The Office of Health Care Affordability’s (OHCA) proposed penalties, already approved by its board, would wipe out three years of combined operating earnings for more than 100 California hospitals. That’s about one in four hospitals in the state.
For the past three years, hospitals have explained their costs, their data, and their concerns to OHCA. Now it is OHCA’s turn to explain its math, its methods, and its disregard for the law that created a regulatory agency charged with the well-being and welfare of all Californians.
OHCA’s latest proposal sets out how it would penalize hospitals that exceed its cap on spending growth. It shows little understanding of what it takes to keep a hospital open 24/7/365. To build better proposals, every OHCA decision should be measured against a simple “Triple A” test:
- Affordable: Will the OHCA regulation make health care more affordable for patients and families?
- Accessible: Will the regulation — in this case around financial penalties — make health care services more or less accessible to Californians? Will communities still have a hospital, an emergency department, a labor and delivery unit, or a behavioral health bed when they need one?
- Accountable: Is OHCA holding the right entity accountable for costs and spending?
The OHCA proposal fails all three parts of this test. CHA laid out the details in this comprehensive letter submitted to Department of Health Care Access and Information Director Elizabeth Landsberg last week.
Affordable?
The penalties paid by hospitals do not lower a single patient’s bill — they simply take money away from the care on which patients rely. Nothing in OHCA’s proposal shows that one dollar of these fines would reach a patient or reduce what a family pays for care. If OHCA’s penalties were able to reduce costs for patients, it should show us how and where.
Accessible?
OHCA relies on unvalidated and volatile data, so more than 80% of hospitals are likely to be found noncompliant each year. Fines could reach hundreds of millions of dollars. For more than 100 California hospitals, the starting penalty alone would wipe out more than three years of operating earnings, at a time when nearly half of California hospitals lose money every day caring for patients. When hospitals lose that kind of money, they cut services or close entirely. OHCA should tell Californians which services it expects hospitals to cut and in which communities.
Accountable?
Accountability starts with transparency, and OHCA’s proposal fails the most basic tests:
- Hospitals cannot fully replicate OHCA’s calculations.
- The published methodology cannot be followed as written.
- Hospitals do not have access to some of the data OHCA used.
- The methodology does not identify key information needed to understand the data behind each calculation.
If OHCA’s math can’t be checked or validated, how can any hospital be held accountable for missing the target?
Also, OHCA is holding the wrong entity accountable. Much of the growth in hospital spending comes from state policy itself: wage mandates, seismic requirements, and chronic Medi-Cal underpayments. Penalizing hospitals for costs the state requires them to carry is not accountability. It is shifting the blame.
And it is patients who will suffer.
In January, OHCA loses its authority to adopt regulations under “emergency” conditions. Regular rulemaking would bring more public input, more transparency, and more scrutiny. OHCA should explain why it is racing to finalize rules this consequential before that happens.
When the OHCA board meets on Nov. 18, CHA will be asking it to:
- Publish a methodology hospitals can replicate along with the full data behind it.
- Validate its data before taking any enforcement action.
- Adopt the waiver process state law requires.
- Use regular rulemaking, not emergency authority, for rules with consequences this serious.
- Show its analysis of how these penalties will affect access, quality, equity, and the health care workforce.
In just a couple of weeks, OHCA bears the burden of proof. Californians deserve answers, and hospitals will be in the room to ask them.
