DHCS Releases Formal State-Only PPS-to-Non-PPS Reimbursement Notice — July 1, 2026 Effective Date Confirmed

DHCS released its formal Federally Qualified Health Center and Rural Health Clinic State-Only Reimbursement Methodology Change Notice on April 24, 2026 — confirming the July 1, 2026 effective date for transitioning State-Only services (provided to undocumented adults via state-only funding) from Prospective Payment System (PPS) reimbursement to fee-for-service Medi-Cal Fee Schedule rates (FFS delivery system) or to negotiated managed-care plan rates (MCP delivery system). This formalizes the May 2025 budget framework now codified through the FY2026-27 budget cycle. Roughly 50-70% revenue cut per encounter compared to existing PPS rates ($200-400/visit). $1B annual GF savings = $1B FQHC revenue loss, with concentrated impact in LA, San Diego, and Central Valley. CPCA, CCALAC, and Health Access have called the formal notice the trigger point for: (1) MCP rate negotiation strategy, (2) cross-subsidization re-modeling, (3) fundraising acceleration, and (4) labor relations transparency about FY26-27 staffing implications. CFOs must now build explicit FY26-27 line-item modeling.