The roadmap

The Pathway to Our Own Network

How RCH gets from a community hospital with a 1,405-life employee plan to owning a provider network — and ultimately its own health plan — without tripping California's strict structural rules. We climb a ladder: bank lives and data first, build the delivery network, then layer on risk only when each gate is cleared.

Orientation

"Our own network" is really two builds

They're often confused, but they're separate vehicles with separate rules. You build the first before you can safely run the second.

Track A — the delivery network The doctors, clinics, and care. In California this can't be a hospital employing physicians (Corporate Practice of Medicine). It's a 1206(l) medical foundation or a friendly-PC + MSO, wrapped by a clinically-integrated network of aligned independents. No DMHC license to deliver care.
Track B — the financing / risk vehicle Bearing risk for covered lives. The moment you take global risk you need at least a Restricted Knox-Keene license; selling your own coverage needs a full Knox-Keene license with reserves. DMHC-regulated.
The sequence Build Track A (the network that can actually serve members) and prove cost & quality on lives you already control — then climb Track B (take risk, then own the plan). Doing B before A is how provider-sponsored plans fail.
The pathway

Six stages, each gated by the last

Stage 0 · Today

The foundation we already own

RCH (licensed general acute care hospital, ED, clinics) + a self-funded employee plan of ~1,405 lives administered by Cigna. That captive population is our pilot lab and our first proof of savings. Structure: existing. License: CDPH hospital license (held).

Stage 1 · 0–12 months · no license needed

Direct-to-employer contracting

Objective: bank lives + cost/quality data with zero new regulatory burden. Structure: RCH contracts directly with the 12 self-funded employers in town — bundled/case rates, centers of excellence, near-site clinics. Lives: hundreds → low thousands. Gate to advance: demonstrated savings on our own plan + 1–2 reference employers.

Stage 2 · 12–30 months · no DMHC license; CPOM-compliant build

Stand up the delivery network (Track A)

Objective: "our own network" in the provider sense — controlled PCP & specialty capacity. Structure: choose a CPOM-compliant vehicle — a 1206(l) medical foundation (40+ MDs, 10+ specialties, ⅔ full-time, research/education mission) or a friendly-PC + MSO — wrapped by a clinically-integrated network that aggregates the independent physicians Optum/Beaver doesn't own. Gate: physician-supply census clears DMHC adequacy math (≥1 PCP : 2,000 lives); foundation/MSO stood up with counsel.

Stage 3 · 24–48 months · Restricted Knox-Keene when you take global risk

Begin Track B — take risk

Objective: capture the savings; align the money with health. Structure: a narrow/tiered network rented to a carrier/TPA → shared-savings → partial → global capitation as a delegated risk-bearing organization (RBO) under a licensed plan. License: taking global risk triggers at least a Restricted/Limited Knox-Keene license; meet DMHC RBO solvency standards. Gate: actuarial & reserve readiness; stop-loss in place.

Stage 4 · 48+ months · full Knox-Keene license

Own the plan (provider-sponsored health plan)

Objective: sell coverage directly to the City & employers — the full "own network." Structure: a provider-sponsored health plan. License: full Knox-Keene (DMHC) — tangible-net-equity reserves, network-adequacy & timely-access filings, annual reporting. Also triggers: AG review if via affiliation (Corp. Code §5914) and OHCA material-change notice (AB 1415). Target: the ~22,000 capturable lives. Gate: capital, reserves, regulator approval.

Stage 5 · Regional

Replicate into the Pass

Objective: a multi-city, at-risk, whole-person system. Structure: extend the network + plan into Calimesa / Yucaipa, then Beaumont / Banning (Riverside County — new data & provider set). Gate: Redlands model proven and profitable.

At a glance

Stage → structure → license → lives

StageWhat you buildLegal structureLicense / triggerLives
0 TodayHospital + employee planExisting NFP hospitalCDPH hospital license~1,405
1 Direct-to-employerBundles, COE, near-site clinicsRCH contractsNone100s–1k
2 Delivery networkPCP core + independents (CIN)1206(l) foundation or PC+MSONone (CPOM-compliant)attributed
3 Take riskNarrow network → capitationRBO delegated by a planRestricted Knox-Keene1k–10k
4 Own the planProvider-sponsored health planLicensed health planFull Knox-Keene + AG/OHCA~22k
5 RegionalMulti-city systemReplicatedPer marketregional

Lives figures are illustrative planning targets. See Market Opportunity for the model behind the ~22k.

Discipline

The go / no-go gates between stages

Each stage adds cost, risk, and regulation. Don't climb until the prior gate is genuinely cleared.

Don't trip the wires

California regulatory checkpoints on the path

Corporate Practice of Medicine RCH can't employ physicians directly. The whole delivery network (Stage 2) must be a 1206(l) foundation or friendly-PC + MSO. Clinical control stays with physicians.
Knox-Keene (DMHC) Global risk → Restricted license (Stage 3). Selling coverage → full license + reserves + network-adequacy filings (Stage 4).
Antitrust (CIN) Independent physicians can only jointly contract if the network is genuinely clinically + financially integrated.
AG + OHCA review Affiliations/acquisitions trigger AG approval (Corp. Code §5914) and 90-day OHCA notice (AB 1415, 2026).
Full detail See the research brief: california_regulatory_requirements.md. Not legal advice — structure decisions need California health counsel.
What could stall it

Risks to the pathway

Track A risks
  • Physician supply locked up by Optum/Beaver
  • 1206(l)'s 40-MD / 10-specialty bar is a heavy lift
  • Capital for the employed-equivalent core
Track B risks
  • Reserves & solvency burden of bearing risk
  • Catastrophic-claim exposure before scale
  • Regulatory timeline (DMHC, AG, OHCA)

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