As California hospitals continue to face strong financial headwinds — soaring inflation, the pending effects of nearly $1 trillion in nationwide federal health care cuts, increased regulatory pressures, and more — all eyes are on the Centers for Medicare & Medicaid Services (CMS), where California’s submission for the next Hospital Fee Program is currently under review.
The state Department of Health Care Services (DHCS), which runs the program for California, has been communicating over the past several weeks with officials at CMS, notably on aspects of the program that have been raised for several years and were ultimately codified in the One Big Beautiful Bill Act: tax uniformity provisions, tax limits, and more.
How these issues and others are ultimately interpreted and defined will be critical to how California positions itself to secure approval for the next version of the vital funding source for health care services.
CHA is in close and frequent communication with DHCS officials to provide information and input as state and federal regulatory bodies work together to come to an agreement on the new fee program. From a political standpoint, we are working closely with California’s Republican delegation and with advocates in the White House.
As an example, one of the issues CMS and the state are working through is the size of new tax programs. Based on a mid-November letter from CMS, the agency intends to limit the size of new tax programs, like the Hospital Fee Program, to taxes that were enacted and imposed as of July 4, 2025. Whether CMS sees an increase in the taxes as “new” or a continuation of a previously enacted and imposed tax is a key question that must be addressed.
The conversations between CMS and DHCS are expected to continue into January, so resolution on the upcoming fee program will not come until next year. Last week, CHA hosted a webinar to inform hospital CEOs and chief financial officers about the issues that remain before CMS approves a new program and some of the risks involved with each of them. If you missed the session and have questions, please reach out to me directly, or to Amber Ott, senior vice president, financial policy (aott@calhospital.org), or Adam Dorsey, group vice president, financial policy (adorsey@calhospital.org).
While the eventual approval of Program 9 would allow for critical planning and financial stability — and the wait for a decision can be anxiety-producing for some — it’s important to remember that payments from the current Hospital Fee Program will continue to flow through calendar year 2026.
That said, DHCS has until mid-January to provide a formal response to CMS based on the latest round of conversations. We will continue to remain close to both state and federal officials as we work to secure the best possible outcome for all California hospitals and the patients you serve.
