removed," said Katie Gorndt, Vice President and Director of Nursing of Santa Ynez Cottage Hospital. The funding change could have meant the loss of $6 million a year, threatening the six-decade-old hospital's existence.
"Rural hospitals operate on a very thin margin as it is," said Gorndt.
Without the hospital, thousands of people who live in the Santa Ynez Valley would have to travel to Santa Barbara or Santa Maria for some types of care.
"Say you lived up the street from the hospital, and you were to have a heart attack," explained Gorndt. "You wouldn't be able to come here to get stabilized, to get the care you need. You'd have to be sent all the way down to Santa Barbara."
What technicality threatened the funding?
"Hospitals like this one that are about 35 miles away from the next closest hospital get a special status called a critical access hospital," said Democratic Sen. Adam Schiff of California, who stepped in to help with the crisis. "That gives them a much higher reimbursement rate under Medicare and Medicaid. If you lose that, then you lose millions and millions of dollars. Someone in the (Trump) Administration decided they were going to recalculate the distance between hospitals in the country, and they found that some of them fell just short because of the 35 miles, and decided they were going to cut them off."
The funding loss loomed over the Solvang hospital for nearly a year.
"There's no new hospital in the region," said Schiff. "The only thing that changed is that someone remeasured the distances. For a community like this, to financially jeopardize the hospital that saves lives and has been a community resource for decades would be a tragedy."
The hospital’s ER serves about 12,000 people a year. In addition to the loss of critical care, hospital officials said if they closed, some elderly patients would be reluctant to drive to Santa Barbara for more routine services. It could mean patients going without important care for a treatable issue.
The hospital asked Schiff for help with the crisis.
"I worked closely with a Republican colleague in Northern California who had a hospital similarly impacted," said the Senator. "I worked closely with a Republican senator from Mississippi who also had a hospital affected the same way, and we got bipartisan language passed into law to make sure these hospitals could keep their critical access designation."
Schiff admitted it wasn't easy. They first tried to get the federal agency to rescind the proposed changes, but officials refused.
"We had to jump through a ton of hoops," Schiff admitted. "We literally had to introduce legislation to make it so. It may only be three hospitals, but it's three communities that really count on their hospitals."
There were no clear explanations as to why the calculations were changed. The new mapping apparently used the most direct route on paper and didn't take into account roads that are seldom used because they're prone to flooding.
The funding has been secured for the three hospitals, including the one in the Santa Ynez Valley.
"The emergency room...I can't tell you how many times I've been here," said Santa Barbara County Supervisor Joan Hartmann. "Having this critical access designation is huge, and we are so grateful to Senator Schiff."
Gorndt added that the passage of the legislation a few weeks ago was a huge relief.
"I finally feel like I can breathe. It's been a year of not knowing what the future is going to look like for the health care we provide for the community."
Schiff visited the hospital for the first time on Wednesday. While it was a celebration, he also had a warning about another looming medical care funding crisis, one that may impact all of the nation’s rural hospitals.
"In that 'One Big Ugly Bill,' there was a trillion-dollar cut to health care, primarily to Medicaid," said Schiff. "That kicks in at the end of this year. For rural hospitals throughout the country, it's going to be a devastating blow. If three hospitals were affected by these mileage recalculations, there are going to be hundreds and hundreds affected by this. We've already seen hospitals in rural areas close, and we're going to see more and more, unless we can claw back some of this money."
