(a) For purposes of this section, “distressed hospitals” are hospitals that participate in selective providers contracting under Article 2.6 (commencing with Section 14081) and that meet all of the following requirements, as determined by the California Medical Assistance Commission in its discretion:

1. (1) The hospital serves a substantial volume of Medi-Cal patients measured either as a percentage of the hospital’s overall volume or by the total volume of Medi-Cal services furnished by the hospital.
2. (2) The hospital is a critical component of the Medi-Cal program’s health care delivery system, such that the Medi-Cal health care delivery system would be significantly disrupted if the hospital reduced its Medi-Cal services or no longer participated in the Medi-Cal program.
3. (3) The hospital is facing a significant financial hardship that may impair its ability to continue its range of services for the Medi-Cal program.

(d) Except as otherwise limited by this section, the fund shall consist of all of the following:

1. (1) The amounts transferred to the fund pursuant to subdivision (e).
2. (2) Any additional amounts appropriated to the fund by the Legislature.
3. (3) Any interest that accrues on amounts in the fund.

(e) The following amounts shall be transferred to the fund from the prior supplemental funds at the beginning of each project year.

1. (1) Twenty percent of the amount in the prior supplemental funds on the effective date of this article, less any and all payments for services rendered prior to July 1, 2005, but paid after July 1, 2005.
2. (2) Interest that accrued on the prior supplemental funds during the prior project year.
3. (3) Notwithstanding paragraph (1), solely for the 2009–10 fiscal year, the amount of funds transferred shall be reduced by six million one hundred and ninety-one thousand dollars ($6,191,000). The funds generated from this reduction shall be transferred to the General Fund.