CalPERS Analysis Indicates Some Sutter Hospital Prices Exceed Other Hospitals’ Charges By 84%
In response to "mounting pressure" to justify its decision to drop 38 of the most costly hospitals from its Blue Shield of California HMO network, CalPERS on Tuesday said its analysis found that Sacramento-area Sutter Health hospitals cost as much as 84% more than other Northern California hospitals, the Sacramento Bee reports (Rapaport, Sacramento Bee, 6/9). Last month, officials for CalPERS, the third-largest purchaser of health care in the nation, voted to drop the hospitals beginning in 2005 to control premium rate increases, which have risen 57% since 2002. The move, which includes 13 Sutter facilities, is expected to save CalPERS $36 million in 2005 and $50 million annually after that. Some 53,000 CalPERS members statewide will be affected by the decision (California Healthline, 6/3). CalPERS' decision has "drawn sharp criticism" from some legislators and unions over "a lack of evidence that such a drastic move was necessary," according to the Bee. In response to such concerns, CalPERS on Tuesday released the results of an analysis by Blue Shield that compared the prices it pays for various medical procedures at every hospital in the state. According to the Bee, the analysis showed that Sutter hospitals cost "far more than the average" at all other Northern California hospitals. For example, Sutter Memorial Hospital cost 62% more than other Sacramento-area hospitals and 84% more than other facilities in Northern California. Citing confidentiality agreements, Blue Shield provided information only regarding the percentage difference between the dropped Sutter hospitals and the Northern California average.
Loren Suter, an executive with CalPERS' health program, said, "We looked at this in a very simplistic way. We want to contract with facilities that are high quality and reasonably priced." Sid Abrams, chair of CalPERS' Health Benefits Committee, said, "We were given information that we believed was reliable and confirmed what many of us already knew about hospital pricing in the state. By almost any standard you could find, Sutter and the other hospitals excluded were just charging amounts that were so high they could not be justified." Robert Reed, chief financial officer for Sutter, said CalPERS' cost analysis was "unsubstantiated," adding that CalPERS and Blue Shield officials would not give him underlying claims data that he believes are necessary to verify their conclusions. "We are in the market of trying to distinguish ourselves based on offering the highest quality, state-of-the-art medicine and technology. We believe our prices are competitive. I have no idea how they measured Sutter to come up with their list of hospitals to exclude." Sen. Deborah Ortiz (D-Sacramento) said she has asked state officials to audit the financial data that CalPERS used to make its decision (Sacramento Bee, 6/9).
In related news, the San Francisco Business Times on Friday examined some of the "unhealthy side effects" of CalPERS' decision, including the potential loss for CalPERS of many of the members who may have to switch doctors or hospitals. Officials for Sutter said that many enrollees and public agencies in the CalPERS system are upset about the decision and are considering other options for coverage. According to the Business Times, Sutter itself is "encouraging unhappy Blue Shield enrollees" to consider switching to Blue Cross of California, which offers its PersChoice PPO to CalPERS' members. CalPERS spokesperson Clark McKinley said it is unlikely that any agency will make a move to change health plans before the CalPERS board finalizes its 2005 rates on June 16. Meanwhile, Sutter officials said that the financial impact of CalPERS' decision "will not significantly affect" results at the company, which posted a 2003 profit of $465 million on $5.7 billion in revenue; CalPERS members accounted for about 2% of Sutter's 2003 revenue (Rauber, San Francisco Business Times, 6/4).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.