California’s Workplace of Well being Care Affordability (OHCA) is shifting past broader policy-setting and into direct intervention on the supplier degree — a shift all hospitals and well being methods throughout the state ought to take severely. In abstract, California simply set strict value progress caps for choose hospitals — and all suppliers ought to be paying consideration.
On April 22, 2025, the Board voted unanimously to impose particular value progress caps on seven hospitals recognized as disproportionately costly primarily based on an in depth pricing evaluation. These amenities, concentrated in areas just like the Bay Space and Monterey Bay, should restrict their annual value progress to not more than 1.8% beginning in 2026, reducing additional to 1.6% by 2029. Hospitals that fail to satisfy these targets may face monetary penalties (as famous under, enforcement mechanisms are nonetheless beneath growth).
This motion builds on OHCA’s broader statutory mission beneath the Well being Care High quality and Affordability Act: selling affordability by regulating each industrywide spending and materials transactions. See Cal. Well being & Security Code § 127500 et seq. Though a lot early consideration targeted on OHCA’s transaction assessment authority, as now we have beforehand mentioned in our weblog, “California: AB 1415 and Expanded OHCA Oversight — What Suppliers, MSOs, and Buyers Have to Know,” the actual core of its mandate has at all times been to curb unsustainable well being care value progress throughout the state.
Based on Board supplies, the seven hospitals have been chosen primarily based on a mix of:
- Internet affected person income,
- Costs paid by industrial insurers in comparison with Medicare, and
- Different value and market benchmarks.
Initially, 11 hospitals have been into consideration, however after supplier suggestions and enchancment submissions, the Board finalized the record at seven. Enforcement mechanisms — together with potential penalties for noncompliance — are nonetheless being developed, with additional discussions deliberate for upcoming Board conferences.
Hospitals topic to the brand new targets argue that the caps are unrealistic given rising labor and tools prices and warn that service reductions might consequence. Nevertheless, OHCA officers emphasised that controlling value progress is essential to sustaining affordability for customers and defending public payers like Medi-Cal.
Why it issues for all hospitals:
This resolution makes clear that OHCA’s work is now actively regulating supplier value developments. Even organizations not but instantly focused ought to be monitoring their pricing and price progress carefully. The methodologies OHCA used on this motion may simply be utilized extra broadly in future enforcement rounds.
Well being care suppliers in California ought to put together for an atmosphere the place value progress is not only a monetary concern — it’s a regulatory compliance subject, topic to direct scrutiny and enforcement.
Foley is right here that will help you tackle the brief and long-term impacts within the wake of regulatory modifications. We’ve the sources that will help you navigate these and different necessary authorized issues associated to enterprise operations and industry-specific points. Please attain out to the authors, your Foley relationship accomplice, or to our Well being Care Observe Group and Well being Care & Life Sciences Sector with any questions.
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