The growing market power of California hospitals and physicians is contributing to the state's rising health care costs, according to a study published Thursday in Health Affairs, the San Francisco Chronicle reports (Lochhead, San Francisco Chronicle, 2/25).
The Center for Studying Health System Change conducted the study with funding support from the California HealthCare Foundation. CHCF is the publisher of California Healthline.
For the study, researchers interviewed about 300 hospital executives, physicians, insurers and employers in six major California markets between October 2008 and December 2008.
The study found that from 1999 through 2005, California hospital fees increased by 10.6% each year, more than double the national average.
Contributing Factors
Researchers suggested that the fees increased as the state's major health care networks began to call for higher payment rates from health insurers.
They note that in the late 1990s, many health care systems and provider networks joined together to increase their leverage in negotiations with newly developed managed care networks. For example, Sutter Health and the UC hospital system each negotiate as a single health care system, which gives them more bargaining power to set payment rates (Arnst/Wechsler, Bloomberg/BusinessWeek, 2/25).
The study also suggests that health insurers have limited power to exclude major physicians and hospitals from their provider networks (Johnson, Wall Street Journal, 2/26).
Recommendations
The study authors recommend that lawmakers restrain the growing market power of health care providers by increasing industry regulation.
They also call for the introduction of an all-payer rate system that would require all insurers to set the same fee schedule based on underlying health care provider costs (Bloomberg/BusinessWeek, 2/25).