Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services

Good morning. We will now call to order Subcommitee three hearing. This hearing should take no more than two hours. I want to welcome everyone who is here and everyone who will be participating. This morning.

We'll have five Department items up for discussion the Department of State Hospitals, the Department of Healthcare Access and Information, Department of Managed Healthcare, California Health Benefit Exchange and the Department of Healthcare Services. We will now begin with the First Department, the Department of State Hospitals. You can come and start with issue number one, which is the overview.

We'll be welcoming the Department, LAO and Department of Finance and you may begin when you're ready.

Good morning, Chair. Stephanie Clendenin, Director for the Department of State Hospitals the Department of State Hospitals manages the California State Hospital System and a continuum of treatment programs in communities and jails throughout the state.

DSH's mission is to provide evaluation and treatment for individuals with complex behavioral health needs in a safe, equitable and responsible manner by leading innovation and excellence across the continuum of care. Across our system of care, we have five state hospitals located throughout California with over 6,000 inpatient beds.

This includes Acute Intermediate Skilled Nursing Facility and Residential Recovery level beds. We also have a Conditional Release program which is a system of community based services operated in partnership with county behavioral health departments and private providers that is designed to transition patients back into the community following a forensic commitment to dsh.

We also have partnerships with county behavioral health programs, private providers and county sheriffs to provide services specifically for individuals found incompetent to stand trial. These include community based restoration, diversion opportunities, stabilization and treatment program as well as jail based competency treatment programs. The majority of the commitments we serve are forensic commitments.

They have either committed or have been accused of committing crimes linked to their mental illness and generally are committed to DSH through the criminal courts or the the Board of Parole hearings after completing a sentence to CDCR.

These includes individuals committed to the Department as incompetent to stand trial, not guilty by reason of insanity, offenders with mental health disorders, sexually violent predators and we also serve as the least restrictive level of care in CDCR's mental health delivery system and provide treatment for CDCR incarcerated persons who require inpatient mental health treatment.

The Department also treats individuals conserved through the civil courts under the Lanterman Petra Short act and serves as one of the various treatment facilities available for conserved individuals and our facilities represent the highest level of care for this commitment type. Generally, we serve individuals with the most complex behavioral health treatment needs.

With respect to organizational changes, there have not been any significant organizational changes in the past year.

I would note that the most significant change occurred a few years ago after the Department was funded for the incompetent to stand trial solutions and significantly expanded its continuum of care into the community and jail settings, and that was to meet the demands of increased IST referrals.

At that time, the Department established the Community Forensic Partnerships Division which has the responsibility to identify the potential partnerships, negotiate the contract contracts with those partners, and provide operational technical assistance, guidance and oversight of those treatment programs.

Lastly, the 25-26 Governor's Budget proposes a total budget of 3.4 billion for the Department and an increase of 3.4 million from 2024 Budget act which includes both support and capital outlay funding and proposes 38 new positions. The proposed budget will allow the Department to maintain operations, delivery of services and provide for state hospital facility capital outlay improvements.

The agenda did ask for us to describe the impacts of the State operations and vacancy reductions on our budget and operations. So the vacancy reductions pursuant to control section 4.12 includes a reduction for DSH of 171.1 vacant positions resulting in savings of 20.4 million.

This represents approximately 1% of the department's authorized positions positions eliminated and the associated savings are across all of our facilities. However, a majority of these positions reflect reductions from the dsh, Atascadero, Napa location and Sacramento Headquarters.

The vacant position reductions are not anticipated to have any significant impact since the majority of these positions include positions associated with closed patient units that were closed due to longer term renovations that were happening on the units or that are units were closed to be used for swing space or they have been closed due to staffing needs.

It also includes the reduction of non level care positions that have been vacant for a significant amount of time. For the state operations reductions pursuant to control Section 4.05, the budget will be reduced by 8.8 million and again no significant impacts are anticipated.

The funding reduction reflects a reduction from Sacramento Headquarters only and no reductions from the State hospital budgets will occur. And this is in recognition of The Budget Letter 2424's guidance related to exceptions associated with locations for programs providing 24 hour care, mission critical benefit or service and public safety.

The State operation savings that will be achieved through the Sacramento Headquarters budget will be recognized through reductions in General expenses, travel printing, just General type of, you know, efficiencies that will be gained. That concludes my testimony on this item. Happy to take any questions.

Thank you so much. Any comments from LAO?

Will Owens with The Legislative Analyst Office. Nothing to add but available for questions.

Thank you. Anything from Department of Finance?

Joseph Donaldson, Department of Finance no additional comments. Thank you.

Thank you so much. Then we will now move to. Oh, I'm sorry. Then we will now move to issue number two Program and Caseload Update.

Good Morning Chair and Committee. My name is Brent Hauser, Chief Deputy Director of Operations for the Department of State Hospitals. Starting with the overall caseload update by the end of 25-26, the Department projects a total patient census of 8,527 patients, which is an increase over 204 patients from what we project at the end of current year.

I'll now provide specific updates to caseload adjustments reflected in the 25-26 Governor's Budget and transition it to the Director and Colleague Chief Deputy Director for the remainder of the updates under issue number two. Starting with the DSH Metropolitan Increased Secure Bed Capacity Project. DSH reports a one time savings of $4.4 million.

This project added security infrastructure around an existing housing unit to create an additional 234 forensic beds across five units for the treatment of individuals determined to be incompetent to stand trial. Three units have already been opened, the other two are currently being used for treatment of skilled nursing facility patients while DSH Metropolitan SNF building is undergoing renovations.

That project is near completion and the SNF patients will transition back to the SNF unit, making the last two units available for the patient driven operating expenses and equipment. Estimate Item DSH requests $21.7 million General Fund, an ongoing tie to increase patient service costs and census. Primary cost drivers include utilities, pharmaceuticals, food and outside hospitalization costs.

Additionally, the agenda requested the Department provide an update on ongoing workforce development efforts and while not a comprehensive list of strategies before you today wanted to provide a brief summary of DSH's efforts.

We have expanded our psychiatric training programs to develop a pipeline for employment with DSH which includes the expansion of DSH Napa's residency program from 7 to 10 cohort participants. With its first full year completed this year, we've created a residency program at DSH Patton in partnership with OMA Linda University which which just recently received ACGME approval.

We have executed numerous fellowship partnerships across the system such as with UCLA, UCSF Riverside and Stanford and last have expanded residency rotation partnerships with Kaiser and Community Memorial Health. Additionally, DSH has executed a contract with the firm to developing marketing outreach campaigns for hard to fill classifications to increase our applicant pools.

We're also partnering with a psychiatric Technician education program directors across California to better align employment efforts with concurrent advertisement of the education programs for how to become a psychiatric technician. We've hosted multiple virtual and on site career fairs as well as rapid hiring events to enable the Department to provide same day job offers.

Last, while DSH is not the primary or the decision maker as it relates to collective bargaining, we do participate with CALHR to inform processes which have resulted in compensation increases in the form of pay differentials, retention bonuses and General salary increases. At this time, I'll hand it over to the Director for the next caseload updates. Thank you.

With respect to the Coleman increased referrals, the Department is requesting three positions in budget year and ongoing. This is position authority only to address increased workload related to referral intake for Coleman patients which are current California Department of Corrections and Rehabilitation incarcerated persons who are referred to the Department for inpatient treatment.

We make available 336 beds to CDCR for this purpose and the Department and CDCR recently implemented new trial processes with the goal of increasing referrals and utilization of DSH beds to address ongoing concerns raised by the Coleman Court and Special Master regarding the decreasing census in our DSH beds that occurred throughout the pandemic.

The agenda asked us to describe the strategies that we've taken to increase utilization of the Coleman beds and in August 20243 new efforts were implemented to increase referrals to the Department and further increase utilization of our beds.

These include reviewing incarcerated persons with close custody or single cell designation or who have a term of life without the possibility of parole for possible treatment at the Department if the Department determines it's clinically indicated and CDCR custody leadership agrees that the patient's designation can be changed to allow for treatment at dsh.

These populations have traditionally been excluded from treatment at the Department. We've implemented a long term intermediate treatment program designed to house and treat patients on a longer term basis who have previously been referred to DSH and who have demonstrated difficulty in reintegrating into CDCR's outpatient level of care due to the severity of their mental illness.

And lastly, we are utilizing our acute admissions units for patient stabilization before being transferred to our ICF unlocked dorm units. This allows more patients to be stabilized at DSH rather than being referred to CDCR's inpatient units for stabilization first before transfer and step down to our least restrictive level of care.

These three programs are in addition to two other programs efforts that we had implemented with CDCR in 2023 to increase referrals. The positions requested will assist in managing the referral intake workload associated with these new processes. I'm going to now pass it to Chief Deputy Director Edens to discuss the CONREP and IST solutions caseload adjustments.

Hi everyone, Chris Edens with respect to the Conditional Release program for non SBP patients, DSH is reporting a one time savings of 3.6 million in the current year which is tied to reduced census.

We anticipate a caseload of 985 Conrep clients in the current and budget year which includes 692 in CONREP programs that don't have dedicated beds, 35 students statewide transitional program beds, 90 forensic assertive community treatment beds and 168 IMD beds.

With respect to the savings which was one of the questions that was asked in the agenda, we do have a one time savings of 450,000 in the current year which is tied to a 30 bed IMD facility. The savings is related to unfilled beds associated with children, challenges with insufficient clinical evaluator staffing.

In addition, we have one time savings of 832,000 in the current year also due to reduced census of filling 20 of 30 beds due to clinical staffing levels.

In addition, we are also reporting one time savings of 2.3 million in the current year for a conditional release Forensic Assertive Community Treatment or otherwise known as FACT program in Alameda. We have closed this program due to the challenges the program experienced in operating.

DSH is currently in negotiations with a new provider and we'll be providing an update at the May revise. With respect to the incompetent to stand trial solutions, the Department is requesting 23 positions positions as a position authority only in the budget year and ongoing.

One of the positions is new and will support data collection and outcomes monitoring for the diversion program and the remaining 22 positions are a conversion of limited term to permanent to support the IST Reevaluation Services program on an ongoing basis.

Reevaluation Services was originally funded as a four year program and authorizing this program ongoing on an ongoing basis, DSH will be able to continue to provide reevaluation services of IST defendants in jail as well as to strategically deploy these evaluator resources to support the community IST treatment programs that do not have this capacity.

The Department is also reporting a one time savings of 237.5 million in the current year, 82.1 million in fiscal year 25-26 and 78.9 million in 26-27. These savings reflect updated timelines for various IST program activations, primarily assumptions regarding the build out of new community based treatment that's both our community based restoration and diversion infrastructure and associated programming.

It also is a result of DSH maximizing the utilization of remaining dollars in prior IST related appropriations that had multi year authority.

I would also note that while we're reporting these significant savings, the Department has made also significant progress and not only met but exceeded the requirements set forth by the court in the Stiavetti case which required the Department to provide substantive treatment to ist defendants within 28 days of the transfer of responsibility by March 1st of of 2025.

The Department submitted the final report to the court on its progress in meeting the 28 day deadline by March 1st. The report reflected that the average time to initiating treatment for all for ist individuals in February 2025 was just five days.

Additionally, since November of 2024100% of all IST individuals who did not have extenuating circumstances beyond DSH's control receive services within the final court compliance benchmark of 28 days.

The agenda also asked a question with regard to the current status of IST community based restoration and diversion programs, including how many temporary and permanent programs are currently in operation. With respect to the diversion pilot program the that is ending on June 302025.

There have been a total of 29 counties that participated in that program since inception and the permanent program currently has 26 counties. Los Angeles County. They shifted to a permanent program back in 202219 county contracts began on July 12024 and the remainder are expected to start in July of 202025.

And that concludes my testimony. Happy to take any questions. Thank you so much. Any comments from Lao?

Nothing to add but available for questions.

Thank you. Any comments from Department of Finance?

No additional comments. Thank you though.

Perfect. Senator Menjivar.

Thank you. First I want to thank the Department Director. You know that we closed a location due to staffing issues in Alameda County. I want to thank you that we took that staffing issue serious knowing that what it could lead to. So do definitely want to thank you on that.

I'm wondering if you could speak a little bit more on the barriers that exist to getting these programs up and running that is causing these savings.

I mean mostly the barriers are having trained qualified staff, having being able to find sufficient staff to. So it's all still back to staffing? Yes, it really is back to staffing.

Okay.

Less so much about capacity.

Okay, good to know on that. And you know Director, the Department proposes best case scenarios to a lot of these requests. And as the Deputy or Chief Deputies have explaining as the briefing shows that there's a lot of savings from these programs.

I'm hoping in Department of Finance, I'm hoping with every program moving forward we are more conservative in what we're asking for, knowing that we have these ongoing persistent challenges so that we don't come back with savings. Also knowing that we're making some really tough decisions this year and cutting things.

If we're going to allocate a certain amount of money and then come back with savings, it's double frustrating. So I think we need to be a little bit more conservative when we allocate for programs moving forward.

Director, can you share a little bit about apology maybe point of privilege here, SB 1323 and any updates we have on if we're seeing more transfers. Less transfers?

Yeah, very good question. So for SB 1323, it introduced an interest of justice option for individuals found incompetent to stand trial. So prior to SB 1323, individuals who were found incompetent to stand trial were referred to the Department.

Now the judge has the option is required actually to consider whether it's in the interest of justice to restore that individual to competency and if it's not in the interest of justice, then to consider other treaties treatment programs first considering whether they are eligible for diversion and if not diversion, then whether they should be conserved under the Lanterman Petra Short act or whether they're a candidate for AOT or CARE court.

And so we did. So that became effective January 1st. And subsequent to the implementation of that Bill, we did start to see a reduction in referrals to the Department.

We anticipated though a pretty swift reduction because all of the proceedings had to go through this first question of interest of justice, then go over to the treatment questions and then potentially come back to the Department for anyone that was determined to be interested of justice.

So we saw a pretty quick reduction in referrals over the first couple months. We are starting to see them ticked back up a little bit. And this month was I think a little bit higher than even last month. And so the we don't really know where it's going to stable. It's still too early.

Yeah, it's still too early to really understand what that long term impact is going to be to the referrals. But they are right now a little lower than what we were seeing on average pretty prior to the illness implementation approaches like this.

And this isn't the only approach we've had to try to decrease the amount of individuals that go to our state hospitals. On the other side, we have Prop 36 and that could potentially increase individuals being transferred over. And I'd like to know if there's a potential correlation to.

I know we're asking for more money for the Coleman program. Is there a correlation between higher cases coming from more arrests on Prop 36 and people needing to be deemed able to stand trial and increases in future increases in the Coleman program? Are those two separate things?

Yeah, the increases for the caseload adjustment for Coleman isn't tied to Prop 36. This is really with the existing population trying to identify more individuals that can be served in DSH's least restrictive setting rather than defaulting them to the CDCR psychiatric inpatient programs at the prison.

So it's really out of the current base of patients really trying to direct more referrals to the Department.

So do we do. Are there any conversations or should we even be thinking about any increases to individuals being transferred over now that Prop 36 is in effect and more people are going to be arrested?

Yeah, we'll continue to watch the, you know, CDCR puts out their population projections. And so we'll continue to, you know, confer with our partners over at CDCR on their population trends and determine whether we anticipate an impact to our bed capacity.

Okay. And final question. Any additional, you know, we had conversations that have been touring and so forth. Any new things you can share on? Just the major drives to people unable to stand trial. Major drivers.

So, you know, going back to when we initially started to see the increase of individuals being referred to the Department, this goes back over a decade now. You know, we really started to try to better understand after we first ultimately were just responding. Right. We were adding capacity and the referrals just kept increasing.

So we did do some research in partnership with UC Davis to try to better understand the drivers of individuals who are found incompetent. And what we didn't see really any significant change in, like, demographics, but what we did see in matching the data with the.

In looking at homelessness, the impacts of homelessness, and as well as matching our data with the Medi Cal Service data is that ultimately we saw that a very significant number of individuals and looking at arrest data, we saw that a very significant number of individuals were.

We were seeing a higher percentage of individuals have more and more arrests. So our data was looking at individuals with over 15 arrests. And we saw a very significant shift over a period of time in the numbers of people who had multiple arrests that were coming into us as incompetent to stand trial.

We also saw that I think it was over 50%, 60% when you include sheltered homeless. But 50% of unsheltered homeless individuals were experiencing homelessness at the time of arrest.

And then we also saw that about, I think it was around, around that same 50% of individuals, not the same individuals, but about 50% of individuals were had access medical mental health services prior to the rest. So really what we were seeing is symptoms of untreated mental illness cycling through the criminal justice system and homelessness.

Thank you so much.

Thank you Senator Menjewar. Really want to thank the Department on your work with IST patients and getting that number down. I know a couple of years ago very much out of compliance and so what you have done in a very short amount of time, time is very commendable.

So want to really give you all your kudos for that and thank you so much for being here and thank you for your presentation. We will now move to issue number three, Facilities and Planning.

Good morning again, Brent Hauser, Chief Deputy Director of Operations for the Department of State Hospitals. I'll speak to issue number three which is specific to DSH's infrastructure and facility proposals starting with the statewide project management proposal.

This item requests position authority only for 12 positions in 25-26 and ongoing to address the sustained increase in workload associated with the number of design and construction projects.

This request is for civil service position authority only and the proposed positions will replace contracted project managers and will exercise project management oversight for construction related projects specific to information technology, capital outlay and maintenance and special repair projects.

The agenda requests for DSH to describe the increased workload which is primarily related to maintenance and operation of aging facilities across our system of care.

This proposal does primarily focus on those projects with an information technology component overlap with construction as that generates additional layers of complexity with structured cabling and telecommunication as it requires significant coordination with regulating entities like the Office of the State Fire Marshal.

The second proposal is specific to Napa State Hospital's electrical infrastructure upgrades where our DSH is proposing $2.8 million General Fund for the preliminary plans phase.

This project is necessary to meet the existing electrical demands of the facility and will upgrade the electrical distribution system which includes replacement of existing transformer substations, feeder lines, facility transformers, switch gear and installation of an additional generator.

In terms of DSH as future infrastructure plans as asked for in the agenda, DSH does complete an annual infrastructure plan for consideration over a five year period that's put forward as part of the annual budget process.

Specifically, the projects over the five year period that DSH is planning are projects associated with addressing electrical, water and utility plant deficiencies at Atascadero, Metropolitan, Napa and Patton State Hospitals. We're also providing a skilled nursing unit at Coalinga State Hospital to address our aging population and last renovating patient housing at Metropolitan State Hospital.

To inform this plan, we have completed facility condition assessments of each of our five state hospitals and evaluations to understand what those needs are in the medium and long term. That concludes testimony on issue number three. And happy to take any questions.

Thank you so much. Any additional comments from LAO?

Nothing further to add. Available for questions. Thank you.

Anything from Department of Finance?

No additional comments. Thank you.

Senator Mendjivar, Department of Finance. I know you just answered Chief Deputy around the plan that DSH is taking for upcoming maintenance. But how are we, how are we calculating in these upcoming potential money we have to put put aside? This is $89.3 million to fix. Which location is this one? The Napa. Napa one.

And knowing that all all other locations will except maybe with one are pretty old, how are we including or structuring in those amounts?

Joseph Donaldson I'm going to defer to my colleague on this item. Thank okay.

Hello. Randy Katz, Department of Finance. So the future phases of these projects are built into the administration's multi year proposals. And so we are accounting for them in the overall look. So for example, for Napa the Budget Year would be preliminary plans. Budget year plus one would be the funding for working drawings.

Budget year plus two would be the funding for construction.

So in the next couple of 5 years, Wi is AEDA request around this amount moving forward?

That is correct.

Ah, for a while. Okay, thank you.

All right. Thank you so much for your presentation. We will now move to the Department of Health Care. Oh, I'm so sorry. Enhanced Treatment Program Trailer Bill language and staffing update.

Good afternoon or good morning, again. Stephanie Clendenin, Director, Department of State Hospitals. And this time I'm joined by Dr. Warburton, who is our Statewide Medical Director. So the Department of State Hospitals manages the California State Hospital System and a continuum of treatment programs and... Oops, let me get to the right. I was like, that sounded really familiar.

Let me start that one over again. The Enhanced Treatment Program. The Enhanced Treatment Program Pilot was established by AB 1340 to serve DSH patients who are at the highest risk for severe physical violence and cannot be treated in a standard treatment environment.

The ETP model provides specialized treatment and includes enhanced staffing for clinical, nursing, and hospital police officer positions, as well as increased physical plant security to protect patients and staff from harm. The treatment provided in the ETP is intended to return patients to a standard treatment environment with clinical improvements that prevent future acts of aggression.

The first ETP pilot, a 13 bed unit at DSH at Atascadero, activated in September of 2021 and the Department anticipates completion of the second ETP unit as 10 bed unit at DSH Patton in spring or summer of this year. The Health and Safety Code, section 1265.9 includes a timeframe for the authorization of each pilot unit to remain in effect, which was until January 1st of the fifth calendar year after each pilot site has admitted its first patient.

The proposed ETP trailer bill language requests to extend the time frame through to January 1, 2030 for all ETP units. This will allow the Department sufficient time to implement the ETP unit at DSH Patton and to provide a thorough analysis of the outcomes across the ETP sites for both patients and team members. And I'm going to hand it over to Dr. Warburton to address the other questions on the agenda.

Good morning, Chair and Committee. Kate Warburton, Statewide Medical Director for State Hospitals. In terms of the level of demand for ETP beds, since our activation we've received 69 referrals for 63 unique patients, 30 of which have received treatment in the ETP. Some of these referrals were either withdrawn or determined to be inappropriate.

If a patient is referred, appropriate, and a bed is unavailable, our Forensic Needs Assessment team and panel provide the referring team with additional treatment recommendations to be implemented in the standard treatment environment. In terms of what we have learned from the implementation of the ETP, as of the 2025-26 Governor's Budget ETP Legislative Report, we can provide the following information. The ETP was conceived of as an environment to manage aggression with units designed and constructed with environmental controls to allow for management of aggression using least restrictive practices.

The foremost goals of the ETP are to reduce episodes of aggression and associated injury severity as well as to reduce the use of mechanical restraints. Our preliminary data indicate that this model is working. Patients engage in significantly less aggression towards others after being admitted to the ETP compared to when they received care in our standard treatment environments.

Since the activation of the ETP In September of 2021, our data shows that, following ETP admission, the rates of aggressive incidents towards staff decreased by 71% while aggressive acts towards other patients decreased by 94%. Serious injuries to staff decreased by 68% and serious injuries to patients due to aggression by peers were altogether eliminated.

Another thing that we have learned is while the ETP is successful in managing behaviors of aggression towards others, we have seen some patients who have self injurious behavior see increases in these behaviors in the ETP. In reviewing restraint use data in the ETP, it was identified that a significant portion of restraint use was due to these increasing self harm behaviors. As a result, the ETP referral process was adjusted to increase screening for self injurious behavior, and this has significantly reduced the utilization of restraints in the ETP.

We do aim to further develop staff skills in treating patients who are at risk for self injurious behaviors, utilizing the unique features of the ETP environment to help these patients. We have also learned the importance of staffing continuity and alignment as an important factor in serving the patient population. It takes specialized training that DSH has implemented.

Since DSH Atascadero is one site serving patients from all over the state, DSH has implemented all available statewide resources in terms of subject matter experts and leadership to assist with troubleshooting issues as they arise. In terms of outcomes upon discharge from the ETP and what happens when people return to a standard treatment environment, we have had 17 discharges from the ETP of 16 unique patients with only one patient returning to the ETP.

That person was discharged before they completed treatment to accommodate an emergency referral and then they were re-referred back to the ETP. Overall, the discharge reasons across patients varied and included discharges for successful completion of treatment, discharges prior to completion of treatment to accommodate emergency referrals, discharges due to a patient's self injurious behavior as I described, discharges for people returning to jail for court proceedings, and we had one transfer to CDCR.

We had a total of seven patients who were discharged following successful completion of the ETP program, and in the six months following their discharge, these patients maintained a 79% reduction in physical aggression and an 87% reduction in restraint utilization compared to the six months prior to the ETP admission.

One of those seven, we're happy to report, was ultimately discharged to the community a few months after their ETP discharge. Not surprisingly, the patients who were discharged before treatment completion did not see those positive outcomes. Thank you.

Thank you. Anything to add from the LAO?

Nothing to add, but available for questions.

Thank you. Anything to add from the Department of Finance?

No additional comments. Thank you.

Just quickly, just another example of the savings. Hoping we could be more conservative moving forward. Thanks.

Thank you so much for your presentation. We will now move to the next department, Department of Health Care Access and Information. You may begin.

Good morning, Madam Chair and Senator Menjivar. I'm Elizabeth Landsberg, the Director of HCAI, the Department of Health Care Access and Information. So I'll be providing the high level overview of HCAI's budget and our mission and programs. So HCAI's current year budget is 684 million and our proposed budget for budget year is 581 million.

This reflects a reduction of 103 million. We are requesting position authority for 62 positions in this budget, which would bring us to 825 positions in the budget year. HCAI's mission is to expand equitable access to quality, affordable health care for all Californians through resilient facilities, actionable information, and the healthcare workforce that each community needs.

The Department has five program areas that I'll go over, facilities, financing, workforce, data, and affordability. In terms of data, we have for decades collected a variety of healthcare data data sets and we disseminate information about California's health care infrastructure and publish valuable information about healthcare outcomes.

We collect, analyze, and disseminate information about hospitals, skilled nursing facilities, clinics, and home health agencies, and we have in the last five years developed California's all payer claims database, which we call the HPD, the Healthcare Payments Data Program, and we have a budget change proposal about ongoing sustainable funding for the HPD.

On the facility side, HCAI is the building department for hospitals and skilled nursing facilities, so we set the building standards and ensure seismic safety standards are complied with for hospitals. On the workforce side, we have a range of healthcare programs which seek to build a workforce that we have three main goals.

One, a workforce that reflects California's linguistic and racial diversity, serves medically underserved areas, and serves Medi-Cal members. We support specifically primary care, behavioral healthcare, and oral health workforces, and we use a range of strategies from pipeline, supporting students, and supporting the education and training programs.

We also support providers and fund programs to ensure Californians have access to reproductive health, including abortion services. On the finance side, we have our Cal-Mortgage program, which offers loan insurance to nonprofit and public health facilities. Our finance team also stood up the Distressed Hospital Loan Program a couple of years ago.

And we have the Small and Rural Hospital Relief Program to assist small and rural and critical access hospitals with seismic safety compliance projects. And then last but not least, we have our affordability area with three main components, the Office of Health Care Affordability, which I'll cover in the next question, the CalRx program, and then the Hospital Fair Billing Program.

With that, I'm happy to move to the second question if you'd like, Madam Chair, related to the Office of Health Care Affordability. So the Office of Health Care Affordability, or OHCA, as we called it, was created in 2022 to address rising healthcare costs, which today are a barrier to consumers not getting needed care.

Every year in an annual survey, half of Californians report that they avoided getting needed health care due to high costs. In response to this long standing affordability crisis, in 2018, AB 3087 was introduced, which would have set rates providers and hospitals could charge. The industry opposed this bill and it was defeated. With rate setting rejected, an alternative approach was needed to address high health care prices.

A group came together to develop an alternative, including representatives from health plans, providers, purchasers, labor, and consumer advocates, and they came up with this compromise approach, which we're implementing now, the Office of Health Care Affordability, the details of which were developed by stakeholders, the administration, and of course the Legislature.

So we have three primary goals with OHCA, to slow healthcare spending growth, to promote a high value healthcare system, and to assess market consolidation because we know market consolidation is a significant driver of healthcare costs. So we are collecting, analyzing, and will start publicly reporting data on total healthcare expenditures.

And then our office is charged with enforcing spending targets that are set by the Health Care Affordability Board, an appointed board. In April of last year, the Affordability Board adopted the state's first spending targets with it's a five year target starting at 3.5% in 2025 and progressively decreasing to 3% in 2029.

This statewide spending target is based on the average annual rate of change in the median household income growth, signaling that healthcare spending should not grow faster than the income of Californians. So we looked at a number of economic indicators, and because the key charge of the office is to address consumer affordability, that number was decided upon.

The spending target applies to the rate of spending growth by healthcare entities. It's very much an all in approach. It applies to health plans, to providers, as well as to physician organizations and hospitals. I do want to note the target is a modest approach. Today consumers can't afford care.

This is not going to bring people's premiums down tomorrow. It's actually setting, it's limiting the rate of growth. So in many ways that's a modest approach. Just to say what we've seen over time is health care costs growing at twice the rate of inflation and wages. And this is, we need to moderate that.

We've had consumers say we're living on a budget and the premiums are really cutting into that. Next, I wanted to talk about hospital spending targets. So in addition to the statewide target called for by the statute that created OHCA, the board has the authority to set different targets on different sectors.

So that could be by geography or types of health care entity. Following a public meeting in August of 2024 on health care costs in California and the Monterey region in particular, the Affordability Board urged the office to provide options to address high cost hospitals through sector targets.

In January 2024, the board voted to create a hospital sector, which enables the board to set a lower target for high cost hospitals. Again, this is done in recognition of the fact that hospital costs are 40% or more of total health care costs and there is huge variability in terms of the prices being charged by hospitals.

So in February of this year, we as the office outlined a recommendation to both identify high cost hospital that merit a lower spending target and for setting spending target values for these hospitals. The methodology recommended identifying high cost hospitals as those that are above the 85th percentile for three out of five years from 2018 to 2022 on two different measures, a per unit measure and a relative measure, which compares commercial prices and Medicare prices.

So we again had dialogue over eight months about whether certain hospitals should be excluded, what the measure should be, and settled upon these two different measures. The initial proposal yielded 11 hospitals. Compared to the other hospitals, the 11 hospitals are twice the statewide average on commercial unit price and relative commercial to Medicare price.

So you have hospitals in the state that are charging 400, 500, 600, 700% of Medicare. So the average hospitals without the high cost hospitals, it's about 200% of Medicare. These 11 hospitals are charging on average 400% of Medicare. Similarly, on the unit price, we see that the hospitals, the high cost hospitals are charging twice of what the average California hospitals are charging. So the proposed adjusted target divides the statewide target by the cost relativity of high cost hospitals.

Basically because those hospitals are charging twice what other hospitals are, the proposed approach was to have the spending target be half of the spending target for all hospitals and all other healthcare entities. OHCA met with representatives of each of the 11 hospitals as well as others to discuss the methodology and their financial information.

After deliberation, the board modified OHCA's proposal and the action was taken on a final list of seven high cost hospitals. So some hospitals were taken off of the list both because of discharge and because their prices were improving over time. And on April 22nd, last week, the board voted 5 to 0 unanimously to establish a separate 1.8 spending growth target in 2026, lowering to 1.6 in 2029 for these seven high cost hospitals.

The board's unanimous vote was in response to two years of public testimony about high cost hospital costs and eight months of public discussion regarding the definition of a hospital sector and the development of a methodology and target values for high cost hospitals.

Other noteworthy accomplishments of the office to date we started a year ago reviewing proposed mergers and acquisitions of healthcare entities in California. So we have a year worth of experience there. On the high value performance side, we have set a target to increase the spend of primary care. Knowing that we do that investing in primary care improves health outcomes, improves health equity, and brings down the cost of care. We also have targets around alternative payment models.

Equity and quality measures have been adopted by the office, and that's very important to us that we are measuring equity and quality measures at the same time that we're measuring healthcare costs so as to not negatively impact equity or quality. We're now... And all of this has been done with a lot of stakeholder engagement.

In addition to the board, which has open public meetings every month, we have an advisory committee with representatives of all of the stakeholders and a number of work groups, which are critical to us as we move forward. So those are some of the accomplishments and milestones of the office. With that, are there questions or should I move on to CalRx?

Go ahead and move on, and we'll ask all the questions at the end.

Okay, thank you very much. So in terms of the CalRx program, I'm pleased to share an update regarding the progress on biosimilar insulin and naloxone, which was asked for in the agenda. Regarding insulin, our partner, Civica Rx has achieved several milestones in developing an affordable biosimilar insulin glargine product. One of three products that are under development.

So for the glargine, they've passed initial facility inspections by regulatory authorities. They've started manufacturing vials and pens at a new U.S. facility for upcoming clinical trials. We've been there, it's in Petersburg, Virginia. And they've been conducting product quality and stability tests.

Civica is also coordinating with the pharmaceutical supply chain to plan for CalRx insulin distribution among FDA approval. And of course, having that distribution plan is very important as we've seen other biosimilar insulin products that have not succeeded. This week we had our first CalRx Insulin Patient Advisory Council.

It was very helpful in terms of gathering patient feedback to refine our strategies for distribution. And so it was very helpful. Most of the folks have type 1 diabetes, some are doctors, some are pharmacists, and they shared their personal experiences of how broken this market is and are helping guide us in our implementation approach.

On naloxone, the CalRx Naloxone Access Initiative has made significant strides in improving access to affordable naloxone and has already saved the state 17 million since its launch a year ago in May of 2024 as the primary supplier of the Department of Health Care Services Naloxone Distribution Project. That NDP project distributes naloxone free of charge to qualifying organizations, such as community organizations and first responders.

Through an open RFI process, HCAI contracted with Amneal Pharmaceuticals in February of last year to manufacture a CalRx branded generic over the counter naloxone product at $24 for a twin pack, which is a 40% savings compared to the previously contracted rate. Last week, Governor Newsom announced that individual twin packs of CalRx branded naloxone are now available.

You can get them direct to consumer. So again, at $24, which is almost half the standard market price. Previously only offered to government entities and businesses in packs of 24, this new direct to consumer program expands individual access to this life saving overdose reversal medication. And in our first week last week with direct to consumer, we received nearly 500 orders. So that was the update that I wanted to give on CalRx, Madam Chair.

Thank you. Any comments from LAO?

Jason Constantouros, LAO. I did want to note that we did provide a brief implementation update on the CalRx program also in our January analysis. The Department touched on a lot of the key oversight questions that we raised. One additional question I wanted to note that we had raised is that there is $50 million General Fund for the Biosimilar Insulin Initiative for constructing a new manufacturing facility. As the Department indicated, manufacturing to date is planned at a Virginia facility.

And so these funds had been deferred and are sort of assumed for expenditure in this coming budget year, but it remains uncertain. At the time we wrote our analysis, it was uncertain what sort of the plan was for these funds. So that could be another sort of oversight issue to dig into a little bit for the Committee. Thank you.

Thank you. Any comments from Department of Finance?

Albert Pineda, Department of Finance. Nothing further to add.

Senator Menjivar.

Thank you so much. Director Landsberg, I'll start off with a question on hospital. We've put a lot of money into distressed hospitals, small hospitals, rural hospitals, help with seismic and so forth. Do we have, or maybe this is the Department of Finance question. Do we have any pots left over that have been allocated to help our hospitals?

The Distressed Hospital Loan Program had an initial $300 million, and that has all been awarded to hospitals.

Great. Any other pot still existing for hospitals?

Well, the Small and Rural Hospital Relief Program, again, is available to small, rural critical access hospitals. So 10% of the E vape tax, the E cigarette tax comes into that. And then the Legislature allocated $50 million from the previous MCO tax. So we have some funds and a small ongoing source. And we're really...

That program is ramping up with the passage and signage of AB 869 last year, which give small rural and critical access hospitals a little bit more time to comply. If they come forward with an individualized compliance plan, they can have up to three years more time. And so we're really anxious to work with each of those hospitals and help them succeed in developing a plan.

Surprise. Usually when we have a pot of money, it goes away really fast. So just wanted to check in on. We still have some money for some rural hospitals. They just need to come forward with...

Correct. We had a webinar a couple months ago. We had a couple hundred people on. We're seeing an increase in interest in the program.

Great. Let's switch over directed to the target. What do you call it? It's the spending target for hospitals at 1.8. Great explanation on how we landed, two years of work, eight months public comment. I know other states have a higher spending target. Ours is lower because of our COLA in California. Is that what I understood?

There are nine. We join nine other states in having a cost target program and each state went through its own process. So some states have a lower target than 3 and some are higher. 1.8 is, I assume it's correct. Deputy Director Pegany, that 1.8 is the lowest in this country. So for those high cost hospitals. But the 3.5% is not out of line with what other states are doing.

What's the 3.5?

So 3.5 is the statewide target that applies to all hospitals today, all health plans, and all facilities.

For the 11 high, but we're only looking at 7 because 4 got a pass. In incorporating and finding that and getting to the 1.8, did we account for we've made some recent changes. The SB 525 healthcare minimum wage, seismic compliance that is creeping up on us. Was that incorporated into reaching the 1.8?

I think the orientation of the office is very much to look at really the high cost hospitals and to measure it. So there's certainly been discussion. Hospitals have come to the table and said, you know, we still have seismic. You know, you're well aware those are requirements that have been in place for 30 plus years. But understand hospitals still have to have to plan for those. So certainly that was part of the discussion is the myriad of requirements on hospitals.

Outside of the seismic, because you're right, it has been for a long time. SB 525 is more recent. Was that taken into consideration?

Again, we certainly, over the couple of years since the board has been meeting, we certainly have heard the hospitals talk about implementing that. We did not do a particular calculation about the impact of SB 525.

And Director, you mentioned, and thank you for making it clear, that these changes aren't going to lower premiums tomorrow. Do we have, do we anticipate when consumers are going to start seeing savings? Next year, two years out?

We don't have an exact timeline for when premiums will come down. So the spending targets, again, are slowing the rate of growth of health care spending, which is related to but not the same, of course, as the premiums that consumers and employers are paying. So we should absolutely see over time an impact. You know, there's a medical loss ratio, right. So 85% of healthcare premiums has to go toward healthcare costs over time. But we don't have an exact calculation as to what day that will happen.

And I apologize, I'm not very well versed in this. Is there something that exists that allows a report back to the Legislature to see if how we're targeting or how the targets are impacting consumers, are they benefiting, and when is the first report back?

Absolutely. So our first report will come out a month from today. So we're required under the law to have our first baseline report. So it's not related directly to the targets, but we did last year collect the first two years of data. So we have data on 2022-2023, which gives us baseline data.

And then this year, 2025 is the first year that we have a target in place. It's an unenforceable target. So we'll be collecting the year, the data from 2025 and 2026. And yes, we'll have an annual report to the Legislature, including the impact to a variety of measures of consumer affordability.

The 1.8 starts in 2026. Are we going to get a report on that moving forward after that?

Yes.

Okay. And it's a report because we're actually tracking the benefits, right, to see if successfully decreasing. Or what is it tracking? What will it track?

So for each of the entities subject to the spending growth target, there's a slightly different way of measuring the costs, measuring their spending. So we're collecting today total healthcare expenditure data for the health plans. So health plan A spent this amount this year.

We're seeing how it grows, and we're making sure they don't exceed the spending growth target. We have developed a methodology for measuring hospital inpatient spend and are close to an outpatient spend. So there's a different way to measure hospital spending than health plan or physician organization spending. But for every entity, for each of those types of entities, we will be measuring their success in meeting the spending growth target.

I hear you on meeting the spending growth. And we're going to track information on the percentage that they spend on X, Y, and Z. How does that then trickle down to data to show? The whole point of OHCA is to reduce the cost for consumers in Californians. How do we then track that information? That we can come say to hey, constituents, this is, we did this and we got this.

So the reports will also include data about deductibles, about premiums. It will be hard to say, you know, this premium increase is related to this spending growth target, but overall. And we also, as I mentioned, have a subset of, we have a set of equity and quality measures that we'll be measuring over time. Some of those relate specifically to hospitals, and some are at the health plan and physician organization level.

Madam Chair, if LAO, I don't know if you had anything to add to any of the questions that I asked.

No, I think you raised a lot of the key sort of oversight questions. This is kind of a program that's still kind of up and running. And so, you know, it's a little early to say at this point what the sort of impact will be.

I think some of the information as it comes available over time will be really critical to help the sort of legislature assess the impact of OHCA. And we're also available to work with your office if you have any other questions or issues you'd like to work through.

Okay, thank you so much. Appreciate it. Thank you.

Sorry. Thank you. Thank you. Madam Chair. Sorry. I'm trying to balance. I'm not being disrespectful. I'm trying to balance other things that are going on. I do apologize. You guys have a 30 million dollar budget allocated, correct? From the general fund?

From the office of Health Care Affordability? I'm going to phone a friend. Elio says yes. It's about that amount.

Roughly $30 million. To help reduce cost of hospitals.

Not just hospitals, ma'am. Health plans. Yeah. All the entities in the health care system. Yes, ma'am.

So I have a couple of questions, but I make a statement. It's hard for me to understand from a business perspective that this body passes out policies which you're subject to.

And I get that's not your, that's not your issue that increase cost for all of our providers, hospitals, medical providers, doctors, everybody has a higher cost policies that come out of this building.

Specifically in the hospital situation where I'm at, in rural hospital areas where, and my Senator Caballero is where hospitals have, are closing, are going to stand by emergency rooms or all of those things because of the providers, we can't afford to keep them there.

The cost and then the new systems that go in. Seismic, they're worried about this. Like we have our CST's that have like people that have to, you know, staff and to make sure that people walk through a metal detector before they go into the hospitals.

All that increased cost, the Medi-Cal reimbursement rates are the hugest issue that we face.

Anybody who serves Medi-Cal patients, and I have a lot of them in my district, I have one hospital is a 90:10 ratio, 90% Medi-Cal 10% plus plan oriented or private pay or commercial pay, I guess I should say. That's a pathway to bankruptcy.

You know, when you treat somebody and it costs $200, you get 50, 60 cents on the dollar. It's a pathway to bankruptcy. So I guess my question is that the LAO currently is projecting a 5.1% inflation rate for California. That's not my projection. That's LAO's projection.

How do you reconcile a 5.1 inflation rate which will affect everybody, including hospitals, providers, doctors and patients, with a 3% overall cost target for hospitals?

So it's 3.5% currently, Senator Grove. And yes, we did have discussion about the impact of inflation and certainly it's a consideration. So again, the office didn't vote on the target. The office put forward a recommendation and this appointed board did vote on it. So there was consideration about inflation.

And really it comes down to having these high cost hospitals are so much higher than other hospitals. It was believed that there were savings to be had. I think there is a lot of evidence about ways that the industry can improve their efficiency. So we're not here to tell an individual entity how to meet the target.

There are a lot of ways, different ways to do that through contracting. It's actually been an interesting vantage point for me to both be administering the distressed hospital loan program and see the hospitals, you know, that are in the most financial distress.

And then as we through OHCA did the analysis and see that there are these hospitals that have such high cost outliers.

And we have heard from teachers and carpenters and hotel workers and superintendents spent the day, took the day off to come to Monterey at the OHCA board meeting to tell us how their teachers are driving an hour to give birth because they can't go to the local hospital.

And we've heard from those teachers saying, I have a family budget that I can't exceed. And we are asking industry to do better. We've at our meetings had a variety of examples of high successes in cost reducing strategies. So there are a wide range of ways to do it.

We're not dictating how to do it, but the board did feel that it was important to set that 3.5 coming down to 3% target. We will have the ability.

I do want to say we're starting a conversation with the board in the fall about what the back end look will be to evaluate, you know, if these tariffs have a huge impact. If inflation goes up, there'll be an ability to adjust the targets for reasonable considerations.

Thank you. I, gosh, I've been here since 2010. I'm part of the old group. And things that come off the dais are things that people say, health care for all, 100% clean air. But those things just don't seem attainable when you're on the ground and you're operating a facility or being a doctor, a provider, or a hospital.

And the reason why I say that is because each hospital is different. When we were discussing the financially distressed hospital issues, I had one of my colleagues say, just get billion dollar donor and put their name on the building. I don't have billion dollar donor. I don't have a hospital foundation that can do that.

But I do have constituents, primarily undocumented farm workers in the Central Valley because that's where they work in the largest three farm producing counties in the world that are having a problem accessing health care.

And when you take a hospital who gets 90% reimbursement for Medi-Cal rates and 10% reimbursement on plans, they naturally have to negotiate a higher rate with the commercial market to try to offset the losses under the Medi-Cal reimbursement rate. Now, we had Proposition 25. Voters overwhelmingly passed it because they are all struggling with.

I mean, they see us going into Canada, you know, government run health care, a lot of them do. And I think that's why they showed up for Proposition 25. But we also missed the deadline for increased rates from the federal government, which will hurt us in the long run. Us meaning our constituents that we serve.

And that bothers me too. But I just. When I look at the Central Valley Hospital doctors in Modesto, Madera is already closed, which impacted Fresno, which has impacted Cahuilla in Tulare, I just see a ripple effect.

And to say that these hospitals, with all the bills that are going through this building, again, not your issue, but the bills going through the building to create greater cost for these providers, whether it's, you know, paying a higher wage for the receptionist and the janitor that folds in, whatever it is.

There's tons of legislation that's gone through this building. I don't see how you can cap a cost and not hurt the providers that will eventually hurt the people seeking that medical care. Why would. Our chair is obgyn. I mean, she has a big heart and she's serving in the legislature.

But if she was out in the medical world, I guess why would. Other than, you know, the things that keep you here is passion in your family. Why would she work in California with a capped rate? She'll never be able to make any more money no matter what she does in her obgyn practice.

And she could go to any other state neighboring us and put a shingle out. And I don't know how you keep doctors here, specifically in the Central Valley. People want to live in the beach area. They want to live.

I mean, they want to live in San Francisco and they want to live in places very few want to live in Ridgecrest. But that has. That hospital has it going down has a negative impact on our domestic security because we have the largest. You have two veterans sitting on this committee.

Largest research and development arm of the United States military is right there. And we have to attract good talent that are just brainiacs that just think shit up to protect our warp fighter. A lot of us don't have that ability, but they just imagine things and make it happen.

So I guess my big issue is that capping what I see you doing, especially under the inflation rate, is just going to devastate hospitals like in the Modesto, Central Valley area. And I can't say rural, because rural is 5,000 people. It's just an isolated community.

It's a larger town, but it's completely isolated by miles and miles and miles of mountains and miles and miles and miles of canyons that you have to drive through to get there. I had somebody tell me it's only 41 miles, but you can only go 30 miles an hour on that road. It's so windy and treacherous.

So how do you expect access not to be affected for the entire region if you hold hospitals like this to a 1.8% limit of cost?

Access is impacted today. And so that's why the office was created today. Half of Californians and two thirds of low income Californians and more in communities of color don't have access. And so we do believe that there are a range of ways for hospitals to. Again, this is not a price cap. This is limiting the spending growth.

The hospitals. One of our board members asked us to analyze if these high cost hospitals were just subject to the 3%, how long would it take them to come in line with the rest of California? And that would take 20 years of people having to drive far to get their care and the like.

So there are very significant access problems today. And that is what led the board to adopt these targets.

So on the 3% cap, does that include seismic? So you're going to exclude them from spending money on seismic?

There are no costs that are exempt per se. There is a process. If there's an entity that exceeds the targets, we'll look at the data together. We will have them explain. If they say.

And this is the conversation we're going to have this fall about developing a list of reasonable factors to be to that would allow someone to exceed the target. And I certainly think there's a strong argument to be made that seismic should be included.

What about capital investment, like a new children's hospital within a hospital? Because before we did capital investment in Bakersfield, our kids with cancer, we have a six bed, six bed pediatric intensive care unit. Now, we never had that before. Our kids used to have to go north or south to Los Angeles and now we got six beds.

But that was a significant capital improvement. So what about capital improvements?

That's the discussion for the board to have. What factors should be factored in, again, that's reasonable to exceed the spending target.

And when does all this conversation take place? So how do hospitals or providers, whoever's on the list, how do they plan for their future and stop building what they're building or stop providing what they're providing until you guys make a decision to see if they're going to be exempt from it?

That process will be happening in the next few months at public meetings. We have a lot of hospital engagement.

And when is this 1.8% going to take effect?

2026.

Thank you.

Thank you.

Well, I want to thank you so much for your presentation. I want to thank my colleagues for their questions and, and with respect for time because we are running over quite long. I won't ask the questions that I had around ocha, but I will make a statement.

I am very concerned that the purpose of OHCA will not be met by the actual consumers, that is the patients and the providers, and that the ultimate goal of OHCA, which is to reduce the cost of health care for individuals, will not be met.

And it's interesting because if the goal was to slow the rate of healthcare spending, but there was no implementation about taking in cost of SB 525, seismic inflation, like none of that was taken into consideration with these targets, whether it's for the high cost hospitals or every other hospital, then I don't know.

I think they're living in a fantasy world. So if they've got a, if they've got this spending limit, but they have to put this money out for these things that have been mandated, then at the end of the day, something has to give.

So either they won't make it and will be penalized, or they have to cut services. And either way the people who will pay are the patients.

You know, and I'm also just flabbergasted that we don't have a very clear way of measuring whether or not individuals in our data and our reporting whether or not they're actually seeing a reduced in the amount that they are having to pay. And I also want to bring up the fact we talk about access.

Access is an issue. We have an issue with access in this state, but it is already being negatively impacted by these targets. In San Diego, we had an insurance company use these targets as a reason to not continue to contract with the hospital.

And so, you know, thousands of San Diegans were then trying to scramble to figure out where they could get their health care coverage because the insurance companies said, oh, OHCA is at 3.5, that's what we're basing our current contracts on. And so, you know, I will be watching this very carefully.

I've already sent a letter with my concerns yesterday. And, you know, I'm really, really concerned about whether or not we're going to ultimately end up decreasing the cost of health care for California residents. But with that, I want to thank you for your for your presentation today.

We are going to move to the next issue and I am going to ask for future presentations to try to limit your presentations to allow for questions and for us to be able to hear public comment at the end.

Thank you and Madam Chair, we did receive your letter and we'll work on a response of of course. Thank you.

Issue two is AB 1112 implementation.

Good morning, Madam Chair and Members. I'm Scott Christman, Chief Deputy Director, HCAI. Happy to present the proposal.

HCAI requests position authority only for three positions to implement portions of AB 112 passed in 2023, which requires hospitals to report balance sheet information to HCAI and authorize the department to make changes to our existing HCAI Quarterly Hospital Financial and Utilization Report to include that new balance sheet data.

The Budget Act 2023 that established the Distressed Hospital Loan Program did not establish physician authority needed to administer the new data reporting requirements specific to this proposal. The positions are necessary to implement those provisions for data collection which resulted in new workload in 2024. Continues ongoing to support the quarterly hospital financial data collection.

Glad to take any questions on this.

Thank you so much. Any comments from LAO? Department of Finance? I see no questions from my colleague. Thank you so much. We will move to issue number three, enterprise risk management, cybersecurity, Patient privacy and governance.

Thank you, Chair. I'll also present that. HCAI requests $209,000 ongoing for one position to meet increased workload demands resulting from new state and federal cybersecurity, patient privacy and related data laws and policies affecting the Department. HCAI has a unique role as a health data organization. Mandated by statute to collect, analyze and safeguard patient records.

In addition to other sensitive information systems, the department needs resource to develop, deliver and maintain an enterprise wide role based privacy training for all information assets classified as personal information. Given our statutory obligations, it's critical for HCAI to maintain appropriate staffing in support of these important functions.

Adding this one resource to our risk management team is a necessary first step. Glad to take any questions on the proposal.

Thank you. Any comments from LAO? Department of Finance? We will now move. Thank you for that presentation. We will now move to issue four, relocation rent adjustments.

Thank you, Madam Chair. HCAI requests 1.1 million in ongoing budget authority plus an additional one time increase of 1.3 million for fiscal year 25-26 to move its Sacramento headquarters in July of this year from a private leased space to state owned office buildings, specifically at the May Lee State Office Complex.

I would note for the committee, the proposal was submitted before the Governor's executive order returning most staff to the office four days per week. With that, the administration is currently evaluating space in this context of compliance with the new executive order.

So at this time we're working with Department of General Services, Department of Finance to determine the best course for the department. The administration will look to provide an update to you with the may revision. Any questions on proposal?

Thank you. LAO? Department of Finance? Senator Menjivar.

Just want to make got to get this clear. So the department is asking for more money because the governor wants people to come back to work four times a week. So we need to pay for a bigger space. So this is costing us money.

This particular proposal, it was actually an increase in rent associated with the May Lee State Office complex. It was just sort of the way the cost structure differs in terms of square footage and space. So the reevaluation actually is to consider whether we do that move or stay.

You need a bigger space if everyone comes back.

Yeah. And it actually may be. It may be reasonable to stay and then in case we would then withdraw this. But we're actually trying to figure that out now with DGS. So anything from Department of Finance?

I hope this is withdrawn in May because Department of Finance, you're asking us to make hard decisions and to approve a BCP that is asking for more physical space. I think it is absurd. Absolutely absurd.

Thank you. And so just for clarity, the space that you are proposing to move into is actually smaller than the current space that you're in.

It's roughly the same space. In either case, we're going to need to expand to accommodate all staff having dedicated workspace. So we were doing some hoteling based on the previous telework policy. So it's roughly the same. The cost is higher.

But where you are right now, how long have you been there?

We've been there since 2017. No, 2016.

So you were able to accommodate all of the workers in that currency prior to the telework order. So why would you need a bigger space or to change the configuration if it was able to accommodate for everybody?

Yeah, it's a great question, I think from Director Landsberg opening. We've experienced quite a bit of growth in the last four years to the tune of about 40%. So we had been roughly 550. And now with this budget, we'll be at about 825 positions.

So it's based on that and we're really trying to figure out what is the most cost effective way to sort of comply with the executive order. Bring folks in. But yes, you know, we want to be sensitive to the budget.

Okay, thank you so much for clarifying that. We will now move to issue number five, BH-Connect Workforce Initiative.

Thank you and good morning. Libby Abbott, Deputy Director for Health Workforce Development. As requested. I'll provide an overview of the initiative. And if you would like, I know we're short on time. I can go into detail details of each of the programs.

The BH-Connect Workforce Initiative will unlock up to $1.9 billion over five years to significantly expand the availability of the behavioral health workforce serving in Medi-Cal safety net settings along the continuum of care. And this is as a result of an 1115 waiver led by DHCS in partnership with CMS. So largely federal funding.

The BH-Connect Workforce Initiative is comprised of five programs, the first of which will launch in July of this year. For each program we will run multiple cycles over the five year period. And we have until December 2029 to disburse funds.

As requested, I can briefly describe each of the five programs, the eligible behavioral health professionals for each, the corresponding service obligations and the expected implementation dates. Should I move ahead with that? I know we're short on time.

Why don't we allow for Senator Menjivar to ask her questions because it may be answered into me.

I just have one question because overall I am over the moon excited about this. I mean we've been fighting against workforce investment cuts the past two years. So I am so excited about what's to come on this. So just one question on the non licensed, non prescribing practitioners or maybe this complies everything.

How often are we going to be able to track the utilization of these loan repayments?

So we for the loan repayment program specifically, which is one of the five programs, we'll be launching it in July of this year, we expect to run potentially four cycles and we'll do an annual analysis of uptake of all of our programs because we expect to run roughly annual cycles.

So we will be looking kind of doing an annual review in partnership with DHCS to look at how the funds are being taken up. The nature of these programs, they're slightly different from what we've run in the past. So we're interested to see what demand looks like and what we can do to sort of accommodate.

This one in particular was like, you know, some are these certificate driven? So I was like, is there a great need for that much loan repayment? For certificate driven?

It's a great question. And if I was to guess, I would say most of the uptake of the loan repayment program will be for our licensed professionals, prescribing and non prescribing. But we didn't want to exclude folks who have eligible educational debt. So it's open. We left the door open on that.

And we're able to move that around if the need isn't as great there.

That's correct. We do have the ability to move funds after a designated period of time across programs.

Great. Thank you so much.

Thank you. Any comments from LAO? Department of Finance? Okay, thank you so much for your presentation. We will now move to issue number six, Health Care Payment Data Program Long Term Funding.

Thank you, Madam Chair. Scott Christman, HCAI. HCAI requests $22 million in ongoing annual funding and position authority for 47 positions to support the ongoing operations of the Healthcare Payments Data Program or HPD. AB 1810, back in 2018 allocated HCI $60,000,000 one time general fund to establish the HPD program. The HPD is California's all payers Claims database.

This is a research database made up of healthcare claims and encounter data submitted by healthcare payers. Healthcare claims data is often used in health services research and policy analysis. 20 other states have similar all payer claims databases. HCAI submitted the initial planning report in March of 2020 as required by AB 1810.

That same year, AB 80 subsequently provided HCI the necessary authority to build the database and begin collecting data from health care payers, including licensed commercial health plans and insurers, as well as DHCs for Medi-Cal data and CMS for Medicare. Since that time, HCI has met all of the statutory milestones for the program.

AB 80 required HCAI to consider long term funding sources for sustaining the HPD operations after the expiration of the one time 60 million general fund appropriation made in 2018. So in March of 2023, HCAI submitted a report to the legislature that provides recommendations for how to fund the ongoing operations.

The database and our budget request is consistent with the recommendations from that legislative report to the TBL listed for a portion of that funding. HCAI requests authority to transfer monies from the Department of Managed Healthcare Fines and Penalties Fund to the Healthcare Payments Data Fund.

In partnership with DMHC, we have submitted proposed trailer bill that would effectuate the transfer with a range of up to 1.5 million to be transferred for fiscal year 25-26 and then up to 6 million to be transferred for fiscal year 26-27 and ongoing.

The transfers are set up as a range to support the allocation of portions of the fines and penalties to various state programs and since the fines and penalties are variable, may change from year to year if approved.

HCAI will continue to implement operate the HPD program to fulfill mandates as required under AB 80, which include providing policymakers and state agencies such as the Department of Healthcare Services and HCI's own Office of Healthcare Affordability with critical data analysis necessary to achieve evidence based health policy and practice and improve transparency more broadly in the healthcare infrastructure.

Happy to take any questions at this time.

Thank you. Any comments from LAO? Department of Finance? Not seeing any questions. Thank you so much. We will move to issue number seven. Diaper Access Initiative.

Hi, my name is Emily. I'm the chief of the Pharmaceutical Policy and Programs Branch over at HCAI. The Diaper Access Initiative aims to reduce financial stress on families by providing three months of free diapers to every newborn in California, regardless of income.

Diapers are a basic necessity, yet half of all families report struggling to afford them with prices rising 45% since the pandemic and averaging $1,000 per year per baby. Despite this, non medical diapers aren't covered by Medi-Cal, CalFresh or WIC.

The phase one pilot for this program will deliver 400 diapers per newborn starting with 25% of births in the state in year one and 50% of births in the state in year two, likely through voluntary participation of hospitals to distribute diapers at the time of birth.

The estimated cost to the State for phase one is 7.4 million in year one and 12.5 million in year two. The funding request for this is from general fund does not include hiring additional positions and I can speak to the questions that were asked as well. With regards to diaper bank networks.

After speaking with representatives from California's Diaper Banks Association, and it appears that diaper banks and other similar organizations may benefit from consolidated purchasing through the Diaper Access Initiative. We've invited diaper banks to respond to our RFI or request for information to get additional information about how diaper banks could be involved with distribution.

And then with regard to babies born in an alternative birthing center or at home, we are still considering options for this and developing options for it.

We're collecting more information through our RFI process, but we do think our program could also establish agreements with licensed birthing centers and midwives to distribute diapers to families through following home or center based births. We could also develop a mechanism for families to request and receive diapers through designated pickup locations or home delivery.

Okay, thank you. Any comments from LAO?

Jason Constantouros, LAO we did raise some concerns with this proposal. And to keep it to the point, we really have three key messages on this proposal.

The first is a general message we have for any discretionary proposal you have this year, given your limited sort of state budget, is to just, you know, weigh diaper affordability against your many other budget priorities.

Our second message is that if this is a high priority for the legislature, this particular proposal approaches diaper affordability in ways that we think have some weaknesses. For example, the proposal is not well targeted. It provides a relatively small benefit for across all Californians.

Instead of targeting resources towards people with the highest financial need, it also pursues a new distribution model that has some uncertainties around it, and there are risks that could sort of undermine the proposal.

And then while this initiative appears to be intended to be ongoing, the the pro spending plan only has two years of funding and no plan for legislative oversight over those first two years. So we offered some alternatives that the legislature could pursue. For example, the Legislature could increase an existing subsidy in the CalWORKS program for diaper affordability.

That's about $30 a month at the moment. And increasing that that subsidy would better target resources towards people with thus our highest financial need. And also the money would go directly to beneficiaries. And so there'd be a high likelihood of success. The other approach we offered was to provide additional funding to diaper banks.

And this is something the legislature has done in the last few budgets, have provided limited term funding for diaper banks. This is already an existing distribution model. The administration has said they are exploring this right now. The original proposal was to pursue this through hospitals.

The administration says they're pursuing other distribution models, but the legislature has also just provided funding directly to the diaper banks. And that's, you know, so that's another option that's available.

And then our final key message is that if the legislature is interested in sort of longer term market interventions that HCAI is sort of pursuing, the legislature could still direct HCAI to pursue and get more information on some of these market interventions and then come back next year with a more detailed proposal. Thank you.

Thank you, Department of Finance. Senator Menjivar.

Thank you so much. Thank you for addressing some of the questions on involving our diaper banks or experts within. So thank you so much for that. And then still looking at how we're going to address when people give birth in their places. So those are my questions on that.

I, I do have similar thoughts on what Jason from LAO shared, because I looked at this, I'm like, first when I saw this proposed, I was like, wow, this is like one of the only things we have in the budget that is addressing affordability in California. I hope it doesn't die, given what we're dealing with.

I'm like, gosh, I think it's going to die in the May revision. Right. So before we do that, I'm wondering if we can just save in a different way. Can we cut it down to 2, 1 months? The income thing was a big thing for me.

I was like, it shouldn't be offered to everybody, love everybody, but it should be income focused. But I know that could add an additional administrative barrier that might be even more expensive. Expensive than what we give out as diapers. The CalFresh idea, I think it's a really great idea.

I had a bill two years ago and adding $10 more for menstrual products in CalFresh because that's already a system that includes individuals that we know are on an income base.

So I would just ask before we scrape this program altogether that we approach different avenues that saves us because we're income specific is in a program that already exists so we don't have to bring a whole other project aboard or gives more money to diaper banks. But I think this is such a great way to address affordability.

And well, the next thing I won't say because it's something the president would say. So never mind.

Thank you so much for your presentation. I agree. I think this is a great idea.

I'm not sure if everyone should be included in it, especially given our financial situation at this moment, putting it into something that already exists instead of having to start from the bottom up and costs that are incurred with that really seems to be the most reasonable at this time.

So I would really encourage, as you all are really hashing out the details, to look at what we've said and what the LAO has recommended. But thank you so much. The next issue is wellness coaches issue number eight.

Thank you, Madam Chair. Elizabeth Landsberg, HCAI. So we have proposed trailer bill language related to our certified wellness coaches. First, it just updates the statutory reference. We previously called them behavioral health coaches. Didn't really roll off the tongue for our youth. So this is a youth tested name to have them called wellness coaches.

The language would revise activities that could be carried out by the coaches to align with their scope of training and practice, including removing crisis de escalation and safety planning and adding crisis referral. And then finally, the language specifies that in addition to the licensed behavioral health staff, credentialed school staff may also supervise wellness coaches.

This is language that was carefully discussed and negotiated with many stakeholders.

Thank you. Anything from LAO? DOF? Not saying any questions. We will move to issue number nine, implementation of chapter legislation.

And this is our last HCAI item with you, Madam Chair. We have AB 1577 that seeks to address the problem of insufficient numbers of clinical training slots for nurses in the California Community College or CSU system. So the legislation requires health facilities and clinics to meet with the community colleges and CSU nursing programs.

If they can't provide clinic placements, they have to report that written justification to HCAI and we have to post those on our website. So this is a position to do that work. And then we have three bills related to facility regulations in California. So I mentioned this earlier.

We have AB 869 that you all passed last year, which allows small rural and critical access hospitals to have up to three years additional time to comply with seismic safety standards if they come forward with a compliance plan with approved milestones. The same applies to Children's Hospital of Los Angeles.

Both of those bills took the approach offered by the administration. So those bills were signed. Then there's a third bill related to building standards for clinics. And so these are the BCPS. This is one consolidated BCP for those three programs for our facilities staff to add 10 additional positions for them to do this work.

Thank you so much. Any comments from LAO? Department of Finance? Not seeing any questions. Thank you so much. Thank you. To the next department, Department of Managed Healthcare. You may begin.

All right. Good morning. My name is Mary Watanabe. I'm the Director of the Department of Managed Healthcare. I have Dan Southard, our Chief Deputy Director with us. I will quickly run through our mission and budget. If you'd like, I can cover each of our offices or skip that and get to the BCPs.

Okay the department's mission is to protect consumers health care rights and ensure a stable health care delivery system. We license and regulate 140 health plans that provide healthcare coverage to approximately 30 million Californians. We regulate more than 96% of the commercial and government health plan enrollment in the state.

The DMHC's total proposed budget for 25-26 is 186 million and 800 authorized positions. And just a reminder, we are specially funded by annual assessments on health plans and receive no general fund. With that, I'll turn it over to Dan to get started on our BCPs.

Morning Madam Chair, members of the subcommitee. So the first one I'll talk about is the Identity and access management workload BCP. The DBC is currently maintaining 11,000 external user accounts across six different data sets for public facing web portals.

Currently, the authentication technology used by the DMHC applications is outdated is an outdated construction that requires custom coding or complex workarounds to integrate modern cloud platforms. The disparate user data sets and outdated authentication technology pose significant risk to the DMHC's initiatives to adopt cloud technologies for business solutions and security compliance.

This proposal aims to enhance the DMHC's security posture, project management and automation processes to mitigate security vulnerabilities. T identity and access management proposal will allow users to access multiple applications with a single set of credentials, enhancing security, ensuring compliance with cal secure requirements and improving operational efficiency and reducing spend time spent on password related issues.

And for this proposal the DMHC is requesting expenditure authority of 187,000 in 25-26 to implement the planning stage of the IT project to provide an IDAM solution. More than happy to answer any questions.

Thank you. Not seeing any questions

And Elio just want to note that we have not raised concerns with any of the DMHC items in case that helps expedite the

Thank you.

I'll move on to the next one which is our project planning for our customer relations management modernization. So the DMC currently operates two separate complaint case management systems to manage and process consumer provider complaints.

This custom framework has led to an increased challenges when trying to implement major upgrades or modernization of these systems and the underlying technology is outdated and requires modernization to both infrastructure as well as software's capacity to streamline and automate workflows. Implementing functionality within the current CRM software requires time consuming custom dot node coding which makes it difficult for the DHC's IT staff to keep up with the changing program needs.

This proposal outlines the initial planning phase for implementing a new CRM system designed to provide timely consumer provider assistance, addressing the increase in complaint volume and expedite complaints, enhancing processing and ensuring compliance with data reporting and auditing requirements and for this proposal, the DMHC is requesting expenditure authority of $1.2 million in fiscal year 25-26 only for the planning phase of this IT project.

More than happy to answer any questions.

Next proposal is the web accessible service portal. The DMC currently uses a ShareWell solution as a web accessible service portal to manage service disruptions, process service requests, facilitate employee onboarding and offboarding, and address customer IT inquiries. The existing ShareWell system will be phased out and reach its end of life on December 31st, 2026 requiring a replacement.

The new enterprise service management solution will use a modern responsive and intuitive user interface offering improved self service capabilities while maintaining compliance with security and accessibility standards. Additionally, a more modern solution will provide real time access to service data, enhancing decision making and IT governance.

For this proposal we are requesting expenditure authority of 618,000 in 25-26 and 348,000 in 26-27. Last workload BCP is for program workload resources and the DBC is requesting funding to modernize Information technology infrastructure which includes updating equipment, enhancing security measures, improving online access for stakeholders and supporting the costs associated with the legal investigation software the funds requested.

This proposal will also support ongoing consultant services to address an increased volume of consumer complaints and cover the increased fees of the clinical consultants. These services are essential to assist the DMHC in conducting medical surveys, evaluating network adequacy and ensuring compliance with statutory timelines requirements.

Additionally, the majority of the DMHC network gear is aging out, will no longer be supported for issues or security updates, exposing the DMHC to potential vulnerabilities. And for this proposal the DMHC is requesting expenditure authority of 2.5 million ongoing to address these numerous system upgrades. We're happy to answer any questions.

All right, I'll turn it over back over to our Director Mary.

We'll try to zip through our legislative BCPs starting with AB 3275. This changed the timeframes for reimbursing, contesting and denying claims for healthcare services from 35 and 45 working days to 30 calendar days for all complete claims.

The bill also increased the penalty on health plans for not automatically paying interest owed on a claim from $10 to $15 or 10% of the accrued interest on the claim. We're requesting 24 positions and 5.5 million ongoing to implement the requirements of AB 3275. Next we have AB 2072 and AB 2434 related to multiple employer welfare arrangements.

AB 2072 amends current law to extend the sunset date from January 1st of 2026 to January 1st of 2030, allowing MEWAs or multiple employer welfare arrangements to provide large group healthcare coverage to member employers in the biomedical industry for an additional four years.

AB 2434 authorizes an association with small employer members in the engineering, surveying or design industry to purchase large group coverage through a MEWA. AB 2434 requires the Association of MEWA to file the registration on or before June 1st of 2025 and must provide annual compliance for filings.

The DMHC will provide the health committee of the legislature with the most recent MEWA filings by June 30th of 2026. We also will conduct an analysis of the impact of mewas on the small employer market and prepare a report summarizing the findings that will be posted by July 1st of 2026.

We're requesting limited term expenditure authority of a 508,000 to conduct the impact analysis for these bills. Moving on to AB 1842, which requires group or individual health plans to cover at least one drug and specified opioid disorder, opioid use disorder treatment categories without prior step therapy or utilization review works.

Request an expenditure authority of 133,000 ongoing to contract with a statistical consultant to develop the methodology to include this review in our annual survey process.

Moving on to SB 1180, which requires health plans to establish a process to reimburse emergency medical services, alternative programs, including services provided by community paramedicine programs, triage to alternate destination programs or mobile integrated health programs and prohibits enrollees from being charged more than the in network cost sharing amount regardless of whether the provider was in network.

This requires us to conduct legal research and review compliance with the requirements of the bill. We're requesting one position and 427,000 ongoing to implement the requirements of SB 1180.

SB 1120 requires health plans that use artificial intelligence or AI algorithms or other software tools for utilization review or utilization management functions to support comply with certain requirements, including that the tools base its determination on specific information and be fairly and equitably applied.

It also prohibits AI algorithms or other tools from making decisions to deny, delay or modify healthcare services based on medical necessity. These decisions must be reviewed by a competent licensed physician or healthcare professional. We're requesting three positions and 740,000 ongoing to implement these requirements. Next is SB 729 treatment for infertility and fertility services.

Beginning July 1st of 2025, large group health plans are required to provide coverage for the diagnosis and treatment of infertility fertility services including IVF, in vitro fertilization. It also requires small group plans to offer this coverage. The DMHC is requesting seven positions and 2.1 million ongoing to implement these requirements.

Next we have AB 3059 related to human donor milk coverage which clarified that medically necessary pasteurized donor human milk obtained from licensed tissue bank is a basic healthcare service and should be covered by health plans. The DMHC is requesting 133,000 ongoing to contract with a consultant to help us with our survey process.

And last I think here is let's see AB 2063 related to Voluntary Employee Benefit Association or VBAs. This bill authorizes. Excuse me.

In 2020, AB 1124 authorized two pilot programs, one in Northern, one in Southern California under which one VEBA trust fund in each region would be exempt from licensure provided that the VEBA partnered with a risk bearing organization and met certain requirements.

The purpose of the pilot program was to demonstrate that these arrangements can provide high quality care at a lower cost. We authorized one VEBA to operate in Southern California beginning in January of 2022. AB 2063 grants a two year extension for the pilot program in Southern California allowing it to operate until December of 2027.

It also extends the deadline for us to submit a report on the pilot program from 2027 to 2029. We're requesting 178,000 through 2028-29 to implement the requirements. Make sure I think that's it. Happy to take questions.

Thank you, not seeing any questions. Would like to thank you for your presentation. We will now move to the next department, California Health Benefit Exchange Covered California.

You may begin.

Good morning, Madam Chair and members. My name is Katie Ravel. I'm the Director of Policy, Eligibility and Research at Covered California. I'm joined by my colleague Emory Wolf, our Associate Deputy Director for Evaluation and Research, and we'll address your agenda questions and then take any additional questions you have.

We'll start with an overview of Covered California's mission and programs. The Affordable Care Act passed in 2010 dramatically changed the individual health insurance market, which is well summarized in your agenda for today.

A key component of the Affordable Care Act was the creation of health benefit exchanges that offer comprehensive health plans with income based financial help to lower premiums and out of pocket costs for individuals who don't have affordable coverage through an employer, Medicaid or Medicare.

Our mission is to increase the number of insured Californians, improve healthcare quality, lower costs and reduce health disparities through an innovative competitive marketplace that empowers our consumers to choose the health plan and providers that give them the best value.

We contract with 12 insurance carriers throughout the state and our members choose from several coverage options that vary in the amount of monthly premium and out of pocket costs. Over the last five years, state and federal action has built on the foundation of the Affordable Care Act to provide more support to our enrollees to afford coverage.

Federal action includes enhanced premium subsidies which were authorized by the American Rescue Plan and extended through 2025 by the Inflation Reduction act of 2022.

California has also taken several key actions on affordability in our program, including implementation in 2020 of a nation leading California Premium Subsidy program through which middle income Californians were able to access premium assistance for the first time. Implementation of the California Premium Credit Program which enabled Covered California to offer plans with 0 monthly premium and more recently, implementation of the subsidies to reduce out of pocket costs and healthcare for the Striking Workers Program.

The Budget Act of 2023 authorized Covered California to spend $82.5 million to lower out of pocket costs for California enrollees. We call this the California Cost Sharing Reduction Program. For benefit year 2024,

we use the funding to eliminate deductibles and lower costs for key services like primary care and outpatient mental health visits and prescription drugs for our lowest income enrollees. And I'll turn it now to Emory to provide an update on our 2025 affordability programs and an update on our

recent open enrollment.

Thank you Madam Chair and members. Emory Wolf, Associate Deputy Director for Evaluation and Research. For the 2025 coverage year, Covered California is offering the highest level of financial assistance in our history. This is thanks to two things.

The first is the Federal Enhanced Premium Tax Credit that was implemented with the American Rescue Plan and extended through 2025 under the Inflation Reduction Act. We're estimating that the Enhanced Premium Tax Credit will provide $2.1 billion in premium support to Covered California enrollees over the course of the 2025 plan year.

And the second is the California Enhanced Cost Sharing Reduction Program, which was made possible by the $165 million appropriation from the Health Care Affordability Reserve Fund. We are using this funding to eliminate deductibles and lower costs for key services like primary care and outpatient mental health visits and prescription drugs.

This record affordability pushed our 2025 open enrollment signups to an all time high. As of January 31st, 1.98 million Californians selected Covered California plans for 2025. This is about 200,000 more enrollees than we've ever had.

Among those, among- nearly 1.3 million enrollees are receiving state support through the California Enhanced Cost Sharing Reduction Program with no deductibles and lower costs when they access care. Individuals moving from Medi-Cal to Covered California continue to increase our enrollment with more than 210,000 of our open enrollment signups having lost Medi-Cal in the past year.

I'll turn it back to Katie for the next question.

Okay, our final question looking out to 2026, if Congress takes action to extend the federal enhanced premium tax credit, Covered California will continue offering the cost sharing reduction program that's in place today.

If the Federal Enhanced Premium Tax Credit is not extended by Congress, federal premium subsidy levels will drop to their pre2021 levels, which are laid out by the Affordable Care Act. For sense of magnitude, that's about $9 billion this this year flowing to California for the ACA level of subsidies.

That said, if the enhancement expires, we'll be losing about $2 billion and our enrollees will obviously feel that difference. So for our enrollees under 400% of the federal poverty level, they'll receive less premium support and our enrollees with income above 400% of the federal poverty level will lose federal support entirely. We've done a lot of analysis here.

I'll just give you one number. On average, this would be a loss of about $100 per member per month in additional premium savings for our enrollees.

So in this scenario, California could use funding that's currently going to the cost sharing program to backfill some of the loss of premium assistance. Prior to 2021, Covered California did have the Premium Subsidy Program, which I mentioned, and it provided support to low and middle income enrollees. The California State Subsidy Program began in 2020.

We phased it out when we had enhanced premium subsidies. So while we know that we can't provide nearly the level of assistance being provided with the federal dollars that state funding will be meaningful to anybody we're able to support.

What we're doing right now is modeling the potential drop in enrollment that could occur if we lose the federal enhanced subsidies. And then we'll use that base of enrollment to estimate what we can do with the state dollars and who we can help.

That work is underway now as we wrap up our budget, our Covered California budget for the upcoming fiscal year, and we'll be ready to present options in the coming weeks and we'll follow up with your staff on that. With that, I'll stop and take any questions you have.

Thank you so much. Any comments from LAO, Department of Finance Senator Menjivar.

Thank you so much. Can you share a little bit more CMS? I don't know if it was a leaked document on new protocols that we're proposing on who would be eligible for ACA as Covered California. Can you sh- Can you talk a little bit, a little bit more about how we're going to be able to prepare for that?

For example, DACA not being able to be eligible, gender affirming care being removed from that.

We're reviewing that regulation. It's a regulation that was released a few months ago. Under that regulation, if it's finalized as proposed, we would no longer be able to offer marketplace coverage to DACA eligible recipients. There would also be changes to gender affirming care. So we're looking at that.

We've submitted a comment to CMS, submitted a comment letter to CMS. We're waiting for the final rule, which could happen in the next one or two months, and then we'll have more to say about how we would respond to those changes that could take effect. Some of them this year, some of

them next year.

For the DACA individuals, how many people do we have enrolled?

We have about 2,500 enrolled today.

Okay, thank you.

Thank you so much for your presentation. I really look forward to continued communication when we actually know more about what's going to happen at the federal level. And I think that's going to have to be a conversation between all of us as to what we're going to do at that point.

So there's a lot of uncertainties out there. But thank you for having a couple of options if this happens, if that happens. It's really important. So.

Thank you.

Thank you, Senator.

Alright. We will now move to Department of Healthcare Services and you may begin.

Good morning. Would you like me to jump in with the first issue?

Please go ahead.

Thank you. Paula Wilhelm, Deputy Director for Behavioral Health at the Department of Healthcare Services and the committee requested a brief overview of significant program changes related to Medi-Cal Specialty Mental Health or the Drug Medi-Cal- Drug Medi-Cal Organized Delivery System the 24 and 25-26 state fiscal years.

So during this time period, the department has continued to implement the behavioral health components of the California Advancing and Innovating in Medi-Cal Initiative, or CalAIM, while also launching new benefits and activities under the Behavioral Health Community Based Organized Networks of Equitable Care and Treatment Initiative, or BHConnect.

We are also working through key implementation milestones for the Behavioral Health Services ACT and Proposition 1 bond funding, so the Behavioral Health Services act and BHConnect are covered as issues 3 and 4 today. I'll hold substantive comment on those activities for now and share very brief updates on CalAIM and specialty behavioral health more broadly.

So, as you may know, our CalAIM benefits and policies for behavioral health include the launch of Medi-Cal Peer Support Specialist services, mobile crisis services, and contingency management services and also several updates to administrative policies that have been intended reduce complexity for plans, providers and members and improve access and quality.

Some of these policies included revisions to our criteria for access to specialty mental health services, our No Wrong Door Policy, the implementation of standardized screening and transition tools for mental health access, updates to our clinical documentation requirements, and the implementation of behavioral health payment reform.

So in fiscal years 24-25 and 25-26, the department is focused on making targeted updates to these policies in partnership with Medi-Cal stakeholders to support effective implementation.

For example, we recently released consolidated guidance to clarify our existing policies for the Medi-Cal Peer Support Specialist Services benefit, and we are currently in the process of finalizing updates to our Access Criteria for Specialty Mental Health, which will include a list of DHCS approved youth trauma screening tools that can be used to help determine whether youth meet the criteria to access specialty mental health service.

We are also updating our Screening and Transition of Care Tools Policy to allow practitioners to override a screening tool score based on their clinical judgment for the Medi-Cal Mobile Crisis Services benefit.

I'm pleased to report that 52 counties, which cover more than 95% of our Medi-Cal Members, have fully implemented this service and can offer 24 hour mobile crisis response countywide the remaining counties are able to offer more limited mobile crisis response, and they continue to work closely with DHCS to come into full compliance with the benefit.

I'll also share some promising data on our contingency management benefit, which has now served more than 7,000 Medi-Cal members, with approximately 2,000 members currently enrolled across more than 100 sites in 21 counties. So contingency management is proving to be effective.

95% of our Medi-Cal members receiving this service have tested negative for stimulant use, and that's compared to an average of 85% in the clinical literature.

Currently, about 80% of our Medi-Cal population is located in a county with at least one contingency management provider, so we look forward to continuing to build capacity to reach more Medi-Cal members with these benefits.

I will close by highlighting our implementation of one more new behavioral health benefit that was recently authorized through an amendment to our CalAIM waiver. Last fall, the department received first in the Nation approval from the Centers for Medicare and Medicaid Services, along with three other states to cover traditional healthcare practices in Medicaid.

California is initially authorized to cover traditional health care practices through December 31st of 2026. These services were really meant to improve access to culturally responsive care for American Indian and Alaska Native Medi-Cal members who are seeking treatment specifically for substance use.

Traditional health care practices will be available through our Indian healthcare providers or IHCPs for Medi-Cal Members enrolled in Drug Medi-Cal Organized Delivery System counties. All 40 of our Drug Medi-Cal Organized Delivery System counties will be required to cover traditional healthcare practices when offered by participating Indian healthcare providers.

DHCS released the Initial Implementation guidance for counties and Indian healthcare providers in late March, and we are beginning to approve providers to participate in the benefit and launch traditional healthcare practices. So I'll end my remarks here and I'm happy to answer questions.

Thank you. Any comments from LAO?

Will Owens, the Legislative Analyst Office. Nothing to add but available for questions.

Anything from the Department of Finance?

Lizbeth Castillo with Department of Finance. Nothing to add.

Thank you. Not seeing any questions. We'll move to the next issue. Children and Youth Behavior Initiative- Health Initiative.

Good Morning. My name is Autumn Boylan. I'm a Deputy Director with the Office of Strategic Partnerships at DHCS. Thank you so much to the Chair and members for having us at this committee today.

As part of the Children and Youth Behavioral Health Initiative, the Department of Healthcare Services administers several complementary work streams to improve access to behavioral health services at public schools, including colleges and universities across the state.

Our goal is for all 58 county offices of education, the more than 1100 Local Education Agencies or LEAs in the state, as well as the California Community Colleges, California State University and University of California campuses to participate in the CYBHI Fee Schedule Program which will provi- provide a permanent source of funding to schools not only to sustain the one time CYBHI School Based Services investments like the Student Behavioral Health Incentive Program and Well-Being and Mindfulness Grants, but to maintain and grow access to behavioral health servi- services for students across California.

A total of 494 local education agencies and institutions of higher education have signed up for the CYBHI Fee Schedule Program through four distinct cohorts. The first cohort launched in January of 2024 with 46 LEAs and they are able to submit claims with dates of service as of July 1st.

In the fall we started onboarding Cohorts 2 and 3 which added an additional 240, excuse me, 245 LEAs to the Fee Schedule Program, including a handful of colleges and universities, and Cohort 4 with an additional 196 LEAs will kick off starting January- July 1st of 2025. The program represents a significant transformation in California's education and behavioral health systems.

It requires very close collaboration between the department, county offices of education, LEAs, colleges and universities, Medi-Cal and commercial managed care plans, insurers, and multiple state departments including the California Health and Human Services Agency, the Department of Managed Health Care, and the Department of Insurance.

Some County Offices of Education and LEAs have shared challenges that they've experienced in standing up this program, and DHCS is working tirelessly to address all of the implementation challenges that have been raised by our implementation partners. This is a significant change for the entire system and changes of this magnitude take time.

DHCS has worked collaboratively with county offices of education, LEAs and institutions of higher education to design and implement all aspects of the policy and operational framework for this program. Stakeholders have con- raised concerns that the process is taking so long. However, we intentionally took the time to work with our County Office of Education, LEA and statewide education partners.

We've listened to their concerns and collaboratively designed the policy. When we've tried an approach that has been less successful, we've made changes to improve the way that we operate the program, and when we've heard LEAs express concerns about difficulty completing onboarding prerequisites, we've made changes to the forms and templates to streamline them.

We've also created additional training and technical assistance opportunities via recorded trainings, live webinars weekly office hour sessions to support LEAs and make sure that we are removing real or perceived barriers to participation.

Further, based on direct feedback from LEAs, Carelon Behavioral Health, the state's third party administrator, is establi- establishing direct data connections with meta- with managed care plans and insurers to reduce the administrative burdens on LEAs related to collecting student health insurance information.

But we do need LEAs to collect student health insurance information as there is not a single statewide database of all plan enrollees for all plan types that are covered under the CYBHI Fee Schedule Program.

We have published jointly with Carelon Behavioral Health several critical pieces of guidance over the last year of the program, including the preliminary CYBHI Fee Schedule Program Manual which was published in February of 2024 and a recent update to the manual that was shared with LEAs as recently as this week, the Provider Participation Agreement, which provides extensive details about requirements for participation of LEAs and colleges and universities.

There are numerous- numerous technical guides, recorded training sessions and user manuals available on our website or Carelon Behavioral Health's website. We've also recently published guidance for adding community providers to the CYBHI Fee Schedule Program, although those are not new policies as community providers have been eligible to participate from the beginning.

The infrastructure to pay claims is in place and claims are being paid. The terms- In terms of claims submitted, as of yesterday, there are 14 LEAs that have submitted claims to Carelon Behavioral Health. 327 total claims have been submitted, not including denials, and a total of 149 claims have been paid.

Most of the claims that have not been paid are- have been submitted in the month of April of 2025 and to date, over $12,000 of reimbursement has been made to participating LEAs.

We've been working closely with the Cohort 1 LEAs to increase the number of LEAs that have completed the onboarding process to get to the ready stage and allow them to start claiming for services throughout the- throughout this process.

In our one on one interviews with LEAs, they've shared a variety of reasons for the delays, a handful of requested edits to the Provider Participation Agreement or Data Use Agreement. We're working through those changes with them.

Some LEAs have expressed confusion about the process or have had questions about program guidance, but a significant number of Cohort 1 LEAs are working through the process internally or getting vendor contracts in place or intentionally waiting to submit claims until a later date.

For those LEAs that have already submitted claims, each has only submitted a small number of claims to date, but I will re emphasize that there are no barriers to prevent these LEAs from submitting claims and getting reimbursed.

As we've been reimbursing claims Since December of 2024, we've had some recent success in increasing the number of claims submitted by LEAs who are working hard alongside DHCS and Carelon Behavioral Health Teams to get to scale.

For example, sorry, for example, Fresno County Superintendent of Schools so I know is here today has the highest level of reimbursement of all LEAs with paid claims totaling more than $5,600. They submitted another 103 claims this week which have already been adjudicated and approved for payment.

The Santa Clara County Office of Education initially submitted two test claims in December of 2024.

Once they worked through the submission errors with Carelon Behavioral Health and submitted clean claims which is a requirement in order to pay the claims, those claims were paid and last week we're happy to report Carelon- Santa Clara County Office of Education submitted an additional 62 claim lines totaling more than $4,000 of reimbursement and those claims were authorized for payment today.

We still have a long way to go before claiming is at scale.

We recognize that, but DHCS is committed to ensuring that all Cohort 1 LEAs have submitted claims and received payment by the end of the fiscal year and all Cohort 2 and 3 participants complete onboarding and are able to start claiming by the beginning of the next school year.

We've also worked closely with community providers like Hazel Health across the state to provide technical assistance so that they can partner with LEAs in the CYBHI Fee Schedule Program alongside school districts that are- that they are already serving. We've conducted trainings for providers at multiple venues.

We've also shared additional guidance with LEAs and LEA affiliated private providers to help expedite their participation as affiliated community based providers in the program. There are three distinct pathways for community based schooling providers to participate.

They can obtain a contract directly with an LEA or IHE and the LEA or IHE can designate them as part of their network.

They can also be eligible as a statewide affiliated provider if they are serving multiple LEAs across multiple counties or they may contract directly with a managed care plan and be a part of the managed care plans network.

As I mentioned, the department has been meeting and working closely with Hazel Health and other statewide affiliated providers to implement this new pathway for the statewide providers that are providing school based services to students across the state and Hazel Health has specifically already begun their onboarding efforts as well as a couple of other statewide community based partner providers and it isn't only just the community providers that can contract with managed care plans for services.

MCPS can directly contract with LEAs and colleges and universities to support school based services delivery and infrastructure, including continuing investments that were initiated as part of the Student Behavioral Health Incentive Program to provide and to, I'm sorry, SBHIP was not established to provide reimbursement to LEAs and IHEs for services.

Instead, the intent was to establish relationships between the managed care plans and LEAs and make necessary infrastructure investments to support school based services that would be sustained as part of the Fee Schedule program.

While implementing the new infrastructure has been a challenge, the mandate is clear and DHCS is firmly committed to establishing a sustainable school based provider network so that all eligible children and youth can access behavioral health services that they need. Thank you.

Any comments from LAO? Department of Finance? Senator? Oh, okay, well you can continue. Next issue.

Oh. No, there's a speaker on this, is there? Yeah, there's- no other speakers on this issue. I think.

Okay.

Good morning. Please introduce yourself and then you all may begin. You have. Madam. Thank you.

Thank you. My name is Trina Frazier and I'm with Fresno County Superintendent of Schools. Can you hear me now? Good morning. My name is Trina Frazier and I'm with Fresno County Superintendent of Schools.

In 2018, Fresno County Superintendent of Schools partnered with the Department of Behavioral Health to become a contracted provider of Tier 3 specialty mental health services across 31 school districts and numerous charter schools in Fresno County.

Over the course of five years, we phased in this initiative to ensure that every school in the county had access to these critical services. Today, our all for Youth program employs 248 staff, including 170 Clinicians and case managers, as well as family partner wellness coaches and support personnel.

We currently have clinicians placed in more than 300 schools and we are serving approximately 4,000 youth annually. The CYBHI funding plays a vital role in addressing significant service gaps in our county. This support allows us to expand services to include Tier 2 mild to moderate mental health services which we previously could not offer or seek reimbursement.

Most importantly, the CYBHI enables us to build managed care plans and private commercial health services insurance companies, completing our continuum of care and establishing a full spectrum of behavioral health services. To build the necessary infrastructure, our county office has used the CYBHI to support personnel.

The personnel that we have hired are a clinical supervisor, 10 Clinicians, 11 wellness coach 1s, 23 wellness coach twos, a program supervisor, and an insurance audit specialist. We began receiving technical support from Carillon, the third party administrator, in November of 2024.

Our experience with Carillon has been very positive and they have been responsive and supportive to our county office. However, when we were accepted into the CYBHI Cohort 1 in December of 2023, we were scheduled to begin billing in April of 2024.

Despite understanding the complexity of integrating educational and medical systems, our experience delivering specialty mental health services proves that such integration is possible. The current rollout feels like building the plane while flying it. Cohorts 2 and 3 have been onboarded before.

Cohort one has fully has become fully operational, which we believe undermines the intent of Cohort 1 as a pilot. Another ongoing challenge for LEAs is the requirement to collect student health plan information. Autumn spoke about that earlier, a task that is typically outside the school's capacity.

Many colleagues have expressed to dhcs that this responsibility is significantly hampering our ability to secure reimbursements. To date, our county Office has submitted 343 claims to our electronic health record. Of those, 40 have been sent on to Carillon, 21 have been denied and only two have been paid for. Totaling $327.

Santa Clara County Office of Education and Sacramento COE have met their timelines for distributing the CYBHI Capacity Grant funds to support LEAs with building infrastructure. And while HCAI has met timelines and has been dispersing the funds so that we can hire wellness coaches, there still is significant uncertainty.

Although we've hired clinicians and wellness coaches, we still lack clarity on what services wellness coaches are eligible to bill and at what rates. This uncertainty poses major challenges for workforce sustainability. Without clear guidance, we face the difficult possibility of laying off staff we've hired throughout California.

Our children and youth are counting on us to follow the timelines that we set. They urgently need these services, and we urge DHCS to address these gaps so we can continue delivering care without interruptions. Thank you for your time.

Thank you.

You may begin. You have two minutes. Thank you. My name is Amanda Dickie. I'm with the Santa Clara County Office of Education. And we have been a proud leader in the school based mental health space for the last five years.

In 2021, we saw a clear need in our community for youth mental health services that was not being met because MediCal eligibility rates in our county are very low and commercial health plans would not reimburse for the services that we provided to students.

As a result, we sponsored the legislation SB508 that was ultimately incorporated into the budget and became the LEA fee schedule.

As a true believer in this model as well as the whole child approach generally, Santa Clara was one of the first LEAs to begin utilizing CYBHI funds to establish student wellness centers and intentionally build out a model based on the fee schedule. We created a youth health and wellness Department.

We opened 25 wellness centers and districts throughout our entire county and hired more than 50 staff, including Clinicians, Wellness Coaches, community schools, liaisons, and Medi Cal billing experts. We were accepted into Cohort 1 of the fee schedule and were one of the few LEAs to actually complete the onboarding process. We submitted our first claims test.

Claims, really in November of 2024, expecting a reimbursement of $1,500 and ultimately received $200 in March of this year. Since then, we've submitted another batch of claims. I'm happy to hear that Caroline found them. They were lost for a few weeks, so that's great.

And our funding model for our wellness centers was built in reliance on the legal implementation date of January 1st of 2024, but because we didn't receive reimbursement for a single claim until 15 months after that, as of March, we were forced to pink slip 27 of our staff, so 27 of the approximately 50 that we hired.

I want to be clear that in my opinion, DHCS leadership has worked incredibly hard to try to get this program up and running.

I know that the Deputy Director starts most of her days at 7 a.m. and works until 7 p.m. most days, and she is really deeply committed to the success of this program, but I do feel in a lot of ways that she has been set up for failure.

The CYBHI had 24 work streams and the fee schedule, which I would argue is the single most important piece, was treated as an afterthought. DHCS on top of that was not given any additional funds or positions to help with implementation of the fee schedule originally.

As a result, I think they've been understaffed until recently and frankly lacked the in house expertise necessary to stand up a very complex and brand new MediCal funding stream. And the third party administrator, Carolon was of course supposed to help with this, but I'd argue that they've been the source of many of the implementation delays.

For instance, they didn't provide access to the software billing platform or provide training on how to use it until nearly a year after the fee schedule was supposed to be implemented.

And they still haven't signed MOUs with the health plans to my knowledge, which delayed payment of reimbursements and forced DHCs to find other creative ways to pay out claims, which they did to their credit. I could go on and on about the implementation issues, but I'm not going to.

I want to spend my last 20 seconds talking about how we move forward. First, we urge Members of the Committee to support the Budget ask being circulated by Senator Perez and Assemblymember Schiavo for one time bridge funding to support alligas like Santa Clara and Fresno who have been negatively impacted by delayed implementation of the fee schedule.

One time funding would help ensure that the infrastructure we built over the last five years is not torn down before schools can fully access ongoing funding. Second, we encourage the state to ensure that DHCS has all the resources they need in order to fully implement the Fee Schedule.

And third, we encourage Members of the Senate to partner with us and with others in the the Education Coalition to explore amendments to the statute establishing the fee schedule.

We have encountered a number of legislative barriers and so has DHCs that we've been trying to work on but they are barriers that would probably need to be changed by legislation and we do think would probably increase participation in the fee schedule if they were changed.

Thank you for this opportunity and I'm happy to answer questions at the appropriate time.

Yeah, you may begin.

Good morning Chair and Members and staff. My name is Erin Davis and I'm here on behalf of Hazel Health. We are the nation's largest provider of telehealth to the K12 population. Thanks to the Student Behavioral Health Incentive Program, SBHIP, Hazel currently serves approximately 1.4 million California students across more than 100 school districts.

Our school centered model connects students with licensed mental health professionals. Virtually we eliminate barriers like transportation, long wait times and out of pocket costs. We we serve all students regardless of insurance type which includes care, navigation and connection to community and wraparound services.

To date, our more than 300 pediatric behavioral health Clinicians have delivered tens of thousands of hours of clinical evidence based therapies. Just this year we have seen an increase of more than 60% for referrals to our services. As you are aware, SBHIP funding expired in 2024 and December.

It was expected that the fee schedule would take over, but as you've heard this morning, full implementation still remains a significant work in progress. But without reliable bridge funding, these vital services that we and others who have been funded through SBHIP are at risk.

Hazel supports the fee schedule and as Autumn mentioned earlier, we are actively working with DHCS on a more expedited affiliated provider process. But on the ground, here's what we are hearing. Only six of our 103 partner districts are currently eligible to submit claims. Of those six, just one is actively submitting and only began submitting in late March.

Our largest district partner has submitted only 70 claims to date, with only a small portion having been paid. And when we speak with district leaders, many of whom are reviewing contract renewals right now, here's what we're hearing.

Confusion about what the fee schedule covers and who qualifies, Uncertainty about how to budget for electronic health records and the staff training required in order to implement and use them, and a growing concern about how to continue these services because they haven't budgeted for them, assuming that the fee schedule would be ready and fully implemented.

Despite best efforts of DHCS, districts and providers, as you've heard this morning, the fee schedule simply is not fully operational. That's why we are respectfully requesting a reauthorization of SBHIP funds during this transition. And Senator Perez and others have graciously also made a funding request this isn't about creating something new.

It's about preserving access to essential services that are working right now. We understand the current challenging budget landscape, but this modest strategic investment will protect California's historic gains in school based behavioral health. Give the fee schedule time to mature and prevent service disruption for thousands of students and families.

Without this stopgap funding, we risk undermining years of progress and significant financial investment that the state has made. We will be leaving schools and families without a safety net and jeopardizing the mental health of students who need care the most. Thank you for your time, your leadership and your commitment to California students.

I'm happy to stand for questions at the appropriate time.

Thank you. Senator Menjivar.

Deputy Director I think you. Sorry, I can't remember your name. You mentioned it correctly. I don't think you wake up and start your day at 7am saying how can I screw over LEAs? That's not 100% not.

I know that's not the thing, but I also don't want to hear that you paint a pretty picture because it's not a pretty picture. I think we'd be able to move forward if we actually recognize that what's happening is not working. I know in the Assembly a lot of blame was put towards the LEAs.

LEAs don't, can't bill. They're not submitting correct claims. They're incomplete. This is a brand new program that we've allotted, that I'm so glad we've allotted for kids to get services on school campuses, full stop. That should be the goal. This is brand new for schools.

It is imperative on us as government to lead them in the right path if we want them to take on something that's completely out of their scope. So I want to know, outside of you pouring your heart and soul into this program, things that we can change.

One thing that we can change is the contract to Carillon is coming to an end soon. I heard it was only for two years. Is that correct?

No.

When is that contract over?

We have an initial contract, an initial contract with Carillon Behavioral Health. And the initial term was based on the original funding, funding that was appropriated by the Legislature in the 2023 Budget Act. So the initial contract term was for the initial like two year period to cover that $10 million of funding.

But last year, as part of the 2024 Budget act, there was a change to the legislation that allows us to collect a fee from the managed care plans and insurers to sustain the TPA infrastructure over the long term. So we didn't just stand this up. And to your point, LEAs are still learning, so are we all learning.

This brand new monumental change to the way that school based services are reimbursed. We didn't stand it up with the intention of tearing it down after two years.