Sutter Health's size matters

As Sutter Health expands, health insurers and patient advocates complain that the system, which is one of Northern California's largest provider networks with 22 acute-care hospitals, may become too big when it comes to negotiating prices, Kaiser Health News reports.

"As Sutter gets bigger," says Anthony Wright, executive director of Health Access California, a nonprofit advocacy group based in Sacramento, "it can dictate higher prices and is less accountable for ensuring good quality because it has a lock on certain markets."

Sutter's high prices are starting to scare some insurers. When designing a new HMO network for employees, the University of California and its insurer, Health Net, excluded several Sutter medical groups and hospitals because they were too expensive compared with other providers.

The average price of a day of care at its hospitals was 37 percent above the California state average in 2009. Sutter hospitals saw more than 1 million outpatient visits from patients who paid out of pocket or were covered by insurance, or 35 percent of the Bay area's total and more than any other hospital system.

A Federal Trade Commission analysis determined that Sutter's 1999 merger of Summit Medical Center in Oakland and Alta Bates Medical Center in Berkeley may have been anticompetitive. Afterward, insurer prices jumped 72 percent.

Despite concerns about the system's expansion, Sutter continues to grow. This February, a 556-bed, 17 story  Mills-Peninsula Medical Center will open in an upscale neighborhood, which keeps with its tendency to choose locations that attract the best-paying patients. Ken Jacobs, a professor at the University of California, Berkeley's Labor Center, notes that gentrifying the patient base will help the bottom line. "They're trying to get away from a place where you have people who are uninsured or in Medi-Cal," the state's low-paying insurance coverage for the poor," he says.

Sutter CEO Patrick Fry seems optimistic that his system's growth will continue despite the current decline in hospital admissions statewide. He told KHN that once the health insurance exchanges come into play, the wave of former uninsured people will create a wave of new business that hospitals might not be able to absorb at first.
To learn more:
- here's the California Report article and the Kaiser Health News interview with Sutter Health CEO Patrick Fry

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