Further consolidation in San Francisco area could drive up hospital prices

Already substantially higher than the rest of the state
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Providers continue to consolidate in one of the priciest parts of California to deliver healthcare, raising concerns that costs could continue to move upward in rapid fashion.

That was the anxiety conveyed by policy analysts through public radio station KQED, based on a new study of the San Francisco Bay Area market by the California Health Care Foundation (CHCF).

Among the recent market shifts: Stanford Health Care acquiring ValleyCare in Pleasanton, some 35 miles to the northeast; UC San Francisco Health and John Muir Health announcing a strategic alliance; and the continued consolidations of the region's largest operator, Sutter Health, which aims to merge three medical foundations under its control.

CHCF Director Maribeth Shannon described the phenomenon to KQED as an arms race and observed "providers see health plans consolidating and they want to have a similar level of leverage when they negotiate" with payers. "The idea (is) that you have to be strong to get a good price in this market."

But hospital prices in the Bay Area in 2010 were already about 70 percent higher than the statewide average and double what they are in Southern California. Sutter's prices alone were nearly 40 percent higher than the statewide average at that time. That led to a lengthy contract dispute last year between Sutter and Blue Shield of California. Sutter also agreed in 2013 to settle a lawsuit claiming it had systematically overbilled for anesthesiology services.

There is concern that the already expensive Northern California market will become even more so for patients and purchasers of insurance coverage. Glenn Melnick, an economist with the University of Southern California, described the movements to KQED as "monstrous healthcare enterprises who are just building on existing market power to expand and protect it in the future."

To learn more:
- read the KQED article
- check out the CHCF study

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