San Francisco Chronicle Examines Implications of CalPERS, Sutter Health Dispute
The San Francisco Chronicle on Thursday examined the ongoing dispute between Sutter Health and CalPERS and the larger implications that the conflict could have on the health care industry and employers (Colliver, San Francisco Chronicle, 5/13). CalPERS will decide next week whether to drop 38 hospitals from its network, a move that the system has said would save $25 million to $50 million in 2005 by reducing premium rate increases by 1.9% to 3.8%. Fifteen of the hospitals are Sutter facilities that CalPERS says have high rates for services. Sutter and CalPERS on April 8 signed an agreement that would allow CalPERS to eliminate coverage at some Sutter hospitals or maintain coverage for beneficiaries at all Sutter facilities at a discounted rate. Sutter began negotiating plans to reduce CalPERS' costs, including proposals to allow Blue Shield of California to exclude the 15 Sutter hospitals from an HMO plan for CalPERS members; to include all Sutter facilities in a health plan for CalPERS members if Sutter would discount prices for them; or to create two separate Blue Shield HMOs for CalPERS members -- one that included all Sutter hospitals but would cost more and one that would exclude Sutter and have lower premiums (California Healthline, 5/12).
According to the Chronicle, the conflict between CalPERS and Sutter "illustrates a major power shift that has taken place between those who pay for health care and those who provide it." CalPERS has "thrown its weight around to bring down health care costs" for years -- aiming its efforts largely at health insurers -- but in recent years, the system has found itself "unable to continue strong-arming the HMOs," so it has "turned its attention to the high price of hospital care," the Chronicle reports. Sean Harrigan, president of the CalPERS board, said, "We really don't have the kind of bargaining clout we once enjoyed. There's been so much consolidation on the provider side, especially among hospitals, that they are in many cases an oligopoly. They believe they don't have to seriously bargain over price." The Chronicle reports that the negotiations among CalPERS, Blue Shield and Sutter mark the first time in CalPERS' history that system officials will negotiate with both an insurer and a provider network. Peter Lee, head of the Pacific Business Group on Health, said, "The negotiations we're seeing now are far less the end but the beginning of moving toward a health care system that doesn't treat all hospitals alike, either in terms of cost or quality" (San Francisco Chronicle, 5/13).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.