SB 184 California: OHCA Spending Targets, Filings, and Enforcement

California’s SB 184, signed as an urgency statute on June 30, 2022, created the Office of Health Care Affordability (OHCA) inside the Department of Health Care Access and Information and gave it three main jobs: set annual per capita healthcare spending growth targets, review large healthcare mergers and acquisitions, and enforce compliance through an escalating penalty process.¹ The 2026 calendar year is the first year the spending targets carry enforcement authority, so payers, providers, and integrated delivery systems operating in California need to understand what the law expects and when the consequences start.

What OHCA Was Built to Do

OHCA analyzes healthcare market trends, identifies spending drivers, and sets policy meant to slow cost growth for consumers and purchasers. It develops a statewide cost-control strategy and monitors how market consolidation affects prices, access, quality, and equity.¹ The Director of HCAI serves as OHCA’s director and carries out enforcement.

The office collects total health care expenditure data broken out by category, including hospital care, physician services, and prescription drugs, and publishes analyses of what is driving increases across regions and populations.² OHCA does not regulate individual billing. It holds healthcare organizations accountable when their overall spending growth outpaces the statewide target.

The Spending Growth Targets

The Health Care Affordability Board sets a statewide target for how fast per capita healthcare spending can grow each year, anchored to the average growth rate of median household income in California from 2002 to 2022.³ The targets step down over time:

2025–2026: 3.5 percent per capita spending growth
2027–2028: 3.2 percent
2029 and beyond: 3.0 percent

The 2025 target year is a reporting-only baseline. Entities must submit data, but no enforcement follows. Starting with the 2026 target year, OHCA has full authority to act against entities that exceed their target.³

The Board has also identified seven hospitals as high-cost outliers and applied a tighter schedule: 1.8 percent for 2026, stepping down to 1.6 percent by 2029.⁴

Targets can be adjusted for an entity whose organized labor costs are projected to grow faster than the target rate, so collectively bargained wage increases do not automatically produce a violation. The statute also directs the Board to weigh quality, equity, the needs of people with disabilities and chronic illness, and workforce stability, including graduate medical education and apprenticeships, when setting and applying targets.⁵

Who Has to Comply

SB 184 defines “health care entity” broadly, sweeping in three categories: payers, providers, and fully integrated delivery systems.⁶

Payers include health care service plans such as HMOs, health insurers, Medi-Cal managed care plans, Medicare, third-party administrators, and any other entity that pays for or arranges healthcare on behalf of employees, dependents, or retirees.

Providers include physician organizations, hospitals and other health facilities, outpatient clinics, ambulatory surgical centers, clinical laboratories, and imaging facilities.

Fully integrated delivery systems combine a physician organization, a health facility or system, and a nonprofit health care service plan serving a specific geographic region.

Physician organizations with fewer than 25 physicians are generally exempt from the spending targets, unless the Board designates them as a high-cost outlier. The Board also has authority to define additional exemptions based on annual revenue, patient volume, or geographic factors.²

How Enforcement Escalates

OHCA does not go straight to fines. The statute lays out a progressive process:

Technical assistance. OHCA analyzes what is driving the entity’s spending and identifies best practices to bring costs down.
Public testimony. The entity can be required to explain its spending failures at a public Board meeting.
Performance improvement plan. The entity submits a plan identifying the causes of excess spending and specific strategies to return to target. Plans can run up to three years, and OHCA will not approve any plan that erodes access, quality, equity, or workforce stability.
Financial penalties. If an entity fails to comply with its plan and still exceeds the target, the Director may assess administrative penalties commensurate with the overshoot.

An entity that fully complies with its approved plan by the deadline avoids penalties even if it has not yet hit the target, though the Director may require modifications until the target is met.¹ Repeated noncompliance draws escalating penalties above the initial amounts. In setting the dollar figure, the Board considers the nature and gravity of the failures, the entity’s financial condition (including revenues, reserves, and profits of affiliated entities), and the entity’s market impact.

OHCA can skip the improvement plan process and go straight to penalties when an entity willfully fails to report accurate data, repeatedly neglects to file an acceptable plan, or knowingly falsifies information.

The specific penalty ranges have not been publicly finalized. The statute describes them as “initially commensurate with the failure to meet the targets, and in escalating amounts for repeated or continuing failure,” and directs the Board to approve the dollar ranges and justification factors through rulemaking.²

When Penalties Can Actually Land

The 2026 target year is the first enforceable one, but actual penalties come later. Data collection for 2026 happens in 2027, public reporting follows in 2028, and the soonest enforcement actions can occur is sometime in 2028.² That gap gives entities time to prepare. It also means anyone ignoring the targets in 2026 will be operating without data when enforcement arrives.

Filing Requirements for Mergers and Acquisitions

Beyond the spending targets, SB 184 requires advance notice of large healthcare transactions. Any health care entity entering a material change transaction must file a written notice with OHCA at least 90 days before closing, for transactions closing on or after April 1, 2024. A transaction is a “material change” when any of the following apply:

Fair market value of $25 million or more
The deal would increase any party’s California-derived annual revenue by $10 million or by 20 percent or more
Sale or disposition of 25 percent or more of an entity’s California assets
Transfer of 25 percent or more of voting power or governance control
Formation of a new entity projected to have at least $25 million in California-derived annual revenue

Smaller entities are not automatically exempt. An entity with at least $10 million in California revenue or assets must file if the other party has at least $25 million. Entities in designated mental health or primary care shortage areas must file regardless of size.¹

If OHCA finds a transaction likely to significantly affect market competition, the state’s ability to meet cost targets, or costs for consumers and purchasers, it will conduct a formal cost and market impact review. The review examines changes in market share, price comparisons with peer providers, effects on quality and access, competition for workers, and barriers to entry. A transaction under review cannot close without written authorization from OHCA.¹

One boundary worth flagging: OHCA’s role in transaction review is informational, not approval-based in the same sense as other agencies. It does not have authority to block a deal or impose conditions the way the Attorney General, the Department of Managed Health Care, or the Department of Insurance can. It collects data, seeks public input, and publishes findings that those enforcement bodies can then act on.

Data Reporting Obligations

The targets rely on data, so reporting is mandatory. All covered health care entities must submit total health care expenditure data to OHCA. Payers and fully integrated delivery systems report on an annual schedule set by the office.² OHCA also draws on the state’s Healthcare Payments Database, which combines claims and encounter data from commercial insurers, Medi-Cal, and Medicare and lets the office trace spending increases to specific service categories rather than relying on aggregate self-reporting.

Willful failure to report complete and accurate data, or knowingly falsifying information, can trigger direct administrative penalties without the intermediate performance improvement plan step.

1
California Legislative Information. SB 184 Health
2
California Department of Health Care Access and Information. OHCA Background and Resources
3
California Department of Health Care Access and Information. Statewide Health Care Spending Target Approval Is Key Step Towards Improving Health Care Affordability for Californians
4
California Department of Health Care Access and Information. Slow Spending Growth
5
California Legislative Information. California Health and Safety Code HSC 127502
6
California Legislative Information. SB 184 Health – Today’s Law As Amended