As we previewed final 12 months concerning SB 184 and the institution of the California Workplace of Well being Care Affordability (OHCA), California now has taken a major regulatory step geared toward restraining progress in well being care prices. On April 24, 2024, OHCA’s board (the “Board”) voted to implement its lengthy anticipated statewide well being care value goal, starting with a 3.5% cap on spending progress in 2025 and reducing within the following years. As with OHCA’s value and market affect evaluate (CMIR) reporting regime,[1] this cover will apply to “well being care entities,” which embrace suppliers similar to hospitals, services, outpatient clinics, giant doctor teams and scientific laboratories, payors and absolutely built-in supply techniques.
Background on Value Targets
California joins a number of different states which have applied a well being care value progress cap or goal legislation, together with Connecticut, Delaware, Massachusetts, Nevada, New Jersey, Oregon, Rhode Island, and Washington.[2] In these states, cost-growth targets or caps have ranged from 2.8% to five.1%.[3]
As a basic matter, the associated fee progress cap mannequin features as a share cap for year-over-year progress tied to sure financial indicators, similar to whole state home product, inflation or median household earnings. California’s value goal relies on the common progress fee of median household earnings from 2002 to 2022, with the concept that “well being care spending shouldn’t develop quicker than the incomes of California households.”[4]
OHCA initially proposed beginning with a 3% value goal based mostly on median household earnings, however following feedback from trade stakeholders, the associated fee goal authorised by the Board gives a glide path method that regularly reaches 3% over a 5 12 months interval. See the desk beneath for explicit targets established for sure years.
| 2025 | 2026 | 2027 | 2028 | 2029 and after |
| 3.5% (non-enforceable) | 3.5% | 3.2% | 3.2% | 3.0% |
Enforcement
According to the framework set in SB 184, OHCA’s enacting laws, the associated fee goal for 2025 is non-enforceable. For years 2026 and after, nevertheless, OHCA could have the authority to take enforcement motion in opposition to well being care entities that exceed the boundary of the goal. Enforcement measures out there to OHCA embrace compelling noncompliant entities to offer a proof at public conferences, requiring the implementation efficiency enchancment plans, and/or assessing administrative penalties.
SB 184 makes payor information on well being care expenditures the first supply of information regarding value progress, and payors might be required to submit information on whole heath care expenditures beginning on September 1, 2024. Nonetheless, OHCA has the authority to gather information as wanted from further sources, together with different state companies (together with the Division of Well being Care Companies and the Division of Managed Well being Care) in addition to well being care suppliers.
What’s Subsequent?
The statewide value goal is only one value goal that OHCA is chargeable for implementing. Within the coming years, OHCA will develop non-statewide targets, which is able to embrace sector particular targets, and doubtlessly geographical targets and targets related to particular person well being care entities. Within the meantime, we are going to preserve our readers posted on any essential exercise and developments associated to OHCA’s new value goal regime, together with any developments associated to information assortment and enforcement.
FOOTNOTES
[1] See our weblog on the ultimate CMIR laws promulgated by OHCA: The Stage is Set: California Finalizes OHCA laws Requiring Discover and Assessment of Materials Healthcare Transaction in 2024.
[2] Well being Care Value Commissions: How Eight States Deal with Value Progress, California Well being Care Basis (Apr. 22, 2022), https://www.chcf.org/publication/cost-commissions-eight-states-address-cost-growth/.
[3] State Well being Care Value Progress Goal Values & Efficiency Stories, Milbank Memorial Fund (Apr. 9, 2024), https://www.milbank.org/information/state-health-care-cost-growth-target-values/.
[4] Statewide Well being Care Spending Goal Approval is Key Step Towards Bettering Well being Care Affordability for Californians, California Division of Well being Care Entry and Info (Apr. 24, 2024), https://hcai.ca.gov/statewide-health-care-spending-target-approval-is-key-step-towards-improving-health-care-affordability-for-californians/.