Health care cost targets.

Added an entirely new Section 127502 to the Health and Safety Code establishing a statewide health care cost target system under the California Health Care Quality and Affordability Act, expanding the bill far beyond its original perinatal care focus.

Requires the board to establish specific cost targets by health care sector, including fully integrated delivery systems, geographic regions, and individual entities, informed by historical cost data, financial data, and considerations of access, quality, equity, and workforce stability.

Cost targets must be adjusted for a provider or fully integrated delivery system when nonsupervisory employee organized labor costs are projected to grow faster than the applicable cost target rate, with a formal request and documentation process including potential audit by the office.

Cost targets must be adjusted for a provider or fully integrated delivery system when prescription drug costs are projected to grow faster than the applicable cost target rate, and the methodology must require the board to account for increased prescription drug expenditures.

Requires the methodology to allow downward adjustments for entities delivering high-cost care not commensurate with quality improvements, and upward adjustments for entities delivering low-cost, high-quality care, using data from quality improvement initiatives, state agencies, and the Health Care Payments Data Program.

Requires payer targets to include limits on administrative costs and profits, subject to annual adjustment but not increasing when medical care portion of the medical loss ratio exceeds a target.

Sets a phased implementation timeline: 2025 is a reporting-only baseline year with no enforcement; enforcement begins in 2026; initial health care sectors must be defined by October 1, 2027; specific sector targets must be established by June 1, 2028.

Defines that 'individual health care entity' does not include an exempted provider, and that statewide and sector-specific cost targets do not apply to exempted providers (though their payments still count in total expenditure calculations).

Establishes public meeting requirements for board deliberation on cost targets, a 45-day public comment period, final adoption by June 1 each year, and exempts target adoption from the Administrative Procedure Act.

Fiscal committee vote changed from 'no' to 'yes', indicating the amended bill now has fiscal implications requiring committee review.