Bill seeks to address state’s high health care costs

Legislation by state Sen. Bill Monning aims to alleviate a long-standing problem in Northern California: consumers paying higher prices for health care because of a lack of competition among regional hospital systems.

The Carmel Democrat’s SB538 targets a relatively narrow slice of the health care sector. It would ban certain contracting practices between large health systems and insurers that some patient advocates say lead to higher costs for consumers. Under the proposed legislation, amended this month, hospital systems could no longer require health plans to contract with all of their affiliates. Nor could a hospital system force employers — which contract with health plans — to arbitrate claims against the hospital system instead of suing in court, or face higher out-of-network rates.

The bill does not single out any providers by name. But Sutter Health, one of the biggest health systems in the Bay Area, recently asked companies, through their insurance administrators, to waive their right to sue Sutter in court or risk having to pay higher out-of-network prices for Sutter services. Sutter has maintained that arbitration — a standard part of its contracts — is the most costeffective way to resolve disputes between providers and employers.

“The motive behind this legislation is to continue to protect the rights of patients in terms of affordability and access in an ever-changing marketplace,” Monning said.

Sutter referred calls to the California Hospital Association, which did not immediately respond to a request for comment.

Market consolidation in health care has long concerned antitrust regulators, lawmakers, consumer advocates and patients in California. The state has seen a wave of consolidation of major hospitals that have acquired physician practices and outpatient facilities in recent years.

Health care premiums are about 30 percent higher in

Northern California than in Southern California, according to an analysis released last month by the Center for Health Policy at the Brookings Institution. Much of this is because Northern California is dominated by a few large health systems, like Sutter and Dignity Health, according to the analysis.

“Insurers have less leverage for negotiating in regions with fewer hospitals and/or places dominated by large medical groups,” the analysis found. “As a result, rates are often higher in those areas.”

In California, from 2004 to 2013, prices grew 113 percent at hospitals that are part of the largest systems, according to a 2016 study coauthored by economist Glenn Melnick. By comparison, prices across all hospitals in the state grew 70 percent.