What’s happening: The Office of Health Care Affordability (OHCA) board met earlier this week to discuss options for defining hospitals as a sector for spending target purposes, as well as receive an update on progress toward adopting a behavioral health investment benchmark.
What else to know: CHA wrote to the board and provided public comment, pressing that the adoption of a hospital sector definition is premature and misguided, while stating the importance of including the full continuum of clinically appropriate services in OHCA’s behavioral health investment benchmark.
The OHCA board met on Dec. 16 to discuss two issues:
- Adoption of one or more hospital sectors
- Establishment of a behavioral health investment benchmark
While no votes were held on either issue, the board signaled an intent to approve the creation of a hospital sector, which could come as soon as the Jan. 28 OHCA board meeting. Creation of sectors allows OHCA to set different spending targets for specific segments of the health care system. Some board members have expressed interest in adopting spending targets lower than the statewide target (3.5% in 2025 and 2026) for some allegedly high-cost hospitals. However, decisions on which hospitals and target values would likely come after the formal adoption of a hospital sector. Hospital sector targets must be finalized by June 2025 in order to take effect in 2026.
OHCA staff presented several measures to identify high-cost hospitals, including commercial reimbursement levels, commercial reimbursement growth over the last several years, a comparison of commercial reimbursement levels to Medicare payments, and hospital operating margins. OHCA staff noted there were no clear patterns in the data, with each measure producing different lists of “high-cost” hospitals, often including rural, small, and specialty hospitals.
In addition, OHCA staff presented their work in developing a behavioral health investment benchmark, the purpose of which is to encourage greater investment in, and access to, behavioral health care services. The discussion focused on which services to include in the benchmark, with staff expressing provisional support for excluding institutional care, such as inpatient hospital and residential services.
CHA submitted a letter to the board pushing back against both of OHCA’s positions, arguing that rushing to adopt sector targets undermines a deliberative, data-driven process. CHA also warned that excluding hospital-based services from the behavioral health benchmark would hinder efforts to expand access across the full continuum of care.
Contact Ben Johnson, group vice president, financial policy, at bjohnson@calhospital.org with any questions or feedback.
