UC Berkeley study finds link between hospital consolidation, higher prices for patients

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A UC Berkeley study published in September found increasing hospital consolidation in California has been associated with significant increases in Affordable Care Act, or ACA, premiums and outpatient service prices.

The study reaffirmed high rates of horizontal concentration, such as hospital mergers, and vertical integration, such as hospitals’ acquisition of private practices, across California. The study found that between 2010 and 2016, the percentage of California doctors in medical practices owned by hospitals grew from 25 to 40 percent, which was found to be associated with a 12 percent increase in ACA premiums, a 9 percent increase in specialist prices and a 5 percent increase in primary care prices.

Richard Scheffler, director of the campus Nicholas C. Petris Center and lead author of the study, explained in an email that as hospitals grow, they are able to negotiate better deals with patients and insurance providers. According to an email from co-author Christopher Whaley, a campus public health assistant adjunct professor, the Bay Area has experienced substantial increases in vertical integration.

“In the Berkeley area, many physician groups are now owned by hospitals or health systems,” Whaley said in an email. “The price increases that we document in this study have real relevance for the Berkeley community.”

The study comes amid controversy surrounding Sutter Health, Northern California’s largest hospital system, which owns Alta Bates medical center in Berkeley.

California Attorney General Xavier Becerra filed a lawsuit against Sutter Health on March 30, alleging anticompetitive activities that drove up health care costs for Northern California patients.

Sutter Health has also drawn criticism surrounding Alta Bates’ imminent closing. The California Nurses Association, or CNA, led protests against the proposed closure in February.

Sutter Health’s move toward a closure of the medical center might indicate some liability in the attorney general’s filing, according to Ben Bartlett, Berkeley City Council member for District 3. Bartlett previously told The Daily Californian that Sutter Health’s decision to close Alta Bates and its refusal to transfer the facility to another operator indicates the organization’s inclination to keep its control over the region.

CNA Co-president Malinda Markowitz said in a statement provided by CNA spokesperson Kari Jones that mergers allow health care giants to consolidate care in high-income communities, drive up prices and reduce services they see as less profitable. They are then able to use profits to lobby to discourage legislative regulation, according to the statement.

According to Scheffler’s email, these trends will continue and demand more attention from regulators and legislators. Markowitz prescribed a more specific solution in her statement — Medicare for all.

“It’s long past time to eliminate the profit incentive in health care,” Markowitz said in her email. “Health care should be a right, not a commodity.”

Olivia Nouriani is the lead schools and communities reporter. Contact her at [email protected] and follow her on Twitter at @olivianouriani.