CEO Message

CEO Message: Budget Proposal Is Another Blow Hospitals Can’t Take

Now is the time to call your state assemblymember and senator to tell them the following:

  1. Hospitals need financial relief now.
  2. Reject the Governor’s budget proposal that would cut managed care payments to hospitals for inpatient care.

Embedded in the state’s latest budget proposal, as the administration looks to make up for the massive losses to state coffers driven by the COVID-19 pandemic, is a recommendation that would upend the way Medi-Cal managed care plans are paid.

While on paper this would be a small savings for the state, the bottom line for hospitals is a loss of $500 million annually and a change that would bring about a 180-degree shift in the way hospitals that contract with these plans are reimbursed for health care services.

The proposal prohibits Medi-Cal insurers from paying more than non-contracted rates, removing incentives to coordinate care among providers and plans. In other words, this proposal would create a barrier to value-based managed care contracting and has the potential to negate years of progress that has made California a national leader in the value-based care movement.

This is a cut that hospitals simply can’t absorb and one that will directly affect Medi-Cal patients who rely on hospitals to work within longstanding networks of providers to get their care. 

All of this comes at a time when hospitals are reeling from nearly $14 billion in short-term revenue losses caused by the pandemic and facing the prospect of depressed revenue for a lengthy period of time as patients have been slow to return to hospitals for the health services they need.

These concerns have been shared with a key Senate budget subcommittee, and there are signs legislators are listening. Even with a condensed agenda for this legislative year, the Senate budget subcommittee chair has shared his concerns about this proposal with the administration. 

The fight to stave off this $500 million annual loss is happening at the same time the push for an immediate $1 billion financial lifeline for hospitals is heating up. There are about two weeks left before the budget is finalized, and the pressure is on the Legislature to protect hospitals now.

The coming days will be critical to the future of hospitals’ financial stability and play an important role in determining how hospitals will be able to care for Californians in the coming months and years. We’ll continue to keep you informed as these conversations progress.

~ Carmela