A Message from Chamber President Charlynn Harless:

Legislation Must Address Cost Control 

MARCH 2007 -- Since my telephone response to a question posed by contributing Record reporter, Joe Goldeen to a story that carried Sara Cardine’s byline on Jan 9, and referenced by Dr. Marvin Singleton in his recent letter to the editor, the response by some in the medical community has been swift and defensive. A reaction I understand given that my comments to one reporter were taken out of context by the eventual author of the article. The perception left by that article that my belief that the sole source of our state’s health care crisis is “due to a physician monopoly” is not an accurate reflection of my comments or concerns. I stated to reporter Goldeen that my belief was that unless our policymakers included legislation that provided protection against excessive charges passed on to patients and their health care plans from multi-hospital organizations and health care provider corporations such as Sutter Health, CHW and Tenet Healthcare, their efforts to resolve the health care crisis would fail. Further, my comments were based on my experience of 25 years and expertise as an employee benefits health care consultant, and not a representation of a position taken or not taken by the Chamber of Commerce.

Modesto is the most expensive community in the United States to receive medical treatment, and a major contributing factor is Sutter Health and Tenet Healthcare. The Institute of Health and Socio-Economic Policy’s report of America’s 100 most and least expensive hospitals found that of the 100 most expensive hospitals, only five hospitals were not part of hospital chains. Three states, California, Florida and Pennsylvania accounted for about 64 percent of the most expensive 100 hospitals. All three states were found to be dominated by corporate hospital chains.

The most expensive hospitals were found to have marked up their gross charges an average of 525 percent. Tenet Healthcare dominated the expensive list, owning 64 of the most expensive 100 hospitals.

“Doctors Medical Center in Modesto, CA placed first with a sticker price of 1,092 percent above its costs”. This means that the hospital “would bill $10,920 for a patient’s case where the costs were $1,000.” The hospital with the next highest markup of 920 percent was Doctors Hospital of Manteca. This report stated that these costs were “a significant contributor to skyrocketing health care costs that are pricing increasing numbers of families out of health care coverage.”

Last year following months of negotiations with Sutter Health, CalPERS the nation’s third largest purchaser of employee health insurance coverage (insuring 1.2 million Californians) preceded only by the Federal government and General Motors, eliminated half of Sutter Health’s hospitals and affiliated physicians from its Blue Shield HMO network, along with five CHW hospitals, five Sharp hospitals, three Daughters of Charity hospitals and two Tenet hospital systems. Based on a cost analysis by Blue Shield and an independent actuary, CalPERS was advised that elimination of these health care providers would generate $38 million in savings the first year and $50 million a year thereafter.

Also considered was the Centers of Medicare and Medicaid’s hospital quality performance ranking of Sutter in the lowest 50 percent of hospitals that provided data.

In addition, CalPERS was forced to set premium rates based on geographic region or lose 50,000 southern California members who threatened to withdraw from the program because of the impact that Northern California’s health care costs were having on the program’s premiums. Today CalPERS insured employees in our community pay the highest premiums; for a family $1,277.90 per month for Blue Shield HMO and $1,146.00 for Kaiser as compared to employees in Los Angeles whose family premiums are $926.04 and $855.76 respectively.

For the past 25 years I have represented employers who provide health insurance to thousands of employees in our community through participation in state-wide self-funded pools.

The insurance premiums charged by state-wide self-funded pools represent the lowest premiums available because costs are limited to claims and administration. Administration as a percentage of total premium is well below levels targeted by the three state-wide pool health care reform proposals. Excessive claims not “excessive CEO salaries and Wall Street profits” as stated by Dr. Singleton are driving the premiums of these self-funded, state-wide pool programs.

For example, our county schools health plan paid $100,000 more to Modesto’s Tenet hospital for open heart surgery than it paid in the same month to Stanford University Medical Center for a heart transplant.

This same plan was billed $18,000 for an out-patient Diltion and Curettage (D&C), a common diagnostic and treatment surgery by a provider in Modesto, who ultimately accepted a payment of $1,700 because of the plan’s PPO contract. Just two months ago the county schools health plan was charged $22,726.05 by a local hospital for a 12-hour out-patient stay for an angiogram, a procedure originally scheduled for only five hours but due to the hospital’s backed up surgery schedule the employee had to endure a 12-hour out-patient stay. This charge did not include the laboratory expenses, the cardiologist or anesthesiologist; they all billed separately. Again, because of the plan’s PPO contract the hospital accepted $6,650. Does this mean that this non-profit hospital charges $16,076.50 more to a citizen without insurance, representing the amount the hospital purports to lose by treating the uninsured?

I stand by my comment that if health care reform is to be successful our policymakers must include controlling the cost of treatment by multi-hospital organizations and health care provider corporations such as Sutter Health, CHW and Tenet Healthcare, not simply shift the cost of insurance coverage to employers. If CalPERS, the nation’s third largest purchasing pool could only control the health plan’s premiums by eliminating these health care monopolies, how can we expect the three publicized reform proposals to be successful without similar action?

As correctly stated by Dr. Singleton, the Chamber’s mission is to promote a vibrant business community and represent the best interest of our community’s businesses and their valued employees. To this end, on Jan. 25, and prior to Dr. Singleton’s letter, the Chamber Board of Directors acted unanimously on my request to establish a Task Force to thoroughly examine the three health care reform proposals submitted by Governor Schwarzenegger, Senate President Pro Tempore Perata and Assembly Speaker Nunez for the express purpose of developing the Chamber’s statement of support, or opposition or concern with these health care reform proposals.