Quick Take
California is moving to impose strict spending caps on seven hospitals, including Santa Cruz's Dominican, sparking concerns about reduced services even as advocates praise the state's efforts to combat soaring health care costs.
California health officials are taking aim at three health care facilities on the Central Coast — including Dominican Hospital in Santa Cruz — that they say are charging excessive amounts for services, proposing new spending limits that would force the medical centers to dramatically slow their price growth over the next several years.
Hospitals warn that the policy will force them to cut staff and curtail important services for their communities, while proponents of the state’s caps say they are crucial to curbing rising health care costs that are putting more people into debt for medical bills and causing many to skip out on care entirely.
After hearing years of complaints from residents, California’s Office of Health Care Affordability is trying to alleviate some of the pressure of climbing medical bills. Gov. Gavin Newsom established the office in 2022 to address the crisis of rising health care costs.
This week, the Health Care Affordability Board unanimously voted to implement a policy for seven “disproportionately high-cost hospitals” out of more than 400 hospitals across the state, including Dominican and two other Central Coast hospitals.
Under the proposal, these hospitals would face tighter spending caps than other medical centers. While most California hospitals must keep their annual cost growth to 3.5%, the targeted facilities would be limited to annual increases of just 1.6% to 1.8% starting in 2026 through 2029.
In an April 11 letter to the board, Nanette Mickiewicz, president and CEO of Dignity Health Dominican Hospital, said the policy will “force us to reduce the care we provide.”
Mickiewicz wrote that the spending caps could potentially force the hospital to scale back community outreach programs, reduce physician on-call coverage and even trim staff.
She noted that about two-thirds of patients admitted to Dominican rely on Medicare and Medicaid coverage, programs that don’t fully cover the cost of care. The facility handles 52,000 emergency room visits a year, provides trauma care and operates a Level III neonatal intensive care unit.
“While it is difficult to predict exactly which services would be impacted, it is clear that further constraints would negatively affect our ability to maintain or expand services for our community’s most vulnerable populations,” Mickiewicz wrote. She also criticized the board’s methodology for defining a separate category of high-cost hospitals “without a comprehensive analysis.”
A Dignity Health spokesperson told Lookout that Mickiewicz was out of the office this week.
Consumer advocates and labor unions who support the state’s plan wrote in submissions to the Office of Health Care Affordability that high hospital prices contribute significantly to rising insurance premiums and medical debt. In California, more than half of residents said in 2024 that they had passed on health care, or postponed treatments, because of costs in the past year.
The California Federation of Teachers said it identified 11 high-cost facilities that charge roughly twice as much as the average California hospital for the same care – $40,000 per hospital visit as opposed to $20,000 at the average hospital, after adjusting for severity of condition requiring care.
Lookout sought an interview with the Office of Health Care Affordability to understand why it approved the spending targets and to understand how they work. California Department of Health Care Access and Information spokesperson Andrew DiLuccia said no one was available for an interview Thursday. Lookout asked DiLuccia how the spending targets are expected to reduce health care costs for California residents but didn’t immediately receive a response.
The other “high-cost hospitals” include Community Hospital of the Monterey Peninsula, Salinas Valley Memorial Hospital, Doctors Medical Center – Modesto, Santa Barbara Cottage Hospital, Stanford Health Care and Washington Hospital – Fremont.
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