Opinion: Who Invests in the Organizations Transforming Medi-Cal?

By Jim Hickman, Abner Mason and Jeremy Cantor • Feb 5, 2026

*Providence Holy Cross Medical Center in the San Fernando Valley. Photo by DutcherAerials*/*iStock.*

California’s initiative to overhaul the Medi-Cal program is genuinely ambitious. Known as CalAIM, it is built around the idea that health care extends beyond the clinic walls. It meets patients where they are, recognizing that health depends not just on medicine but on housing, food and coordination of care.

Community-based organizations have become essential partners in this transformation. But CalAIM was designed with an assumption: that CBOs could absorb the operational complexity and cash flow demands of becoming health care delivery partners. For many, this assumption is proving fragile.

For the past two years, one of us, Jim Hickman, has co-facilitated meetings in five counties and helped lead numerous projects across California to help these organizations cope with the state’s demands. In nearly every meeting, he observes the same pattern: Community-based organizations are financing California’s Medicaid transformation out of their own organizational capacity.

They are forced to carry 60 to 90 days of costs while waiting for reimbursement from managed care plans, a burden their balance sheets and bank accounts were not prepared to bear. They stretch staff across expanding caseloads. They defer technology investments. They absorb the gap between what CalAIM requires and what reimbursement rates actually cover.

This is a form of investment — organizational capacity and budgets deployed in advance of payment, with no guarantee of return. But we don’t call it that. We call it “implementation challenges” or “capacity constraints.” We rarely ask the harder question: Who should be investing in the organizations doing this work?

The invisible subsidy

Consider what “Enhanced Care Management” actually requires: sophisticated care coordination platforms, data systems that connect to managed care plans and county agencies, and trained staff who can navigate medical, behavioral, and social services simultaneously. These aren’t capabilities most CBOs had before CalAIM. Building them requires capital — working capital, technology capital and human capital.

We’ve been here before. The HITECH Act of 2009 invested over $35 billion in health information technology — but that investment flowed primarily to hospitals and physician practices. Community health centers received some support, but CBOs, social service agencies, and the broader social care delivery system were largely left behind. Today, hospitals have sophisticated electronic health records, while many CBOs still coordinate care through spreadsheets and phone calls. CalAIM assumes interoperability that HITECH never built for the organizations now expected to deliver it.

Where does the capital come from to close that gap? In most cases, from the organizations themselves. They are subsidizing California’s Medicaid transformation with their own sustainability.

The equity question

This dynamic has equity implications that deserve attention. The communities most dependent on CBO-delivered care — rural counties, communities of color, areas with provider shortages — are precisely the communities most vulnerable if those CBOs can’t sustain the investment they’re being asked to make.

When a CBO serving a rural Central Valley community struggles to maintain its Enhanced Care Management program, the patients who lose access aren’t the patients with other options. They’re the patients for whom that CBO was the only option.

PATH funding — the federal and state dollars supporting CalAIM readiness — sunsets in late 2026. The governor’s January budget proposal included no new infrastructure investments. Last summer’s big federal budget bill puts $28.4 billion in California’s federal Medicaid funding at risk. The organizations holding CalAIM together are being asked to keep investing while every signal suggests the resources to support those investments won’t follow.

A different kind of investor

Last September, the three of us facilitated a session at UC Berkeley’s School of Public Health on innovative financing for Medi-Cal infrastructure. The question we posed: How do you capitalize this work when the state budget can’t, and traditional markets won’t?

One answer emerged from unexpected quarters. New Mexico’s State Investment Council has committed over $1.8 billion from its sovereign wealth fund to venture capital funds that invest in companies building a presence in-state — generating both market returns and economic development. A January 2026 report showed $2 billion in economic impact while the fund returned $2.6 billion to the state’s operating budget. The model: direct capital toward state priorities while maintaining the returns fiduciary duty requires.

California’s public pension funds hold approximately $920 billion in assets. CalPERS recently adopted a “Total Portfolio Approach” that gives investment staff new flexibility to evaluate investments by their contribution to total portfolio outcomes, rather than rigid asset class benchmarks. What if fund managers were evaluated, in part, on whether their portfolios include investments that serve California’s healthcare infrastructure needs? Health technology platforms, workforce development enterprises, and working capital facilities can generate market returns while building the connective tissue the safety net requires. This would require creative structuring — but the flexibility to ask the question now exists.

This isn’t the only answer. But it’s the kind of answer the current conversation isn’t asking for.

What we’re asking

The Future of Medi-Cal Commission — which includes 29 commissioners and 50 advisory group members — convened for the first time on Jan. 22 to begin building a 10-year vision for a program serving more than 14 million Californians. In their opening session, the advisory group explicitly named “implementation capacity” and “fragmentation” as priorities requiring sustained attention. The infrastructure question is now on the table.

We’d ask them to include one question in their deliberations: Who invests in the organizations that make Medi-Cal transformation possible? If the answer continues to be “the organizations themselves,” we should be honest about what we’re asking them to sacrifice — and who bears the cost when they can no longer afford to.