Existing law establishes the Department of Health Care Access and Information to oversee and administer various health programs, including, among others, the California Reproductive Health Equity Program. Under existing law, this program provides grant funding to safety net providers of abortion and contraception services to offset the costs of providing uncompensated care to patients with low incomes who would otherwise lack access to care. Existing law establishes the California Reproductive Health Equity Fund, and, within the limits of funds available, authorizes the department to award grants that, in the departments judgment, best promote the purposes of the program.

This bill would establish the Safe Delivery Fund Pilot Program, until January 1, 2030, which would be administered by the department to provide funding to hospitals to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services. The bill would require a hospital to meet specified requirements to qualify for the program, including, among other things, that the hospital can demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care.

This bill would establish the Safe Delivery Fund, and would require moneys in the fund to be available, upon appropriation by the Legislature, to the department for the purposes of the program. The bill would require the hospital to use the funds from the program for salaries, benefits, insurance, contracted physician compensation, contracted advanced practice provider compensation, or other expenses attributable to maintaining standby clinical capacity. The bill would require the program to reimburse a hospital quarterly based on the number of deliveries performed per day using a specified schedule. The bill would prohibit the department from awarding a hospital more than $5,000,000 per year.

This bill would require a participating hospital, by April 1, 2027, and quarterly thereafter, to submit to the department specified data, including, among other things, maintenance of specialty staffing and service availability. The bill would authorize the department to conduct annual audits or program reviews, as specified. The bill would require a hospital to meet all of the program requirements for continued participation in the program.

Existing law declares that it is the policy of the state that each county and city permit and encourage the development of sufficient numbers and types of alcohol or other drug abuse recovery or treatment facilities as are commensurate with local need. Existing law requires an alcohol or other drug abuse recovery or treatment facility that serves 6 or fewer persons to be considered a residential use of property for the purposes of local regulation, regardless of whether or not unrelated persons are living together.

This bill would make a technical, nonsubstantive change to these provisions.

GOVERNOR'S VETO

GV Bill Id:AB 1882

Author:(Ellis)

As Enrolled Ver:August 24, 2026

2/3 vote

SUMMARY

Establishes the Safe Delivery Fund Pilot Program (SDFP Program), until January 1, 2030, administered by the Department of Health Care Access and Information (HCAI) to provide funding to hospitals to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services. Requires a hospital to meet specified requirements to qualify for the program, including, among other things, that the hospital can demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care.

Governor's Veto Message

I share the author's goal of preserving access to care in geographically isolated communities, where hospitals often face financial gaps. In this year's budget, we made unprecedented investments into our hospital system - including $90 million in grant funding to financially distressed hospitals, with authority to augment this funding by an additional $50 million, $250 million dollars for public hospitals, and $10 million dollars to stand up a new healthcare stability unit within HCAI to better assist hospitals with difficult financial situations.

This bill, while well-intentioned, does not draw from any of these budget investments and instead enacts a new, complex, and unfunded hospital reimbursement program. Further, this bill would require significant technical, operational, and reporting responsibilities that would inject unnecessary bureaucratic complexity and be costly to implement.

COMMENTS

In the past decade, more than 50 labor and delivery wards have closed in California hospitals. As a result, large areas of California are without access to birthing facilities or maternity care providers. The absence of access to maternity care has disproportionally impacted California's low-income, Black, Latinx, and Indigenous populations, and those living in rural communities. When maternity wards close, particularly in rural counties, birthing people receive less prenatal care and rates of preterm birth increase. Currently, twelve California counties, most of them rural, do not have any hospitals delivering babies.

Critical Access Hospitals (CAHs). CAHs are licensed general acute care hospitals that are federally designated and certified to receive cost-based reimbursement from Medicare, which is intended to reduce hospital closures in rural areas. To be certified as a CAH, a hospital can have no more than 25 beds and must be located in a rural area and: i) more than 35 miles from another hospital; or, ii) 15 miles from another hospital in mountainous terrain or an area with only secondary roads. Other requirements include operating an emergency department, and having an annual average length of stay of 96 hours or less per patient.

Medi-Cal Hospital Reimbursement. Medi-Cal hospital reimbursement is complicated and multi-layered. First, hospitals receive different types of Medi-Cal payment depending on whether the patient they are treating is enrolled in a managed care plan or in Fee-for-Service (FFS) Medi-Cal. Second, hospitals also deliver care in different settings—inpatient, outpatient, and nursing facilities— and different reimbursement mechanisms apply to these three types of care within each of the two delivery systems (FFS and managed care). Third, a hospital's status as designated public hospital, district hospital, or private hospital determines how a hospital is paid and eligibility for supplemental payments. Finally, CAHs are treated separately for purposes of certain types of payments. Broadly speaking, hospital payments are comprised of both "base rate"—e.g., the type of payment that may correspond to an itemized bill for an episode of service—as well as supplemental payments. The term "supplemental payments" has become somewhat of a misnomer, as these payments have grown in recent years to comprise a large proportion of many hospitals' total Medi-Cal revenue.

Designated public hospitals, which include county-administered and University of California hospitals, have a reimbursement methodology that is highly specific to this class of hospital. The majority of hospitals, i.e., private hospitals or other public (district) hospitals, are paid through similar mechanisms with respect to the "base rate," but differ in their eligibility for and participation in various Medi-Cal supplemental payment programs. Medi-Cal reimbursement mechanisms that currently apply for inpatient care CAHs are described below.

Reimbursement for CAHs in Medi-Cal. In FFS Medi-Cal, inpatient services are reimbursed via a mechanism called diagnosis-related group (DRG). Within the DRG system, CAHs are eligible for a CAH-specific rate, a prospective rate that is projected to cover 95% of their costs, with costs aggregated across the class of CAHs as a whole and not on a per-hospital basis. With respect to base rates for Medi-Cal inpatient services in Medi-Cal managed care, rates are negotiated between plans and CAHs; however, the Medi-Cal FFS rate often serves as a benchmark in these negotiations. With respect to supplemental payments, a CAH is eligible for payments based on whether it is a district hospital or a private hospital. CAHs that are district hospitals participate in two inpatient supplemental payment programs, the District Hospital Directed Payment Program and the District Hospital Quality Improvement Program. CAHs that are private hospitals participate in the hospital quality assurance fee (HQAF) supplemental payment program.

This bill, in addition to the supplemental payments above, requires HCAI to provide funding to hospitals to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services.

Ridgecrest Regional Hospital. According to a 2025 California Hospital Association report (CHA report),"Maternity care in California: an environmental scan," after more than 65 years delivering babies, the Central Valley's Ridgecrest Regional Hospital shuttered labor and delivery services in the spring of 2024, due to a shortage of obstetric clinicians and an annual loss of $5 million to $6 million attributed to the high costs associated with running a labor and delivery unit and low reimbursement rates for services. Expectant moms in the community, built around the Naval Air Weapons Station China Lake, had to travel as many as two hours to deliver their babies. Emergency funding from the U.S. military has enabled services to resume for now.

According to the Author

For the residents of Ridgecrest and the workforce at China Lake Naval Air Weapons Station, Ridgecrest Regional Hospital is a lifeline. Without local access to labor and delivery, expectant mothers face dangerous multi-hour drives for basic prenatal services. This creates an untenable burden for those stationed here for our national security. The author states that this bill addresses this crisis by establishing the SDFP Program, which will provide the targeted financial support necessary to maintain 24/7 standby clinical capacity. The author concludes that this bill is a critical investment in the operational readiness of our military and the long-term health of a geographically isolated community.

Arguments in Support

Ridgecrest Regional Hospital supports this bill and states that as a provider of labor and delivery services, inpatient pediatric care, and general surgery, Ridgecrest plays a vital role in ensuring that patients in remote communities can access timely and life-saving care close to home. Notably, Ridgecrest has previously faced disruptions to its labor and delivery services due to financial pressures, underscoring the need for targeted support like that proposed in this bill. Hospitals like Ridgecrest must maintain 24/7 clinical readiness, including specialized staffing and coverage, regardless of patient volume. However, low delivery volumes in rural areas make it difficult to sustain these services under current reimbursement structures, as the high fixed "standby" costs are not adequately offset. Without targeted support, hospitals may be forced to scale back or eliminate maternity services altogether, further exacerbating access challenges for vulnerable populations. Ridgecrest notes that this bill takes a targeted approach by establishing a pilot program to offset these uncompensated standby costs. By providing funding tied to delivery volume while recognizing the need for continuous readiness, the bill helps stabilize essential services in communities where alternatives may be many miles away. Importantly, the program includes oversight and reporting requirements to ensure accountability and allow the state to evaluate its effectiveness over time. Ridgecrest concludes that ensuring access to safe, local maternity care is critical for the health and well-being of families in rural and isolated regions.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Senate Appropriations Committee:

1. The Department of Health Care Access and Information (HCAI) estimates ongoing General Fund costs of $750,000 for staffing resources and one-time General Fund costs of $600,000 in 2026-27 for vendor support.
2. Unknown General Fund costs to provide funding to participating hospitals. The bill's provisions would authorize HCAI to award up to $5 million per year per hospital during the pilot program, subject to appropriation by the Legislature.
3. Unknown potential General Fund cost pressures to expand or continue the pilot program beyond the sunset date.

VOTES

ASM HEALTH: 16-0-0

YES: Bonta, Chen, Addis, Aguiar-Curry, Ahrens, Caloza, Carrillo, Mark González, Johnson, Patel, Patterson, Rogers, Sanchez, Schiavo, Sharp-Collins, Stefani

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa

ASSEMBLY FLOOR: 77-0-3

YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lowenthal, Macedo, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas

ABS, ABST OR NV: Lee, Muratsuchi, Celeste Rodriguez

SENATE FLOOR: 39-0-1

YES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

ABS, ABST OR NV: Reyes

UPDATED

VERSION: August 24, 2026

CONSULTANT: Lara Flynn / HEALTH / (916) 319-2097 FN: 0004604

 THIRD READING  

Bill No: AB 1882

Author: Ellis (R)

Amended: 3/19/26 in Assembly

Vote: 21

SENATE HEALTH COMMITTEE: 10-0, 7/1/26

AYES: Weber Pierson, Valladares, Caballero, Durazo, Gonzalez, Grove, Menjivar, Padilla, Pérez, Smallwood-Cuevas

NO VOTE RECORDED: Rubio

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/13/26

AYES: Cervantes, Seyarto, Cabaldon, Dahle, Grayson, Richardson, Wahab

ASSEMBLY FLOOR: 77-0, 5/26/26 - See last page for vote

SUBJECT: Safe Delivery Fund Pilot Program

SOURCE: Ridgecrest Regional Hospital

DIGEST:

This bill establishes the Safe Delivery Fund Pilot Program to provide funding to critical access hospitals that meet specified requirements in order to support the cost of maintaining standby capacity for labor and delivery units that have a lower volume of baby deliveries.

ANALYSIS:

Existing law:

1. Licenses and regulates health facilities by the California Department of Public Health (CDPH), including general acute care hospitals. Permits general acute care hospitals, in addition to the basic services required to be offered under that license, to seek approval from CDPH to offer supplemental services. Defines a “supplemental service,” in regulations, as an organized inpatient or outpatient service which is not required to be provided by law or regulation. [Health and Safety Code (HSC) §1250 and 22 California Code of Regulations (CCR) §70067]
2. Defines “perinatal unit,” in regulation, as a maternity and newborn supplemental service of a hospital for the provision of care during pregnancy, labor, delivery, postpartum and neonatal periods with appropriate staff, space, equipment and supplies. [22 CCR §70545]
3. Licenses and regulates clinics by CDPH, including primary care clinics and specialty clinics. Includes alternative birth centers as a category of specialty clinic, defined as a clinic that is not part of a hospital and that provides comprehensive perinatal services and delivery care to pregnant women who remain less than 24 hours at the facility. [HSC §1200 et seq., and §1204(b)]
4. Requires a hospital, not less than 120 days prior to eliminating a supplemental service of either an inpatient psychiatric unit or a perinatal unit, to provide public notice of the proposed elimination of the supplemental service, including a notice posted at the entrance to all affected facilities, a notice to all contracted Medi-Cal managed care plans, and a notice to CDPH and the board of supervisors of the county in which the hospital is located. Requires the health facility to conduct at least one noticed public hearing within 60 days of providing public notice of the proposed elimination of the supplemental service. [HSC §1255.25(a)(3)]

This bill:

1. Establishes the Safe Delivery Fund Pilot Program (Pilot Program) within the Department of Health Care Access and Information (HCAI) to provide funding to hospitals that support standby capacity for the following specialty services:
   1. Inpatient general surgery;
   2. A licensed labor and delivery inpatient unit with nursery beds; and,
   3. Inpatient pediatrics capability;
2. Requires a hospital to meet the following requirements in order to qualify for the Pilot Program:
   1. Maintain 24-hours-per-day, 7-days-per-week, 365-days-per-year clinical readiness to provide the services consistent with state and federal licensing and certification requirements;
   2. Be a critical access hospital (CAH) that provides obstetric services;
   3. Be located at least 75 miles from the nearest tertiary hospital;
   4. Perform no more than 225 inpatient surgeries annually;
   5. Maintain active licensure with CDPH and certification from the Centers for Medicare and Medicaid Services;
   6. Maintain a valid Medi-Cal contract, including participation with county-designated Medi-Cal managed care plans, as applicable; and,
   7. Demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care.
3. Requires a hospital to use Pilot Program funds for salaries, benefits, insurance, contracted physician compensation, contracted advanced practice provider compensation, or other expenses attributable to maintaining standby clinical capacity.
4. Establishes the Safe Delivery Fund (Fund) to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services.
5. Requires moneys in the Fund to be available, upon appropriation by the Legislature, to HCAI for the purposes of this bill.
6. Prohibits HCAI from awarding a hospital more than $5 million per year.
7. Requires HCAI, on an annual basis, to calculate standby costs, in consultation with providers, using the hospital’s prior-year Medicare or Medi-Cal cost report, and to be composed of:
   1. Medicare cost-based reimbursement;
   2. Reimbursement from any other cost-based payer; and,
   3. Federal disproportionate share hospital payments attributable to the covered specialty services, as specified by HCAI.
8. Requires HCAI to calculate standby costs per delivery using a time-study methodology and relative value units, or another allocation methodology it establishes.
9. Requires the Pilot Program to reimburse a hospital quarterly based on the number of deliveries performed per day, using the following schedule:
   1. $25,000 for zero deliveries;
   2. $18,500 for one delivery;
   3. $12,000 for two deliveries;
   4. $5,500 for three deliveries; and,
   5. $0 for four or more deliveries.
10. Requires a participating hospital, by April 1, 2027 and quarterly thereafter, to submit the following data to HCAI:
    1. Number of deliveries performed per day;
    2. Maintenance of specialty staffing and service availability;
    3. Quality metrics, including at minimum three maternal and infant quality indicators to be specified by HCAI; and,
    4. Verification of costs using annual Medicare or Medi-Cal cost reports.
11. Permits HCAI to conduct audits of a participating hospital’s cost reports and to conduct annual audits or program reviews to ensure that funds are used to maintain standby specialty service capacity, and that hospitals continue to meet eligibility criteria and quality requirements.
12. Sunsets the provisions of this bill on January 1, 2030.

Comments

According to the author:

For the residents of Ridgecrest and the workforce at China Lake Naval Air Weapons Station, Ridgecrest Regional Hospital is a lifeline. Without local access to Labor and Delivery, expectant mothers face dangerous multi-hour drives for basic prenatal services. This creates an untenable burden for those stationed here for our national security. This bill addresses this crisis by establishing the Safe Delivery Fund Pilot Program, which will provide the targeted financial support necessary to maintain 24/7 standby clinical capacity. This bill is a critical investment in the operational readiness of our military and the long-term health of a geographically isolated community.

Background

Background provided by author. According to the author, hospitals serving low-volume, geographically isolated populations especially face a structural financial gap, as existing reimbursement systems are largely volume-based and do not adequately account for these continuous “standby” costs. As a result, some hospitals are at risk of reducing or discontinuing maternity and related services, which can significantly impact access to care in communities where alternative facilities may be far away. The author believes that by tying funding to delivery volume, while recognizing fixed operational needs, the Pilot Program aims to stabilize access to care in underserved regions.

Background on perinatal units in hospitals. With some exceptions, general acute care hospitals are required to provide eight basic services: medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary. Beyond these basic services, hospitals can be authorized to offer supplemental services, including outpatient services such as emergency services, or inpatient services such as intensive care, cardiovascular surgery, psychiatric units, and perinatal units, among other supplemental services.

Perinatal units are defined in regulations as a maternity and newborn service of the hospital for the provision of care during pregnancy, labor, delivery, postpartum, and neonatal periods with appropriate staff, space, equipment and supplies. The regulations pertaining to the required staff for perinatal units specify that a physician certified or eligible for certification by the American Board of Obstetrics and Gynecologists or the American Board of Pediatrics is required to have overall responsibility of the unit. If a physician with those qualifications is not available, a physician with training and experience in obstetrics and gynecology or pediatrics is permitted to administer the service, while a physician with the necessary qualifications provides consultation at a frequency that will ensure high quality service. Regulations require the physician to be responsible for providing continuous obstetric, pediatric, anesthesia, laboratory, and radiologic coverage, among other requirements. They also require one registered nurse on duty on each shift assigned to the labor and delivery suite, with sufficient additional trained personnel to assist the family, monitor and evaluate labor and assist with the delivery. One registered nurse is required to be on duty for each shift assigned to the antepartum and postpartum areas, and a registered nurse who has had training and experience in neonatal nursing is required to be responsible for the nursing care in the nursery.

CAHs. CAHs are licensed general acute care hospitals that are certified to receive cost-based reimbursement from Medicare, which is intended to reduce hospital closures in rural areas. To be certified as a CAH, a hospital can have no more than 25 beds and must be located in a rural area and: (1) more than 35 miles from another hospital; or, (2) 15 miles from another hospital in mountainous terrain or an area with only secondary roads. Other requirements include operating an emergency department and having an annual average length of stay of 96 hours or less per patient. There are 34 CAHs in California.

Sharp increase in maternity unit closures. On November 15, 2023, CalMatters published an investigative story focusing on the increase in maternity unit closures in California, titled “As Hospitals Close Labor Wards, Large Stretches of California Are Without Maternity Care.” According to this report, from 2012 to 2019, at least 19 hospitals stopped offering labor and delivery services (six of those were because the hospitals closed completely). In an acceleration, 16 more closed maternity services from 2020 to 2022. By the time of publication, 11 more had announced maternity closures in 2023, including one hospital that closed completely (Madera Community Hospital). CalMatters reported that after El Centro Regional Medical Center closed its maternity service in January of 2023, Imperial County was left with only one hospital doing births for the approximately 2,500 babies born every year in Imperial County. In total, according to CalMatters analysis, at least 46 California hospitals have shut down or suspended labor and delivery since 2012, and 27 of those have taken place in the last three years. Twelve rural counties do not have any hospitals delivering babies, and Latino and low-income communities have been hit hardest by losses. CalMatters noted that the closures come as the country and state contend with a maternal mortality crisis, with pregnancy-related deaths reaching a ten-year high in 2020 in California.

The CalMatters report stated that hospital administrators cite a number of reasons for the closures, including high costs, labor shortages, and declining birth rates. In the past 30 years, the number of births have dropped by half in California, and the birth rate is at its lowest level on record. CalMatters noted that the trend is not unique to California, with labor and delivery units closing across the country. Many closures result from hospital systems consolidating maternity care into one location, which hospitals argue can help maintain staff training and provide a higher level of care. According to CalMatters, labor and delivery units are often the second-most expensive department for hospitals to run, second only to emergency rooms, and quoted a health researcher as stating that obstetrics units are often unprofitable for hospitals to operate.

Informational letter from Naval Air Warfare Center. The Commanding Officer of the Naval Air Warfare Center Weapons Division submitted a letter providing information regarding the direct impact of local health care availability on national security operations at Naval Air Weapons Station (NAWS) China Lake. The purpose of the letter was to provide factual context between the availability of specific local healthcare services and the execution of the national security mission at the base in order to inform legislative understanding of their unique operational environment. The letter states that NAWS China Lake is a critical component of the nation’s defense infrastructure, responsible for the research, development, test, acquisition, and evaluation of the U.S. Navy’s most advanced weapons systems, and this mission is dependent on a highly specialized workforce of 600 Active Duty Sailors, 5,000 Department of Defense civilians, and 800 civilian contractors. The mission has a single point of failure for health care. A 2024 assessment identified NAWS China Lake as the only installation in the Department of War with a single supporting hospital, Ridgecrest Regional Hospital, and no alternative within a 60-minute drive. The financial fragility of this sole provider stems from a confluence of systemic challenges, and the immense fixed costs required to maintain 24/7 “standby capacity” for critical but lower-volume services cannot be sustained under standard fee-for-service models in geographically isolated areas. The letter states that preservation of this standby clinical capacity for essential services, specifically inpatient general surgery, labor and delivery, and inpatient pediatrics, is foundational to retaining their critical workforce and avoiding the severe consequences experienced during the recent temporary loss of these services. According to the letter, a September 2024 survey revealed that the health care crisis was a primary driver of attrition risk, with 22% of the workforce actively making plans to leave. Federal intervention was required to prevent the projected departure of more than 350 specialized personnel. The nine-month suspension of labor and delivery services forced hundreds of expectant mothers to travel 90 to 150 miles for care through the Mojave Desert with little cellular connectivity. More alarmingly, 15 births occurred in the emergency department without prenatal care, a complete breakdown in the standard of care. The letter states that data confirms that without mechanisms to support the unique standby costs of rural healthcare, instability in these core services acts as an existential threat to their workforce.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, HCAI estimates ongoing General Fund costs of $750,000 for staffing resources and one-time General Fund costs of $600,000 in 2026-27 for vendor support.

Unknown General Fund costs to provide funding to participating hospitals. The bill’s provisions would authorize HCAI to award up to $5 million per year per hospital during the pilot program, subject to appropriation by the Legislature.

Unknown potential General Fund cost pressures to expand or continue the pilot program beyond the sunset date.

SUPPORT: (Verified 8/13/26)

Ridgecrest Regional Hospital (source)

Department of the Navy, Military Services in California

Indian Wells Valley Economic Development Corporation

Military Services in California

Ridgecrest Area Association of Realtors

Ridgecrest Chamber of Commerce

One individual

OPPOSITION: (Verified 8/13/26)

None received

ARGUMENTS IN SUPPORT: This bill is sponsored by Ridgecrest Regional Hospital, which is a CAH serving a geographically isolated region where access to essential health service is already limited. Ridgecrest states that as a provider of labor and delivery, inpatient pediatric care, and general surgery, the hospital plays a vital role in ensuring that patients in remote communities can access timely and life-saving care close to home. Ridgecrest notes that it has previously faced disruptions to its labor and delivery services due to financial pressures, underscoring the need for targeted support as proposed by this bill. Without targeted support, hospitals may be forced to scale back or eliminate maternity services altogether, further exacerbating access challenges for vulnerable populations. By providing funding tied to delivery volume while recognizing the need for continuous readiness, this bill helps stabilize essential services in communities where alternatives may be many miles away.

ASSEMBLY FLOOR: 77-0, 5/26/26

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lowenthal, Macedo, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas

NO VOTE RECORDED: Lee, Muratsuchi, Celeste Rodriguez

Prepared by: Vincent D. Marchand / HEALTH / (916) 651-4111

8/14/26 13:33:59

**** END ****

SENATE COMMITTEE ON

Senator Sabrina Cervantes, Chair

2025 - 2026 Regular Session

AB 1882 (Ellis) - Safe Delivery Fund Pilot Program

Bill Summary:

AB 1882 would establish the Safe Delivery Fund Pilot Program.

Fiscal Impact:

• The Department of Health Care Access and Information (HCAI) estimates ongoing General Fund costs of $750,000 for staffing resources and one-time General Fund costs of $600,000 in 2026-27 for vendor support.
• Unknown General Fund costs to provide funding to participating hospitals. The bill’s provisions would authorize HCAI to award up to $5 million per year per hospital during the pilot program, subject to appropriation by the Legislature.
• Unknown potential General Fund cost pressures to expand or continue the pilot program beyond the sunset date.

Background:

General acute care hospitals are required, with some exceptions, to provide eight basic services: medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary. Beyond these basic services, hospitals can offer supplemental services, including outpatient services such as emergency services, or inpatient services such as intensive care, cardiovascular surgery, psychiatric units, and perinatal units. If the hospital operates a perinatal unit, the hospital must follow state regulations regarding the provision of care during pregnancy, labor, delivery, postpartum, and neonatal periods with appropriate staff, space, and equipment.

Critical Access Hospitals. Critical access hospitals are licensed general acute care hospitals that are certified to receive cost-based reimbursement from the federal Medicare program, which is intended to reduce hospital closures in rural areas. To be certified as a critical access hospital, a hospital can have no more than 25 beds, must be located in a rural area, and be more than 35 miles from another hospital or more than 15 miles from another hospital in mountainous terrain or an area with only secondary roads. Critical access hospitals must provide emergency care services and have an annual average length of stay of 96 hours or less per patient.

Standby Perinatal Services Pilot Program. Current law requires the California Department of Public Health to establish a pilot project to allow participating critical access hospitals to establish “standby perinatal services.” Under the pilot program, “standby perinatal services” means the provision of obstetric and neonatal medical care to patients who are transferred from an alternative birth center, or who present to the hospital’s emergency department with an urgent or emergent obstetric issue, in a specifically designated area of the hospital that is equipped and maintained at all times to receive patients and capable of providing physician, midwifery, and nursing services within a reasonable time not to exceed 30 minutes.

Proposed Law:

Specific provisions of the bill would:

• Establish the Safe Delivery Fund Pilot Program within the HCAI; and specify that the purpose of the program is to provide funding to hospitals that support standby capacity in a hospital for all of the following specialty services:
  • Inpatient general surgery.
  • A licensed labor and delivery inpatient unit with nursery beds.
  • Inpatient pediatrics capability.
• Require that, to qualify for the program, a hospital must meet all of the following:
  • Maintain 24-hours-per-day, 7-days-per-week, 365-days-per-year clinical readiness to provide the services described above consistent with state and federal licensing and certification requirements.
  • Be a critical access hospital that provides obstetric services.
  • Be located at least 75 miles from the nearest tertiary hospital.
  • Perform no more than 225 inpatient surgeries annually.
  • Maintain active licensure with the California Department of Public Health and certification with the federal Centers for Medicare and Medicaid Services.
  • Maintain a valid Medi-Cal contract, including participation with the county-designated Medi-Cal managed care plans, as applicable.
  • Demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care.
• Establish the Safe Delivery Fund to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services; provide that moneys in the fund be available, upon appropriation by the Legislature, to the HCAI for these purposes; and limit a hospital award to no more than $5,000,000 per year.
• Require the HCAI to calculate standby costs, as specified; require the program to reimburse a hospital quarterly based on the number of deliveries performed per day, using a specified schedule; and authorize the HCAI to conduct audits, as specified.
• Sunset the provisions on January 1, 2030.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Akilah Weber Pierson, Chair

BILL NO: AB 1882

SUBJECT: Safe Delivery Fund Pilot Program

SUMMARY:

Establishes the Safe Delivery Fund Pilot Program to provide funding to critical access hospitals that meet specified requirements in order to support the cost of maintaining standby capacity for labor and delivery units that have a lower volume of baby deliveries.

Existing law:

1. Licenses and regulates health facilities by the California Department of Public Health (CDPH), including general acute care hospitals. Permits general acute care hospitals, in addition to the basic services required to be offered under that license, to seek approval from CDPH to offer supplemental services. Defines a “supplemental service,” in regulations, as an organized inpatient or outpatient service which is not required to be provided by law or regulation. [HSC §1250 and 22 CCR §70067]
2. Defines “perinatal unit,” in regulation, as a maternity and newborn supplemental service of a hospital for the provision of care during pregnancy, labor, delivery, postpartum and neonatal periods with appropriate staff, space, equipment and supplies. [22 CCR §70545]
3. Licenses and regulates clinics by CDPH, including primary care clinics and specialty clinics. Includes alternative birth centers as a category of specialty clinic, defined as a clinic that is not part of a hospital and that provides comprehensive perinatal services and delivery care to pregnant women who remain less than 24 hours at the facility. [HSC §1200 et seq., and §1204(b)]
4. Requires a hospital, not less than 120 days prior to eliminating a supplemental service of either an inpatient psychiatric unit or a perinatal unit, to provide public notice of the proposed elimination of the supplemental service, including a notice posted at the entrance to all affected facilities, a notice to all contracted Medi-Cal managed care plans, and a notice to CDPH and the board of supervisors of the county in which the hospital is located. Requires the health facility to conduct at least one noticed public hearing within 60 days of providing public notice of the proposed elimination of the supplemental service. [HSC §1255.25(a)(3)]

This bill:

1. Establishes the Safe Delivery Fund Pilot Program (Pilot Program) within the Department of Health Care Access and Information (HCAI) to provide funding to hospitals that support standby capacity for the following specialty services:
   1. Inpatient general surgery;
   2. A licensed labor and delivery inpatient unit with nursery beds; and,
   3. Inpatient pediatrics capability;
2. Requires a hospital to meet the following requirements in order to qualify for the Pilot Program:
   1. Maintain 24-hours-per-day, 7-days-per-week, 365-days-per-year clinical readiness to provide the services consistent with state and federal licensing and certification requirements;
   2. Be a critical access hospital (CAH) that provides obstetric services;
   3. Be located at least 75 miles from the nearest tertiary hospital;
   4. Perform no more than 225 inpatient surgeries annually;
   5. Maintain active licensure with CDPH and certification from the Centers for Medicare and Medicaid Services;
   6. Maintain a valid Medi-Cal contract, including participation with county-designated Medi-Cal managed care plans, as applicable; and,
   7. Demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care.
3. Requires a hospital to use Pilot Program funds for salaries, benefits, insurance, contracted physician compensation, contracted advanced practice provider compensation, or other expenses attributable to maintaining standby clinical capacity.
4. Establishes the Safe Delivery Fund (Fund) to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services.
5. Requires moneys in the Fund to be available, upon appropriation by the Legislature, to HCAI for the purposes of this bill.
6. Prohibits HCAI from awarding a hospital more than $5 million per year.
7. Requires HCAI, on an annual basis, to calculate standby costs, in consultation with providers, using the hospital’s prior-year Medicare or Medi-Cal cost report, and to be composed of:
   1. Medicare cost-based reimbursement;
   2. Reimbursement from any other cost-based payer; and,
   3. Federal disproportionate share hospital payments attributable to the covered specialty services, as specified by HCAI.
8. Requires HCAI to calculate standby costs per delivery using a time-study methodology and relative value units, or another allocation methodology it establishes.
9. Requires the Pilot Program to reimburse a hospital quarterly based on the number of deliveries performed per day, using the following schedule:
   1. $25,000 for zero deliveries;
   2. $18,500 for one delivery;
   3. $12,000 for two deliveries;
   4. $5,500 for three deliveries; and,
   5. $0 for four or more deliveries.
10. Requires a participating hospital, by April 1, 2027 and quarterly thereafter, to submit the following data to HCAI:
    1. Number of deliveries performed per day;
    2. Maintenance of specialty staffing and service availability;
    3. Quality metrics, including at minimum three maternal and infant quality indicators to be specified by HCAI; and,
    4. Verification of costs using annual Medicare or Medi-Cal cost reports.
11. Permits HCAI to conduct audits of a participating hospital’s cost reports and to conduct annual audits or program reviews to ensure that funds are used to maintain standby specialty service capacity, and that hospitals continue to meet eligibility criteria and quality requirements.
12. Sunsets the provisions of this bill on January 1, 2030.

FISCAL EFFECT:

According to the Assembly Appropriations Committee, General Fund cost pressures in the millions of dollars per year. The author has requested an allocation of up to $5 million annually to fund this bill as a pilot program. Costs to HCAI to administer the program could be in the hundreds of thousands to low millions, depending on how many hospitals participate.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, for the residents of Ridgecrest and the workforce at China Lake Naval Air Weapons Station, Ridgecrest Regional Hospital is a lifeline. Without local access to Labor and Delivery, expectant mothers face dangerous multi-hour drives for basic prenatal services. This creates an untenable burden for those stationed here for our national security. This bill addresses this crisis by establishing the Safe Delivery Fund Pilot Program, which will provide the targeted financial support necessary to maintain 24/7 standby clinical capacity. This bill is a critical investment in the operational readiness of our military and the long-term health of a geographically isolated community.
2. Background provided by author and budget request. According to the author, hospitals serving low-volume, geographically isolated populations especially face a structural financial gap, as existing reimbursement systems are largely volume-based and do not adequately account for these continuous “standby” costs. As a result, some hospitals are at risk of reducing or discontinuing maternity and related services, which can significantly impact access to care in communities where alternative facilities may be far away. The author believes that by tying funding to delivery volume, while recognizing fixed operational needs, the Pilot Program aims to stabilize access to care in underserved regions. The author did submit a funding request for the 2026-2027 state budget to support the Pilot Program proposed by this bill. Specifically, the author requested an appropriation of up to $5 million annually per eligible hospital, through January 1, 2030, consistent with the funding structured in this bill.
3. Background on perinatal units in hospitals. With some exceptions, general acute care hospitals are required to provide eight basic services: medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary. Beyond these basic services, hospitals can be authorized to offer supplemental services, including outpatient services such as emergency services, or inpatient services such as intensive care, cardiovascular surgery, psychiatric units, and perinatal units, among other supplemental services.
   
   Perinatal units are defined in regulations as a maternity and newborn service of the hospital for the provision of care during pregnancy, labor, delivery, postpartum, and neonatal periods with appropriate staff, space, equipment and supplies. The regulations pertaining to the required staff for perinatal units specify that a physician certified or eligible for certification by the American Board of Obstetrics and Gynecologists or the American Board of Pediatrics is required to have overall responsibility of the unit. If a physician with those qualifications is not available, a physician with training and experience in obstetrics and gynecology or pediatrics is permitted to administer the service, while a physician with the necessary qualifications provides consultation at a frequency that will ensure high quality service. Regulations require the physician to be responsible for providing continuous obstetric, pediatric, anesthesia, laboratory, and radiologic coverage, among other requirements. They also require one registered nurse on duty on each shift assigned to the labor and delivery suite, with sufficient additional trained personnel to assist the family, monitor and evaluate labor and assist with the delivery. One registered nurse is required to be on duty for each shift assigned to the antepartum and postpartum areas, and a registered nurse who has had training and experience in neonatal nursing is required to be responsible for the nursing care in the nursery.
   
4. CAHs. CAHs are licensed general acute care hospitals that are certified to receive cost-based reimbursement from Medicare, which is intended to reduce hospital closures in rural areas. To be certified as a CAH, a hospital can have no more than 25 beds and must be located in a rural area and: (1) more than 35 miles from another hospital; or, (2) 15 miles from another hospital in mountainous terrain or an area with only secondary roads. Other requirements include operating an emergency department and having an annual average length of stay of 96 hours or less per patient. There are 34 CAHs in California.
5. Sharp increase in maternity unit closures. On November 15, 2023, CalMatters published an investigative story focusing on the increase in maternity unit closures in California, titled “As Hospitals Close Labor Wards, Large Stretches of California Are Without Maternity Care.” According to this report, from 2012 to 2019, at least 19 hospitals stopped offering labor and delivery services (six of those were because the hospitals closed completely). In an acceleration, 16 more closed maternity services from 2020 to 2022. By the time of publication, 11 more had announced maternity closures in 2023, including one hospital that closed completely (Madera Community Hospital). CalMatters reported that after El Centro Regional Medical Center closed its maternity service in January of 2023, Imperial County was left with only one hospital doing births for the approximately 2,500 babies born every year in Imperial County. In total, according to CalMatters analysis, at least 46 California hospitals have shut down or suspended labor and delivery since 2012, and 27 of those have taken place in the last three years. Twelve rural counties do not have any hospitals delivering babies, and Latino and low-income communities have been hit hardest by losses. CalMatters noted that the closures come as the country and state contend with a maternal mortality crisis, with pregnancy-related deaths reaching a ten-year high in 2020 in California.
   
   The CalMatters report stated that hospital administrators cite a number of reasons for the closures, including high costs, labor shortages, and declining birth rates. In the past 30 years, the number of births have dropped by half in California, and the birth rate is at its lowest level on record. CalMatters noted that the trend is not unique to California, with labor and delivery units closing across the country. Many closures result from hospital systems consolidating maternity care into one location, which hospitals argue can help maintain staff training and provide a higher level of care. According to CalMatters, labor and delivery units are often the second-most expensive department for hospitals to run, second only to emergency rooms, and quoted a health researcher as stating that obstetrics units are often unprofitable for hospitals to operate.
   
   On February 8, 2024, Adventist Health Simi Valley announced it was closing its labor and delivery department and neonatal intensive care unit effective May 8, 2024. Adventist stated that births had declined by 25% at the hospital and it could no longer sustain the service. Adventist noted that Ventura County births dropped from 19 per 1,000 in 1990 to 10.5 per 1,000 in 2021. Earlier this year, Alameda Health System, which recently acquired St. Rose Hospital in Hayward, announced it was “temporarily suspending” its birthing center at St. Rose on February 18, for 12 to 18 months as they work to evaluate and improve birthing services.
6. Distressed Hospital Loan Program (DHLP). The DHLP was established through AB 112 (Committee on Budget, Chapter 6, Statutes of 2023), following the closure of Madera Community Hospital, in an effort to prevent further hospital closures and to help facilitate the reopening of Madera. AB 112 initially funded the DHLP at $150 million, but an additional $150 million was later appropriated to make it a $300 million loan program. After development of an application process and reviewing applications from 30 hospitals, HCAI awarded loans to 17 hospitals. Under the terms of the DHLP, the loans are interest free, and hospitals are to begin making monthly payments 18 months following disbursement of the loan. The loans are required to be repaid within 72 months of the date of the loan. The DHLP also required HCAI to develop, in consultation with the California Health Facilities Financing Authority (CHFFA), and upon the approval of the Department of Finance, a process for hospitals who received DHLP loans to request forgiveness or loan modifications. On February 3, 2025, HCAI and CHFFA began accepting applications for loan modifications for a 12-month extension of the loan payment deferral period.
7. Informational letter from Naval Air Warfare Center. The Commanding Officer of the Naval Air Warfare Center Weapons Division submitted a letter providing information regarding the direct impact of local health care availability on national security operations at Naval Air Weapons Station (NAWS) China Lake. The purpose of the letter was to provide factual context between the availability of specific local healthcare services and the execution of the national security mission at the base in order to inform legislative understanding of their unique operational environment. The letter states that NAWS China Lake is a critical component of the nation’s defense infrastructure, responsible for the research, development, test, acquisition, and evaluation of the U.S. Navy’s most advanced weapons systems, and this mission is dependent on a highly specialized workforce of 600 Active Duty Sailors, 5,000 Department of Defense civilians, and 800 civilian contractors. The mission has a single point of failure for health care. A 2024 assessment identified NAWS China Lake as the only installation in the Department of War with a single supporting hospital, Ridgecrest Regional Hospital, and no alternative within a 60-minute drive. The financial fragility of this sole provider stems from a confluence of systemic challenges, and the immense fixed costs required to maintain 24/7 “standby capacity” for critical but lower-volume services cannot be sustained under standard fee-for-service models in geographically isolated areas. The letter states that preservation of this standby clinical capacity for essential services, specifically inpatient general surgery, labor and delivery, and inpatient pediatrics, is foundational to retaining their critical workforce and avoiding the severe consequences experienced during the recent temporary loss of these services. According to the letter, a September 2024 survey revealed that the health care crisis was a primary driver of attrition risk, with 22% of the workforce actively making plans to leave. Federal intervention was required to prevent the projected departure of more than 350 specialized personnel. The nine-month suspension of labor and delivery services forced hundreds of expectant mothers to travel 90 to 150 miles for care through the Mojave Desert with little cellular connectivity. More alarmingly, 15 births occurred in the emergency department without prenatal care, a complete breakdown in the standard of care. The letter states that data confirms that without mechanisms to support the unique standby costs of rural healthcare, instability in these core services acts as an existential threat to their workforce.
8. Related legislation. AB 1923 (Soria) revises the DHLP by expanding eligibility to any hospital, regardless of ownership type or system affiliation, and to require loan forgiveness to prior recipients of loans under this program if financial projections demonstrate that the participant will become financially distressed as a result of loan repayments under the program or other outside factors such as the impacts of HR 1. AB 1923 is set for hearing on July 1^st in this Committee.
9. Prior legislation. AB 108 (Gabriel, Chapter 8, Statutes of 2026) was a Budget Bill Junior which increases a General Fund appropriation in the Budget Act of 2025, in this case to provide $25 million to support grants to hospitals in immediate and significant financial distress, defined as those with less than ten days cash on hand.
   
   SB 32 (Weber Pierson of 2025) would have required the Department of Managed Health Care, the Department of Insurance, and the Department of Health Care Services to consult with stakeholders to develop and adopt standards for the geographic accessibility of perinatal units to ensure timely access for enrollees and insureds. SB 32 was held on the Assembly Appropriations Committee suspense file.
   

AB 55 (Bonta, Chapter 595, Statutes of 2025) removes the requirement that an alternative birth center be a comprehensive perinatal services provider as a condition of licensure, and a condition for Medi-Cal reimbursement. AB 55 removes the requirement that an alternative birth center be 30 minutes from a hospital.

SB 1300 (Cortese, Chapter 894, Statutes of 2024) extends the public notice requirement when a health facility eliminates a supplemental service, currently 90 days prior to elimination of the service, to instead be 120 days when it involves the closure of either inpatient psychiatric services or perinatal services, expands the notice of closure to include data on the patients served and a justification for the decision to eliminate services, and requires the hospital to hold a public hearing within 60 days of providing the notice.

AB 1895 (Weber of 2024) would have required a hospital that operates a perinatal unit, and expects challenges in the next six months that may result in a reduction or loss of perinatal services, to make a report to HCAI, and for HCAI to forward this report to relevant state departments and to the Chairs of the Senate and Assembly Health Committees, but otherwise required this report to be kept confidential. AB 1896 would have required HCAI to do a community impact assessment of a potential closure within 90 days of receiving a report from a hospital, and to share this impact assessment with state agencies and the two policy committee chairs, but otherwise required this impact assessment to be kept confidential unless the hospital announces a closure of the perinatal services. AB 1895 was vetoed by the Governor, who stated in part: “…current law already requires hospitals to provide public notice in advance of a supplemental service elimination, and much of the information in the proposed community impact report is duplicative. Further, this bill creates costly administrative burdens for the state that are unlikely to change hospitals' business decisions.”

SB 45 (Roth of 2023) would have established the California Acute Care Psychiatric Hospital Loan Fund to provide zero-interest loans to qualifying county applicants for the purpose of constructing or renovating acute care psychiatric hospitals or psychiatric health facilities, or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit. SB 45 was held on the Assembly Appropriations Committee suspense file.

AB 112 (Committee on Budget, Chapter 6, Statutes of 2023) establishes the DHLP to provide interest free cash-flow loans to not-for-profit hospitals and public hospitals, as defined, in significant financial distress, or to governmental entities representing closed hospitals. Requires HCAI to administer the DHLP and to enter into an interagency agreement with CHFFA to implement the DHLP.

1. Support. This bill is sponsored by Ridgecrest Regional Hospital, which is a CAH serving a geographically isolated region where access to essential health service is already limited. Ridgecrest states that as a provider of labor and delivery, inpatient pediatric care, and general surgery, the hospital plays a vital role in ensuring that patients in remote communities can access timely and life-saving care close to home. Ridgecrest notes that it has previously faced disruptions to its labor and delivery services due to financial pressures, underscoring the need for targeted support as proposed by this bill. Without targeted support, hospitals may be forced to scale back or eliminate maternity services altogether, further exacerbating access challenges for vulnerable populations. By providing funding tied to delivery volume while recognizing the need for continuous readiness, this bill helps stabilize essential services in communities where alternatives may be many miles away.

SUPPORT AND OPPOSITION:

Support: Ridgecrest Regional Hospital (sponsor)

Department of the Navy, Military Services in California
Indian Wells Valley Economic Development Corporation
Military Services in California
Ridgecrest Area Association of Realtors
Ridgecrest Chamber of Commerce
One individual

Oppose: None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1882

Author:(Ellis)

As Amended Ver:March 19, 2026

Majority vote

SUMMARY

Establishes the Safe Delivery Fund Pilot Program (SDFP Program), until January 1, 2030, administered by the Department of Health Care Access and Information (HCAI) to provide funding to hospitals to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services. Requires a hospital to meet specified requirements to qualify for the program, including, among other things, that the hospital can demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care.

Major Provisions

COMMENTS

In the past decade, more than 50 labor and delivery wards have closed in California hospitals. As a result, large areas of California are without access to birthing facilities or maternity care providers. The absence of access to maternity care has disproportionally impacted California's low-income, Black, Latinx, and Indigenous populations, and those living in rural communities. When maternity wards close, particularly in rural counties, birthing people receive less prenatal care and rates of preterm birth increase. Currently, twelve California counties, most of them rural, do not have any hospitals delivering babies.

Maternity care in California. According to the California Health Care Foundation's 2023 Health Care report, "Maternity Care in California," access to quality maternal care is essential for positive birth outcomes. In California, 46,000 women age 15 to 44 live in counties with no hospitals with obstetrics care or birth centers, and an additional 76,000 live in counties with only one hospital with obstetrics care or a birth center. Fifty-one thousand women age 18 to 44 live in counties with fewer than 29 obstetricians or certified nurse midwives per 10,000 births. In 2021, births to Latina/x mothers and birthing people made up nearly half of all births in the state, at just under 200,000 births. About three in 10 births in California were to mothers or birthing people born outside the United States.

Critical Access Hospitals (CAHs). CAHs are licensed general acute care hospitals that are federally designated and certified to receive cost-based reimbursement from Medicare, which is intended to reduce hospital closures in rural areas. To be certified as a CAH, a hospital can have no more than 25 beds and must be located in a rural area and: i) more than 35 miles from another hospital; or, ii) 15 miles from another hospital in mountainous terrain or an area with only secondary roads. Other requirements include operating an emergency department, and having an annual average length of stay of 96 hours or less per patient.

Medi-Cal Hospital Reimbursement. Medi-Cal hospital reimbursement is complicated and multi-layered. First, hospitals receive different types of Medi-Cal payment depending on whether the patient they are treating is enrolled in a managed care plan or in Fee-for-Service (FFS) Medi-Cal. Second, hospitals also deliver care in different settings—inpatient, outpatient, and nursing facilities— and different reimbursement mechanisms apply to these three types of care within each of the two delivery systems (FFS and managed care). Third, a hospital's status as designated public hospital, district hospital, or private hospital determines how a hospital is paid and eligibility for supplemental payments. Finally, CAHs are treated separately for purposes of certain types of payments. Broadly speaking, hospital payments are comprised of both "base rate"—e.g., the type of payment that may correspond to an itemized bill for an episode of service—as well as supplemental payments. The term "supplemental payments" has become somewhat of a misnomer, as these payments have grown in recent years to comprise a large proportion of many hospitals' total Medi-Cal revenue.

Designated public hospitals, which include county-administered and University of California hospitals, have a reimbursement methodology that is highly specific to this class of hospital. The majority of hospitals, i.e., private hospitals or other public (district) hospitals, are paid through similar mechanisms with respect to the "base rate," but differ in their eligibility for and participation in various Medi-Cal supplemental payment programs. Medi-Cal reimbursement mechanisms that currently apply for inpatient care CAHs are described below.

Reimbursement for CAHs in Medi-Cal. In FFS Medi-Cal, inpatient services are reimbursed via a mechanism called diagnosis-related group (DRG). Within the DRG system, CAHs are eligible for a CAH-specific rate, a prospective rate that is projected to cover 95% of their costs, with costs aggregated across the class of CAHs as a whole and not on a per-hospital basis. With respect to base rates for Medi-Cal inpatient services in Medi-Cal managed care, rates are negotiated between plans and CAHs; however, the Medi-Cal FFS rate often serves as a benchmark in these negotiations. With respect to supplemental payments, a CAH is eligible for payments based on whether it is a district hospital or a private hospital. CAHs that are district hospitals participate in two inpatient supplemental payment programs, the District Hospital Directed Payment Program and the District Hospital Quality Improvement Program. CAHs that are private hospitals participate in the hospital quality assurance fee (HQAF) supplemental payment program.

This bill, in addition to the supplemental payments above, requires HCAI to provide funding to hospitals to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services.

Ridgecrest Regional Hospital. According to a 2025 California Hospital Association report (CHA report),"Maternity care in California: an environmental scan," after more than 65 years delivering babies, the Central Valley's Ridgecrest Regional Hospital shuttered labor and delivery services in the spring of 2024, due to a shortage of obstetric clinicians and an annual loss of $5 million to $6 million attributed to the high costs associated with running a labor and delivery unit and low reimbursement rates for services. Expectant moms in the community, built around the Naval Air Weapons Station China Lake, had to travel as many as two hours to deliver their babies. Emergency funding from the U.S. military has enabled services to resume for now.

According to the Author

For the residents of Ridgecrest and the workforce at China Lake Naval Air Weapons Station, Ridgecrest Regional Hospital is a lifeline. Without local access to labor and delivery, expectant mothers face dangerous multi-hour drives for basic prenatal services. This creates an untenable burden for those stationed here for our national security. The author states that this bill addresses this crisis by establishing the SDFP Program, which will provide the targeted financial support necessary to maintain 24/7 standby clinical capacity. The author concludes that this bill is a critical investment in the operational readiness of our military and the long-term health of a geographically isolated community.

Arguments in Support

Ridgecrest Regional Hospital supports this bill and states that as a provider of labor and delivery services, inpatient pediatric care, and general surgery, Ridgecrest plays a vital role in ensuring that patients in remote communities can access timely and life-saving care close to home. Notably, Ridgecrest has previously faced disruptions to its labor and delivery services due to financial pressures, underscoring the need for targeted support like that proposed in this bill. Hospitals like Ridgecrest must maintain 24/7 clinical readiness, including specialized staffing and coverage, regardless of patient volume. However, low delivery volumes in rural areas make it difficult to sustain these services under current reimbursement structures, as the high fixed "standby" costs are not adequately offset. Without targeted support, hospitals may be forced to scale back or eliminate maternity services altogether, further exacerbating access challenges for vulnerable populations. Ridgecrest notes that this bill takes a targeted approach by establishing a pilot program to offset these uncompensated standby costs. By providing funding tied to delivery volume while recognizing the need for continuous readiness, the bill helps stabilize essential services in communities where alternatives may be many miles away. Importantly, the program includes oversight and reporting requirements to ensure accountability and allow the state to evaluate its effectiveness over time. Ridgecrest concludes that ensuring access to safe, local maternity care is critical for the health and well-being of families in rural and isolated regions.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, General Fund cost pressures in the millions of dollars per year. The author has requested an allocation of up to $5 million annually to fund this bill as a pilot program. Costs to HCAI to administer the program could be in the hundreds of thousands to low millions, depending on how many hospitals participate.

VOTES

ASM HEALTH: 16-0-0

YES: Bonta, Chen, Addis, Aguiar-Curry, Ahrens, Caloza, Carrillo, Mark González, Johnson, Patel, Patterson, Rogers, Sanchez, Schiavo, Sharp-Collins, Stefani

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa

UPDATED

VERSION: March 19, 2026

CONSULTANT: Lara Flynn / HEALTH / (916) 319-2097 FN: 0002885

Date of Hearing: May 6, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 1882

Author:(Ellis) – As Amended Ver:March 19, 2026

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the Department of Health Care Access and Information (HCAI) provide funding to hospitals to offset uncompensated standby costs associated with maintaining inpatient general surgery, labor and delivery, and inpatient pediatrics capacity. The bill establishes the Safe Delivery Fund (Fund), and requires moneys in the fund to be available, upon appropriation, to HCAI to award to hospitals in amounts not to exceed $5 million per year.

Specifically, this bill:

1. Establishes the Safe Delivery Fund Pilot Program (SDFP Program) within HCAI to provide funding to hospitals that support standby capacity for all of the following specialty services:
   
   1. Inpatient general surgery.
      
   2. A licensed labor and delivery inpatient unit with nursery beds.
      
   3. Inpatient pediatrics capability.
      
2. Requires a hospital, to qualify for the program, do all the following:
   
   1. Maintain 24-hours-per-day, 365-days-per-year clinical readiness to provide the services described in item 1, above, consistent with state and federal requirements.
      
   2. Be a critical access hospital that provides obstetric services.
      
   3. Be located at least 75 miles from the nearest tertiary care hospital.
      
   4. Perform no more than 225 inpatient surgeries annually.
      
   5. Maintain a valid Medi-Cal contract, including participation with the county-designated Medi-Cal managed care plans, as applicable.
      
   6. Demonstrate the hospital serves a geographically isolated population and loss of obstetric services would significantly impact access to maternity care.
      
3. Requires a hospital to use the funds from the SDFP Program for salaries, benefits, insurance, contracted physician compensation, contracted advanced practice provider compensation, or other expenses attributable to maintaining standby clinical capacity.
   
4. Establishes the Safe Delivery Fund, the primary purpose of which is to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services.
   
5. Requires moneys in the fund to be available, upon appropriation by the Legislature, to HCAI for the purposes of this bill.
   
6. Prohibits HCAI from awarding a hospital more than five million dollars ($5,000,000) per year.
   
7. Requires HCAI to annually calculate standby costs, in consultation with providers, using the hospital’s prior-year Medicare or Medi-Cal cost report, as specified, and standby costs per delivery.
   
8. Requires the SDFP Program to reimburse a hospital quarterly based on the number of deliveries performed per day, as follows: $25,000 for zero deliveries; $18,500 for one delivery, $12,000 for two deliveries; $5,500 for three deliveries; and $0 for four or more deliveries per day.
   
9. Authorizes HCAI to conduct audits of a participating hospital’s cost reports and requires, by April 1, 2027, and quarterly thereafter, a participating hospital to submit to HCAI specified data.
10. Authorizes HCAI to conduct annual audits or program reviews to ensure funds are used to maintain standby specialty service capacity and hospitals continue to meet eligibility criteria and quality requirements.
    
11. Requires a hospital to meet all program requirements to continue to participate in the program.
    
12. Sunsets on January 1, 2030.

FISCAL EFFECT:

General Fund cost pressures in the millions of dollars per year. The author has requested an allocation of up to $5 million annually to fund this bill as a pilot program. Costs to HCAI to administer the program could be in the hundreds of thousands to low millions, depending on how many hospitals participate.

The Legislative Analyst’s Office recently warned of General Fund structural deficits of around $35 billion per year in the 2027-28 fiscal year and ongoing.

COMMENTS:

1. Purpose. This bill is sponsored by Ridgecrest Regional Hospital. According to the author:

For the residents of Ridgecrest and the workforce at China Lake Naval Air Weapons Station, Ridgecrest Regional Hospital is a lifeline. Without local access to Labor and Delivery, expectant mothers face dangerous multi-hour drives for basic prenatal services. This creates an untenable burden for those stationed here for our national security. [This bill] addresses this crisis by establishing the Safe Delivery Fund Pilot Program, which will provide the targeted financial support necessary to maintain 24/7 standby clinical capacity. This bill critical investment in the operational readiness of our military and the long-term health of a geographically isolated community.

1. Background. In the past decade, more than 50 labor and delivery wards have closed in California hospitals. As a result, large areas lack access to birthing facilities or maternity care providers. Twelve California counties, most of them rural, do not have any hospitals delivering babies. In 2023, CalMatters reported that, from 2012 to 2019, at least 19 hospitals stopped offering labor and delivery services (six of these hospitals closed completely).
   
   Hospital administrators cite several reasons for the closures, including high costs, labor shortages, and declining birth rates. In the past 30 years, the number of births has dropped by half in California, and the birth rate is at its lowest level on record. According to the Assembly Health Committee analysis, many closures result from hospital systems consolidating maternity care into one location, which hospitals argue can help maintain staff training and provide a higher level of care. According to CalMatters, labor and delivery units are often the second most expensive department for hospitals to run.
   
   According to a 2025 California Hospital Association report, after more than 65 years delivering babies, the Central Valley’s Ridgecrest Regional Hospital shuttered labor and delivery services in the spring of 2024, due to a shortage of obstetric clinicians and annual losses of $5 million to $6 million attributed to the high costs of running a labor and delivery unit and low reimbursement rates. Expectant mothers in the community, which is built around the China Lake Naval Air Weapons Station, had to travel up to two hours to deliver babies. Emergency funding from the U.S. military has enabled services to resume for now.
   
2. Related Legislation. AB 1923 (Soria) makes a hospital, regardless of ownership type or system affiliation eligible for state assistance under the Distressed Hospital Loan Program (DHLP), changes criteria for loan forgiveness in the DHLP, and appropriates $300 million from the General Fund to the DHLP to provide additional rounds of funding to hospitals in financial distress. AB 1923 is pending in this committee.
3. Prior Legislation. SB 669 (McGuire), Chapter 603, Statutes of 2025, requires the California Department of Public Health to establish a five-year pilot project to allow critical access and individual and small system rural hospitals to establish standby perinatal medical services. It also requires a participating hospital to be greater than 60 minutes from the nearest hospital providing full maternity services and not have closed a full maternity or labor and delivery department on or after January 1, 2025.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: April 21, 2026

ASSEMBLY COMMITTEE ON HEALTH

Mia Bonta, Chair

ABPCA Bill Id:AB 1882

Author:(Ellis) – As Amended Ver:March 19, 2026

SUBJECT: Safe Delivery Fund Pilot Program.

SUMMARY: Establishes the Safe Delivery Fund Pilot Program (SDFP Program), until January 1, 2030, administered by the Department of Health Care Access and Information (HCAI) to provide funding to hospitals to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services. Requires a hospital to meet specified requirements to qualify for the program, including, among other things, that the hospital can demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care. Specifically, this bill:

1. Establishes the SDFP Program within HCAI to provide funding to hospitals that support standby capacity in a hospital for all of the following specialty services:
   1. Inpatient general surgery;
   2. A licensed labor and delivery inpatient unit with nursery beds; and,
   3. Inpatient pediatrics capability.
2. Requires a hospital, to qualify for the program, to meet all of the following:
   1. Maintain 24-hours-per-day, 7-days-per-week, 365-days-per-year clinical readiness to provide the services described 1) above, consistent with state and federal licensing and certification requirements;
   2. Be a critical access hospital (CAH) that provides obstetric services;
   3. Be located at least 75 miles from the nearest tertiary hospital;
   4. Perform no more than 225 inpatient surgeries annually;
   5. Maintain active licensure with the State Department of Public Health (DPH) and certification with the federal Centers for Medicare and Medicaid Services (CMS);
   6. Maintain a valid Medi-Cal contract, including participation with the county-designated Medi-Cal managed care plans, as applicable; and,
   7. Demonstrate that the hospital serves a geographically isolated population and that loss of obstetric services would significantly impact access to maternity care.
3. Requires a hospital to use the funds from the SDFP Program for salaries, benefits, insurance, contracted physician compensation, contracted advanced practice provider compensation, or other expenses attributable to maintaining standby clinical capacity.
4. Establishes the Safe Delivery Fund the primary purpose of which is to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services.
5. Requires moneys in the fund to be available, upon appropriation by the Legislature, to the HCAI for the purposes of this bill.
6. Prohibits HCAI from awarding a hospital more than five million dollars ($5,000,000) per year.
7. Requires HCAI, on an annual basis, to calculate standby costs, in consultation with providers, using the hospital’s prior-year Medicare or Medi-Cal cost report, and to be composed of all of the following:
   1. Medicare cost-based reimbursement;
   2. Reimbursement from any other cost-based payer; and,
   3. Federal disproportionate share hospital payments attributable to the covered specialty services, as specified by HCAI.
8. Authorizes HCAI to calculate standby costs per delivery using a time-study methodology and relative value units, or another allocation methodology established by HCAI.
9. Requires the SDFP Program to reimburse a hospital quarterly based on the number of deliveries performed per day, using the following schedule:
   1. Twenty-five thousand dollars ($25,000) for zero deliveries;
   2. Eighteen thousand five hundred dollars ($18,500) for one delivery;
   3. Twelve thousand dollars ($12,000) for two deliveries;
   4. Five thousand five hundred dollars ($5,500) for three deliveries;
   5. Zero dollars ($0) for four or more deliveries.
10. Authorizes HCAI to conduct audits of a participating hospital’s cost reports.
11. Requires, by April 1, 2027, and quarterly thereafter, a participating hospital to submit to HCAI all of the following data:
    1. Number of deliveries performed per day;
    2. Maintenance of specialty staffing and service availability;
    3. Quality metrics, including at minimum three maternal and infant quality indicators to be specified by HCAI; and,
    4. Verification of costs using annual Medicare or Medi-Cal cost reports.
12. Authorizes HCAI to conduct annual audits or program reviews to ensure both of the following:
    1. Funds are used to maintain standby specialty service capacity; and,
    2. Hospitals continue to meet eligibility criteria and quality requirements.
13. Requires a hospital to meet all of the program requirements for continued participation in the program.
14. States that the provisions of this bill will remain in effect only until January 1, 2030, and as of that date are repealed.

EXISTING LAW:

1. Establishes HCAI in the California Health and Human Services Agency to expand equitable access to quality, affordable health care for all Californians through resilient facilities, actionable information, and the health workforce each community needs. [Health and Safety Code (HSC) § 127000, et seq.]
2. Establishes the California Reproductive Health Service Corps or the purposes of recruiting, training, and retaining a diverse workforce of reproductive health care professionals who will be part of reproductive health care teams to work in underserved areas. [HSC § 128560]
3. Licenses and regulates health facilities by DPH, including general acute care hospitals (GACHs). Permits GACHs, in addition to the basic services required to be offered under that license, to seek approval from DPH to offer supplemental services. Defines a GACH to mean a health facility having a duly constituted governing body with overall administrative and professional responsibility and an organized medical staff that provides 24-hour inpatient care, including the following basic services: medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary services. Specifies that a GACH, as defined, includes a “rural GACH.” Prohibits a rural GACH from being required by DPH to provide surgery and anesthesia services. [HSC § 1250 and § 1255]
4. Makes hospitals designated as a CAH by the Department of Health Care Services (DHCS), and certified as such by the federal Department of Health and Human Services, eligible for supplemental payments for Medi-Cal covered outpatient services. [Welfare and Institutions Code (WIC) § 14105.17]

FISCAL EFFECT: Unknown. This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, for the residents of Ridgecrest and the workforce at China Lake Naval Air Weapons Station, Ridgecrest Regional Hospital is a lifeline. Without local access to labor and delivery, expectant mothers face dangerous multi-hour drives for basic prenatal services. This creates an untenable burden for those stationed here for our national security. The author states that this bill addresses this crisis by establishing the SDFP Program, which will provide the targeted financial support necessary to maintain 24/7 standby clinical capacity. The author concludes that this bill is a critical investment in the operational readiness of our military and the long-term health of a geographically isolated community.
2. BACKGROUND. In the past decade, more than 50 labor and delivery wards have closed in California hospitals. As a result, large areas of California are without access to birthing facilities or maternity care providers. The absence of access to maternity care has disproportionally impacted California's low-income, Black, Latinx, and Indigenous populations, and those living in rural communities. When maternity wards close, particularly in rural counties, birthing people receive less prenatal care and rates of preterm birth increase. Currently, twelve California counties, most of them rural, do not have any hospitals delivering babies.
   1. Maternity care in California. According to the California Health Care Foundation’s 2023 Health Care report, “Maternity Care in California,” access to quality maternal care is essential for positive birth outcomes. In California, 46,000 women age 15 to 44 live in counties with no hospitals with obstetrics care or birth centers, and an additional 76,000 live in counties with only one hospital with obstetrics care or a birth center. Fifty-one thousand women age 18 to 44 live in counties with fewer than 29 obstetricians or certified nurse midwives per 10,000 births. In 2021, births to Latina/x mothers and birthing people made up nearly half of all births in the state, at just under 200,000 births. About 3 in 10 births in California were to mothers or birthing people born outside the United States.

California's pregnancy-related mortality rate has fluctuated since 2009. It increased by 45% from 2019 to 2020, possibly due to COVID-19. About one in four deaths occurred on the day of delivery between 2018 and 2020. A recent Centers for Disease Control and Prevention analysis found that more than four in five pregnancy-related deaths were preventable. Between 2009 and 2020, the pregnancy-related mortality rate for Black mothers and birthing people was three to four times higher than the rate for mothers and birthing people of other races/ethnicities. This variation cannot be explained by factors such as age, income, education, and health insurance coverage. Research shows that implicit bias and racism are key causes of disparate outcomes for Black mothers and birthing people.

• 1. Maternity unit closures. On November 15, 2023, CalMatters published an investigative story focusing on the increase in maternity unit closures in California, titled “As Hospitals Close Labor Wards, Large Stretches of California Are Without Maternity Care.” According to this report, from 2012 to 2019, at least 19 hospitals stopped offering labor and delivery services (six of those were because the hospitals closed completely).

The CalMatters report stated that hospital administrators cite a number of reasons for the closures, including high costs, labor shortages, and declining birth rates. In the past 30 years, the number of births have dropped by half in California, and the birth rate is at its lowest level on record. CalMatters noted that the trend is not unique to California, with labor and delivery units closing across the country. Many closures result from hospital systems consolidating maternity care into one location, which hospitals argue can help maintain staff training and provide a higher level of care. According to CalMatters, labor and delivery units are often the second-most expensive department for hospitals to run, second only to emergency rooms, and quoted a health researcher as stating that obstetrics units are often unprofitable for hospitals to operate.

• 1. CAHs. CAHs are licensed general acute care hospitals that are federally designated and certified to receive cost-based reimbursement from Medicare, which is intended to reduce hospital closures in rural areas. To be certified as a CAH, a hospital can have no more than 25 beds and must be located in a rural area and: i) more than 35 miles from another hospital; or, ii) 15 miles from another hospital in mountainous terrain or an area with only secondary roads. Other requirements include operating an emergency department, and having an annual average length of stay of 96 hours or less per patient.
  2. Medi-Cal Hospital Reimbursement. Medi-Cal hospital reimbursement is complicated and multi-layered. First, hospitals receive different types of Medi-Cal payment depending on whether the patient they are treating is enrolled in a managed care plan or in Fee-for-Service (FFS) Medi-Cal. Second, hospitals also deliver care in different settings—inpatient, outpatient, and nursing facilities— and different reimbursement mechanisms apply to these three types of care within each of the two delivery systems (FFS and managed care). Third, a hospital’s status as designated public hospital, district hospital, or private hospital determines how a hospital is paid and eligibility for supplemental payments. Finally, CAHs are treated separately for purposes of certain types of payments.

Broadly speaking, hospital payments are comprised of both “base rate”—e.g., the type of payment that may correspond to an itemized bill for an episode of service—as well as supplemental payments. The term “supplemental payments” has become somewhat of a misnomer, as these payments have grown in recent years to comprise a large proportion of many hospitals’ total Medi-Cal revenue.

Designated public hospitals, which include county-administered and University of California hospitals, have a reimbursement methodology that is highly specific to this class of hospital. The majority of hospitals, i.e., private hospitals or other public (district) hospitals, are paid through similar mechanisms with respect to the “base rate,” but differ in their eligibility for and participation in various Medi-Cal supplemental payment programs. Medi-Cal reimbursement mechanisms that currently apply for inpatient care CAHs are described below.

• 1. Reimbursement for CAHs in Medi-Cal. In FFS Medi-Cal, inpatient services are reimbursed via a mechanism called diagnosis-related group (DRG). Within the DRG system, CAHs are eligible for a CAH-specific rate, a prospective rate that is projected to cover 95% of their costs, with costs aggregated across the class of CAHs as a whole and not on a per-hospital basis.

With respect to base rates for Medi-Cal inpatient services in Medi-Cal managed care, rates are negotiated between plans and CAHs; however, the Medi-Cal FFS rate often serves as a benchmark in these negotiations.

With respect to supplemental payments, a CAH is eligible for payments based on whether it is a district hospital or a private hospital. CAHs that are district hospitals participate in two inpatient supplemental payment programs, the District Hospital Directed Payment Program and the District Hospital Quality Improvement Program. CAHs that are private hospitals participate in the hospital quality assurance fee (HQAF) supplemental payment program.

This bill, in addition to the supplemental payments above, requires HCAI to provide funding to hospitals to offset uncompensated standby costs associated with maintaining specialty physician coverage, advanced practice provider coverage, and hospital staffing necessary to safely provide deliveries and related inpatient specialty services.

• 1. Ridgecrest Regional Hospital. According to a 2025 California Hospital Association report (CHA report),“Maternity care in California: an environmental scan,” after more than 65 years delivering babies, the Central Valley’s Ridgecrest Regional Hospital shuttered labor and delivery services in the spring of 2024, due to a shortage of obstetric clinicians and an annual loss of $5 million to $6 million attributed to the high costs associated with running a labor and delivery unit and low reimbursement rates for services. Expectant moms in the community, built around the Naval Air Weapons Station China Lake, had to travel as many as two hours to deliver their babies. Emergency funding from the U.S. military has enabled services to resume for now.
  2. Cost of providing maternity services. The CHA report also notes that the cost of maintaining hospital labor and delivery services in California has been influenced by several factors:
     1. Financial Performance: California hospitals have seen a significant increase in total net patient revenue and operating expenses, indicating rising costs associated with delivering care.
     2. Labor and Delivery Unit Closures: Over 50 labor and delivery units have closed in recent years due to cost pressures and staff shortages, reflecting the financial challenges faced by hospitals.
     3. Cost of Delivering Births: The cost of giving birth in California includes various services such as pharmacy, nursery, labor and delivery room, medical and surgical supplies, and anesthesia, with median charges for C-sections and vaginal deliveries being around $15,555 and $12,968, respectively.

1. SUPPORT. Ridgecrest Regional Hospital supports this bill and states that as a provider of labor and delivery services, inpatient pediatric care, and general surgery, Ridgecrest plays a vital role in ensuring that patients in remote communities can access timely and life-saving care close to home. Notably, Ridgecrest has previously faced disruptions to its labor and delivery services due to financial pressures, underscoring the need for targeted support like that proposed in this bill. Hospitals like Ridgecrest must maintain 24/7 clinical readiness, including specialized staffing and coverage, regardless of patient volume. However, low delivery volumes in rural areas make it difficult to sustain these services under current reimbursement structures, as the high fixed “standby” costs are not adequately offset. Without targeted support, hospitals may be forced to scale back or eliminate maternity services altogether, further exacerbating access challenges for vulnerable populations.

Ridgecrest notes that this bill takes a targeted approach by establishing a pilot program to offset these uncompensated standby costs. By providing funding tied to delivery volume while recognizing the need for continuous readiness, the bill helps stabilize essential services in communities where alternatives may be many miles away. Importantly, the program includes oversight and reporting requirements to ensure accountability and allow the state to evaluate its effectiveness over time. Ridgecrest concludes that ensuring access to safe, local maternity care is critical for the health and well-being of families in rural and isolated regions.

1. RELATED LEGISLATION. AB 1923 (Soria) would make a hospital, regardless of ownership type or system affiliation eligible for state assistance under the Distressed Hospital Loan Program (DHLP). Would require the evaluation for loan forgiveness in the DHLP to incorporate projections of future financial performance, and, in place of the current criteria, would require HCAI to provide loan forgiveness to any participant in DHLP who received a loan award before the effective date of this bill, if HCAI and the California Health Facilities Financing Authority (CHFFA) determine the participant has demonstrated a good faith effort to comply with program requirements through January 1, 2026, and the financial projections demonstrate that the participant will become financially distressed as a result of loan repayments or other outside factors, including, but not limited to, the impacts of the federal One Big Beautiful Bill Act. Would appropriate $300,000,000 from the General Fund to the DHLP to provide additional rounds of funding to hospitals in financial distress. AB 1923 is pending in the Assembly Health Committee.
2. PREVIOUS LEGISLATION.
   1. SB 32 (Weber Pierson) of 2025 would have required the Department of Managed Health Care, the Department of Insurance, and DHCS to consult with stakeholders to develop and adopt standards for the geographic accessibility of perinatal units to ensure timely access for enrollees and insureds. SB 32 was held on the Assembly Appropriations Committee suspense file.
   2. SB 669 (McGuire) Chapter 603, Statutes of 2025 requires DPH to establish a five-year pilot project to allow critical access and individual and small system rural hospitals to establish standby perinatal medical services. Requires a participating hospital to be greater than 60 minutes from the nearest hospital providing full maternity services and not have closed a full maternity or labor and delivery department on or after January 1, 2025.
   3. AB 1386 (Bains) of 2025 would have included perinatal services as a required basic hospital service, beginning on an unspecified date. Requires DPH to establish a process to approve or deny a perinatal service compliance plan to meet the requirement to provide perinatal services, and requires hospitals that do not provide perinatal services to submit a perinatal service compliance plan to DPH. AB 1386 was held on the Assembly Appropriations Committee suspense file.
   4. AB 1918 (Petrie-Norris) Chapter 561, Statutes of 2022 establishes the California Reproductive Health Service Corps within HCAI to recruit, train, and retain a diverse workforce of reproductive health care professionals to work in underserved areas.

REGISTERED SUPPORT / OPPOSITION:

Support

Ridgecrest Regional Hospital

Opposition

None on file

Analysis Prepared by: Lara Flynn / HEALTH / (916) 319-2097