Healthcare organizations in California should prepare to pay more for staff, as the state will raise the minimum wage for healthcare workers to $25 per hour over the next decade under a new law signed by Gov. Gavin Newsom on Oct. 13.

Introduced by Sen. María Elena Durazo (D-Los Angeles), SB 525 establishes five separate minimum wage schedules for covered healthcare employees. The rate of increase for qualifying workers depends on categories such as an employer’s size, location and where they get their funding, Courthouse News Service reported.

Employers affected include facilities that are part of an integrated healthcare delivery system; licensed acute care hospitals and licensed acute psychiatric hospitals; and a patient’s home when healthcare services are delivered by a general acute care or psychiatric hospital. Hospitals owned by the Department of State Hospitals are not included, nor are tribal clinics or outpatient settings.

A covered healthcare employee is defined as an employee of a facility that provides patient care, healthcare services or other services supporting the provision of healthcare. It will apply not only to workers like medical residents and interns but also workers such as housekeepers, guards, clerical workers, food service workers, technical and ancillary services workers, medical coding and medical billing personnel, schedulers, call centers and warehouse workers and more.

The law also extends the definition of “employees” to include independent contractors, law firm Fisher Phillips wrote in a blog post. Independent contractors are covered if there is a contract with the health care facility to provide health care services or services supporting the provision of health care, and the health care facility employer directly or indirectly exercises control over the contractors’ wages, hours or working conditions.

Several city councils in California have already passed local laws to raise the minimum wage for healthcare workers, AP reported. The healthcare industry then qualified referendums asking voters to block those increases. Labor unions responded by qualifying a ballot initiative in Los Angeles that would limit the maximum salaries for hospital executives. The law will preempt those local minimum wage increases.

“SB 525 now strikes an important balance between supporting workers and protecting jobs and access to care in some of our most vulnerable communities,” Carmela Coyle, president and CEO of the California Hospital Association, said in a statement. “The bill creates a pathway to improving wages for our lower-wage healthcare workers while also recognizing the needs of our state’s most troubled hospitals. And, by preempting local ballot measures on minimum wage and compensation, all healthcare workers will be paid equitably regardless of where they work. SB 525 demonstrates hospitals’ commitment to healthcare workers, patients and communities.”

Others feel the struggling community hospitals across the state are ill prepared for the new minimum wage.

Craig Castro, president and CEO of Community Health System, called SB 525 “another crushing blow” for hospitals struggling in the inflation-laden economic aftermath of Covid-19 without a commensurate increase in Medi-Cal and Medicare reimbursement rates — especially those safety-net hospitals caring for high volumes of patients insured by these government programs.

“Sadly, nothing in the bill will help cover the cost of this new unfunded mandate. Medi-Cal and Medicare reimbursements lag behind inflation and don’t cover the dramatically rising costs of healthcare labor and supplies,” Castro wrote in a guest commentary published by CalMatters. “Last year alone, Community Health System incurred a nearly $214 million shortfall in Medi-Cal and Medicare reimbursements even with supplemental reimbursement streams aimed to minimize the strain for hospitals.”