What’s happening: At the Jan. 28 Office of Health Care Affordability’s (OHCA) board meeting, the board voted 6-0 to create a statewide hospital sector and focused on options for imposing stricter spending targets on a limited set of “high-cost” hospitals.
What else to know: In February, OHCA staff will propose methodologies for determining which hospitals are high cost and what the spending target values will be. To set a lower sector spending target for at least some hospitals in 2026, OHCA’s board must take formal action by June 1, 2025.
Creating a hospital sector allows OHCA to adjust the statewide spending target (of 3.5% in 2026) downward for hospitals that it deems as high cost. The statewide target would still apply to hospitals not identified in this limited set of high-cost hospitals.
Without making any decisions, the board reviewed options both for identifying high-cost hospitals and determining what their lower spending target(s) would be. OHCA derived its list of high-cost hospitals based on two measures:
- The top 10-20% of hospitals in terms of commercial reimbursement
- The top 10-20% of hospitals on a complicated measure of the degree to which commercial reimbursements covered their costs to a greater extent than Medicare does
OHCA’s list of high-cost hospitals is current as of Jan. 28. It is subject to change, however, following feedback from board members, and their initial preferences appear to be a potentially expanded list of hospitals on both of the above measures.
The board also reviewed potential spending target values to impose on high-cost hospitals, ranging from 1.7% to 1.9% for 2026 and potentially beyond. While the board members generally expressed comfort with the presented approach, some opined that the values were too high.
In both written and verbal comments, CHA pushed back against the rush to adopt a hospital sector, the approach for identifying high-cost hospitals, and the spending target levels under consideration.
To learn more about what these and other OHCA developments mean for your hospitals, join CHA and CHA Board of Trustees Chair Siri Nelson for an executive update webinar on Feb. 19 from 8-9 a.m. (PT).
Contact Ben Johnson, group vice president, financial policy, at bjohnson@calhospital.org, with any questions.
