On December 13, 2020 CBS aired an interesting story during their 60 Minutes show featuring the Attorney General of California, Xavier Becerra’s successful challenge to Sutter Health – an incredibly large Hospital / Health system including 24 hospitals and 5,500 doctors in California – accused of creating a monopoly by buying out nearly all their competition and raising health care costs as much as four times higher than comparable care available at other hospitals. I found the timing of the 60 Minutes story somewhat suspect as the lawsuit brought by the Attorney General was filed in 2018 and actually settled out of court on the eve of trial later in 2019. Why was this story relevant a year after it happened? I have to wonder if it had more to do with helping boost the Attorney General’s nationwide popularity since he was announced as President-elect Biden’s choice to head up the Department of Health and Human Services just a week before the story aired. Did I mention that he has absolutely no health care administration experience outside of a history of litigation against health care systems and just about anything Trump tried to change in the Affordable Care Act?
But there is so much more to this story. And the alleged action and subsequent outcome of this story is not an isolated incident in California. It’s happening everywhere in the U.S. including here in “River City”. The importance of this story is understanding the economic power a health system can amass over health insurance carriers, employers, and patients when they eliminate competition by buying them out. And this is different than say, when your cable company buys out all the other cable companies you had access to, because you knew up front what they were going to charge you and you had a choice to accept their price or not – without having to make a life-or-death decision. That’s usually not the case when you find yourself as a “customer” of a hospital.
The larger the hospital system the more clout they have over the insurance company’s PPO network. That’s because as the health system saturates the market (by owning most of the hospitals and doctors) they limit your choice of where to get your medical care. They likely own most of hospitals and doctors that you want to use. With this power they often force the insurance carriers into a “all-or-none” contract, which means the carrier must include all their facilities and doctors thereby keeping the PPO from contracting with just the best providers of their system based on quality and cost. And whether we accept it or not some doctors and hospitals are better than others. Unfortunately, most employers do not have access to the data that would help them discern the high-quality providers from the not so good ones. But the PPO networks do have that data. And if they were able to use it, they could improve the cost and quality of their networks – which would be economically detrimental to some of the hospitals and doctors (the not so good ones) owned by the large hospital systems. But typically, PPO contracts with large health systems prohibit insurance carriers from using this data due to the “all or none” contract provisions. It turns out to be a classic battle between the insurance carriers and the hospital systems on who gets to decide how and where to steer patients for health care. And employers and patients are stuck in the middle of the war. Dr Eric Bricker, a renowned expert in health care management published a recent video on the subject. He explains in simple terms the challenges this brings to improving quality and reducing cost for employers. And he notes that if health insurance carriers can’t provide information about quality and outcomes of local hospitals and doctors, employers can – if they know how and where to get the information. And if they have sound advice on how to best use it. If your current broker / advisor isn’t bringing this solution to you give me a call at (815) 742-2066 or click on the “Contact Me” tab on the top of this page. I’ll show you how to access this data to use with your own employee health plan.