Sustainable Financing

A Looming Financial Crisis

California’s 21 public health care systems are the core of the state’s safety net. They primarily serve individuals from historically marginalized communities, including persons of color, individuals experiencing financial hardship or homelessness, and individuals with complex social and medical needs. 

Although public health care systems represent six percent of all hospitals statewide, they serve 3.7 million Californians each year and provide a comprehensive range of services including primary care and specialty care, inpatient hospital care, and emergency care, among other services. 

The pandemic further highlighted the essential roles of public health care systems during times of crisis. They met the urgency of the moment and stepped up to provide treatment, vaccination, testing, and tailored outreach services to those most in need. Public health care systems also expanded telehealth services to increase access to primary and specialty care services. 

Today, these public health care systems are facing a looming financial crisis. By 2026, public health care systems will face an additional shortfall of at least $2 billion, which must be addressed if they are to maintain their essential safety net roles.

Even prior to the pandemic and the financial impacts associated with changes in utilization, costs, and revenue, public health care systems were facing extraordinary financial threats and uncertainty. For decades, public health care systems have helped finance a significant portion of the care they provide to the Medi-Cal patients they serve. Medicaid is a federal-state partnership that relies upon federal and state dollars to provide health coverage and care to individuals with a low-income. However, in California, public health care systems are often required to cover the State’s portion of the costs, creating an inherent deficit in which the costs of providing care can never fully be covered. 

By 2026, public health care systems will face an additional shortfall of at least $2 billion, which must be addressed if they are to maintain their essential safety net roles.

Given the large proportion of Med-Cal patients served by public health care systems (nearly 40% of all hospital care to Medi-Cal beneficiaries in the communities they serve, in addition to providing over 40% of all hospital care to the remaining uninsured), this results in significant unreimbursed cost, which has become unsustainable. 

To address this challenge, CAPH is seeking long-term sustainable solutions for public health care system financing with the goal of ensuring they can continue to serve their communities and provide high quality equitable health care to all.