The Office of Cost and Accountability asked its board for guidance on how to contextualize spending growth when entities exceed legally established spending targets. Staff outlined a set of possible enforcement considerations and asked the board and public to weigh which factors should influence whether an entity advances from an initial review to technical assistance, performance-improvement steps or financial penalties.

Core questions presented: OCA staff described a staged enforcement workflow mandated by statute in which entities that exceed a spending target are first notified and may provide additional information; all such entities receive technical assistance; and OCA may then evaluate enforcement considerations to determine next steps. Staff emphasized these considerations would not change reported performance but could inform prioritization of enforcement resources.

Potential considerations discussed by the board and staff included:
- Population characteristics: staff showed age- and demographic-adjusted growth estimates and suggested OCA could examine whether shifts in an entity's covered population (for example, an older caseload) materially contributed to higher spending.
- High-cost patient outliers: the board discussed whether sudden emergence of a small number of very high-cost patients, new high-cost therapies, or a concentrated patient mix could justify different treatment for small entities and argued that OCA should compare changes against statewide trends before making exceptions.
- Historical spending growth and trends: board members supported examining multi-year patterns to prioritize entities with persistent overshoot rather than penalizing one-year fluctuations that may reflect noise or special circumstances.
- Consumer access and market role: members said OCA should prioritize enforcement against entities whose spending growth most threatens access or affordability in a region (for example, dominant regional plans or hospitals), but they also noted rural or sole-provider hospitals may warrant special handling because of local access concerns.
- Investments in primary and preventive care: staff suggested that investments intended to shift care toward primary and preventive services could increase short-term spending but lower long-term spending; board members asked for clearer definitions to avoid "box-checking" acquisitions that do not expand meaningful primary-care capacity.
- Entity baseline costs: several board members and stakeholders argued enforcement should account for an entity's starting point (absolute cost level) so that higher-cost entities that routinely operate above peers are prioritized for enforcement over lower-cost entities that exceed growth targets but remain relatively affordable.
- High-cost drugs and new technologies: members discussed how novel therapies (for example, some gene- and cell-based treatments) and new inpatient technologies can cause sharp spending spikes. The board suggested OCA may need methods to treat truly new, clinically appropriate innovations differently from excessive pricing or markup behavior.
- Acts of God or catastrophic events: staff proposed considering unforeseeable natural disasters or other catastrophic events that materially increase spending; board members asked how OCA would assess foreseeability and reasonable mitigation.

Board and public input: Board members repeatedly urged OCA to use statewide comparisons and to prioritize enforcement resources toward entities with the largest combined effect on spending and consumer access. Dr. Richard Pan, Rick Kronick and Elizabeth Mitchell noted the need to balance timely enforcement with the recognition that some investments or outlier events can be legitimate drivers of short-term spending. Public commenters including Jen Yuen of the California Hospital Association and Beth Capelle of Health Access urged transparency about how enforcement considerations will be applied; Capelle cautioned that too many exceptions could render the target less meaningful.

Timing and next steps: staff outlined an implementation calendar: continued discussion of assessing performance in October; work on technical assistance and public testimony in November and December; and later shifts to performance-improvement plans and penalties to be scheduled in early 2026. Staff said if they observe systematic effects that apply statewide (for example, major federal policy changes), they will present observations to the board to inform future target-setting.

Ending note: the conversation highlighted trade-offs between encouraging high-value investments and preventing loopholes that would undermine spending targets. Board members asked OCA to return with more detailed proposals and examples that could be applied consistently across plans, hospitals and physician organizations.