Hospital Costs Higher in Northern California Counties, Analysis Finds

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The cost of being hospitalized in Southern California is significantly less than the cost of being hospitalized in Northern California, according to a Los Angeles Times analysis of state records.

Key Findings

The Times analysis found that hospitals in Northern California's six most populous counties collect an average of $6,826 in net revenue daily for each privately insured patient they treat.

The amount is 56% more than the net revenue collected by hospitals in Southern California's six most populous counties, which receive an average of $4,373 per patient daily.

Hospitals in San Francisco County -- the most costly of the six Northern counties -- receive an average of $7,349 per patient daily. In comparison, hospitals in San Bernardino County -- the least costly of the six Southern counties -- receive an average of $3,931 per patient daily.

Aetna said it charges policyholders in Northern California about 30% more in premiums than policyholders in Southern California because it pays more in reimbursements to Northern California hospitals than to Southern California hospitals. Other insurers reported similar differences in premium prices.

The Times analysis does not include information from Kaiser Permanente, which does not report financial data to the state because it operates as an insurer and health care provider network.

Possible Reasons

Hospitals in Northern California say their prices are pushed up by high costs for labor, supplies and other necessities.

However, some health care economists say the price differences stem from a lack of competition in the north, where a consolidation of health care organizations has allowed a few powerful hospital networks to exert influence over reimbursement rates.

For example, Sutter Health and Catholic Healthcare West control about one-third of the 16,214 hospital beds in Northern California's six most populous counties.

In comparison, half of the 167 hospitals in Southern California are run by independent operators (Helfand, Los Angeles Times, 3/6).

Robert Forster
Oligopolies in any service segment distroyes free market dynamics and accelerates cost. Since the FTC and OIG did not inforce many hospital system consolidations with M&A and then with "affilitated" physician groups, they have been able to market leverage their price to payers who must pass it along to consumers (either employers or citizen consumers). Hopitals followed a decade of payer consolidation that again was able to negotiate from structural power not value to the people. Add that in No. Calif. we do not have an excess of hospital beds, it currently places the negotiating payer at a disadvantage for their products and ultimately the consumer (service costs ultimately determine the premium). Rob MD

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