{"id":1043476,"date":"2026-09-04T19:34:29","date_gmt":"2026-09-04T19:34:29","guid":{"rendered":"https:\/\/www.europesays.com\/us\/1043476\/"},"modified":"2026-09-04T19:34:29","modified_gmt":"2026-09-04T19:34:29","slug":"california-sets-penalties-to-curb-hospital-spending-growth","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/1043476\/","title":{"rendered":"California sets penalties to curb hospital spending growth"},"content":{"rendered":"

By Ana B. Ibarra<\/a>, CalMatters<\/p>\n

\t\t\t\t\""Two\"
\n\t\t\t\tMedical personnel working in the Emergency Room unit in the Hazel Hawkins Memorial Hospital in Hollister on March 30, 2023. Photo by Larry Valenzuela, CalMatters\/CatchLight Local<\/p>\n

This story was originally published by CalMatters<\/a>. Sign up<\/a> for their newsletters.<\/p>\n

Year after year Californians watch their health bills increase faster than their wages \u2014 for some, to the point where care becomes unaffordable. Four years ago, the state created an office to curb that trend. Now, the California Office of Health Care Affordability is gaining new power to control costs.<\/p>\n

Its board last week adopted penalties for hospitals, physician groups and insurers that exceed state spending caps \u2014 among the strictest in the country.\u00a0<\/p>\n

Under the approved framework, violators will pay up to 125% of the amount they spend over the limit. Currently the state caps annual spending growth at 3.5%<\/a>, dropping to 3% in 2029. Certain hospitals deemed \u201chigh cost\u201d face even stricter limits.\u00a0<\/p>\n

Over the last decade, health spending grew<\/a> by an average of 6% a year.\u00a0<\/p>\n

The soonest hospitals can face fines is 2028. In October, the state will release enforcement guidelines.<\/p>\n

State officials say the penalties are a last resort. Providers who miss spending targets will first get technical assistance and go through a performance improvement plan; fines apply only if they violate that plan. The framework gives the office discretion to set penalties anywhere from 0% to 125% of the overage, depending on individual circumstances.<\/p>\n

\u201cThe hope is that by imposing these penalties\u2026 we’ll begin to reduce the rate of growth of spending on healthcare to make it more affordable for Californians,\u201d said Stephen Shortell, professor emeritus at the UC Berkeley\u2019s School of Public Health and a member of the office\u2019s advisory committee.\u00a0<\/p>\n

Hospitals and others protest<\/strong><\/p>\n

Hospital executives are the most vocal critics. That\u2019s because the Office of Health Care Affordability narrowed in on hospitals<\/a> as \u201ca high-impact area to improve efficiency and affordability.\u201d Hospitals account for about a third<\/a> of healthcare spending.<\/p>\n

But hospitals say some of their spending is out of their hands. Barry Arbuckle, executive chairman at MemorialCare health system and a member of the office\u2019s advisory committee, says hospitals have little control over costs related to labor, seismic related construction<\/a>, and pharmaceuticals.\u00a0<\/p>\n

\u201cI’ve got drugs in my children’s hospital that are over $1 million a dose. Those are then passed through as hospital costs. So people think, \u2018Oh, the hospital is really expensive.\u2019 But the hospital has nothing to do with that drug cost,\u201d Arbuckle told CalMatters.<\/p>\n

Arbuckle ran Long Beach Memorial\u2019s spending data for 2022-23 through the state\u2019s penalty formula. Had the rules been in effect then, he estimated the hospital could have faced a $27 million fine. \u201cThat\u2019s just beyond belief,\u201d he said.<\/p>\n

Industry groups also object to the amount of discretion the office has, calling the 0%-to-125% penalty range too broad. And they warn the caps could hurt patients.\u00a0<\/p>\n

\u201cUnder the current growth targets, the primary way for hospitals to reduce costs is to reduce services and limit access,\u201d Angus Cochran, chief of community support services at Washington Health, a hospital in Fremont, told board members last week.<\/p>\n

Washington Health is one of seven hospitals<\/a> deemed particularly \u201chigh cost\u201d by the Office of Health Care Affordability. These hospitals have stricter annual growth limits \u2013 their spending growth is currently capped at 1.8%, dropping to 1.6% by 2029.<\/p>\n

The California Hospital Association sued last year<\/a> to block the spending caps. The association argued that the office \u201conly focused on capping hospital spending, without ensuring its cost targets would not harm patients or the availability of hospital services,\u201d as required by statute. In the lawsuit, hospitals say that health insurers began\u00a0 negotiating reimbursement rates based on the office’s spending cap rather than the actual cost of care. That suit is still pending in the San Francisco County Superior Court.<\/p>\n

Hospitals are also asking for more clarity on how the office will weigh outside cost pressures, including a likely rise in uncompensated care for uninsured patients as federal healthcare cuts take effect. These cuts combined with state changes are projected to nearly double California\u2019s uninsured rate<\/a> \u2014\u00a0 a shift that could push more people into emergency rooms.<\/p>\n

The California Association of Health Plans, which represents insurers, raised similar concerns in a statement, pointing to recent changes in a tax<\/a> the state charges private health plans.\u00a0<\/p>\n

\u201cFor this framework to succeed, it must distinguish between spending growth that can be addressed and spending growth driven by broader market and policy realities,\u201d the group said in a statement. \u201cUnfortunately, many critical questions were not answered, leaving great uncertainty and significant work ahead.\u201d<\/p>\n

Getting serious about healthcare costs<\/strong><\/p>\n

Board members said the state\u2019s affordability crisis demands urgent action.\u00a0<\/p>\n

Nearly 60% of Californians report skipping or delaying care<\/a> because they can\u2019t afford it, and four in 10 carry medical debt. Rising premiums are also pushing more people to drop their health plans<\/a> altogether.<\/p>\n

Eight other states have also adopted health spending benchmarks, but because most don\u2019t enforce them, research shows<\/a> that they have not made a difference in hospital prices or premiums.<\/p>\n

\u201cThere has to be a penalty framework that is meaningful,\u201d said Christine Eibner, a senior principal economist at the think tank RAND. \u201cIf it’s too small or if it’s not enforced, then it wouldn’t be enough motivation.\u201d<\/p>\n

Experts caution that relief will take time. Shortell said many hospitals likely won\u2019t meet the state\u2019s spending limits in the first year, with real progress emerging only when the state and industry adjust to work together.<\/p>\n

\u201cThis is getting from home plate to first base,” he said. \u201cI would look to three or four years from now to begin to see this having some impact.\u201d<\/p>\n

Consumers are hungry for relief. Claudia Garcia, a San Francisco hotel worker and mother of two, has gone on strike over health insurance because she can\u2019t go without it \u2013 her son has severe asthma, and needs his inhaler and medication refills.<\/p>\n

Garcia belongs to Unite Here, the hotel and restaurant workers\u2019 union. Unions have been a forceful voice for controlling health spending because these costs, they argue, eat into potential wage increases. That\u2019s backed up by UC Berkeley Labor Center research<\/a>, which shows that when employers spend more on premiums, they spend less on raises.<\/p>\n

\u201cWe should not have to fight every year just for our healthcare,\u201d Garcia said. She hopes that if the state can control health costs, maybe her union can pivot to fighting for higher pay.<\/p>\n

Beth Capell, a lobbyist with the consumer advocacy group Health Access California, said the goal is not to punish struggling providers.\u00a0<\/p>\n

\u201cIt is not our goal to bankrupt a small rural hospital,\u201d Capell told the board last week. \u201cBut we are interested in penalties that will help to convince large, wealthy health systems and insurers that the state of California is serious about slowing the growth of healthcare costs.\u201d\u00a0<\/p>\n

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.<\/p>\n

This article was originally published on CalMatters<\/a> and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives<\/a> license.<\/p>\n","protected":false},"excerpt":{"rendered":"By Ana B. Ibarra, CalMatters Medical personnel working in the Emergency Room unit in the Hazel Hawkins Memorial…\n","protected":false},"author":3,"featured_media":1043477,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[35],"tags":[210,1141,1142,3584,67,132,68],"class_list":["post-1043476","post","type-post","status-publish","format-standard","has-post-thumbnail","category-health-care","tag-health","tag-health-care","tag-healthcare","tag-hospitals","tag-united-states","tag-unitedstates","tag-us"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/117214451497422645","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/1043476","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=1043476"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/1043476\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/1043477"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=1043476"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=1043476"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=1043476"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}