California Bill Would Reduce Anti-Competitive Practices by Largest Hospital Chains

A Bay Area legislator is trying to level the playing field among hospital chains, particularly in Northern California, where he said studies show consolidations have led to some of the highest healthcare prices for consumers and employers in the state.

Sen. Bill Monning, D-Carmel, on Tuesday will introduce Senate Bill 538 that he said seeks “fairness, access and affordable health care” on behalf of patients. The legislation would, among other things, stop certain anti-competitive practices, such as gag clauses in health plan contracts, which prevent employer groups from sharing pricing data that could encourage more cost-effective care for employees.

Monning points to a 2016 study by University of Southern California healthcare economist Glenn Melnick and co-author Katya Fonkych that showed how costs grew at a faster rate at the state’s two largest hospital chains.

Using claims data provided by Blue Shield of California, the economists found that between 2004 and 2013, prices at hospitals that are members of the Sacramento-based Sutter Health and San Francisco-based Dignity Health chains grew by 113 percent while prices paid to all other California hospitals rose by 70 percent.

The authors found that prices were similar in both groups at the start of the period — about $9,200 per admission. But by the end of the period, prices at hospitals in the two largest systems exceeded prices at other California hospitals by almost $4,000 per patient admission.

“These academic studies show with the consolidation of networks, the prices are going up, not down, and that is the classic sign off once you control a market, you can monopolize cost and cost-setting,’’ said Monning on Monday.

Spokespeople for Sutter and Dignity, both non-profits, as well as the California Hospital Association, all declined to comment on the legislation Monday, saying they had not been able to evaluate the final language of the bill.

The California Labor Foundation, the Pacific Business Group on Health, and the Silicon Valley Employers Forum support the bill. No opposition was listed yet.

“SB 538 is important legislation that will help restore competition to the healthcare marketplace and lower costs for anyone who pays for or receives care in California, including consumers, employers, and labor groups,” said Kristof Stremikis of the Pacific Business Group on Health, on behalf of both business groups. Combined, he said, the two groups represent 82 companies, 61 of which — like Apple, Google, Facebook and Wells Fargo — are either based or have a presence in the Bay Area.

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