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Thursday, Sep 28, 2023

Rethinking Hospital, Doctors Affiliations

There is a growing trend in Southern California of consolidation of hospital groups such as Providence Health & Services and UCLA Health System acquiring doctor’s practices, medical groups, labs and imaging centers. In the March 4 edition of the San Fernando Valley Business Journal there was an article, “Hospital, Doctor Affiliations Getting Second Opinion,” addressing this trend. I was quoted in the article, but I felt it left a number of unanswered questions. l Does this new service model address any of the cost drivers of health care? l How will these new delivery models handle dependent children, under the age of 26, who live or go to college out of the area? l How will they handle employers with multiple sites in and out of California? l How will they handle insured members that travel out of California or out of the country? l Will the financial pressure of cutting costs lead to less care? Dr. Matteo Dinolfo, director of the UCLA Department of Medicine community offices, is quoted as saying, “Most of the care in Southern California will be delivered by four or five entities.” Is that a good thing for consumers? If we look at the history of consolidation in the airline and the banking industries, among others, did the economies of scale lower prices as promised? My experience is that although larger companies may lower overall operating costs, the end result was never positive for the users of those services. This consolidation by large hospital groups does little to address the real cost drivers of health care inflation. These cost drivers include technology, increased use and cost of pharmaceuticals, rising clinic and hospital costs, unhealthy lifestyles, aging population, increased patient demand, medical malpractice and insurance costs, government mandates and taxes, and fraud and abuse I am a bit skeptical that a consolidation into four or five entities will address any of these drivers. Most California residents that have health insurance obtain coverage through their employer. Employers have to deal with many issues including covering employees’ families and employee morale. The growing trend of limited medical networks surrounding a specific geographic area will cause issues with employees and their families. As an example, I have a client that is headquartered in the San Fernando Valley and has 158 employees in six locations, including one in Las Vegas. How do they cover the employees in Las Vegas if they are in a health plan that uses the UCLA Health System or Kaiser? Some employees, including one of the owners, have children in Colorado and Michigan attending college. How does this model handle children under 26 that are not in the service area? I think the more pressing question is where do employees obtain their health care. In my experience working with almost 300 employer groups throughout Southern California with the majority in the San Fernando Valley, employees see doctors where they live, not where they work. I have a law firm client in Encino that has employees who live in the Santa Clarita Valley, Pasadena, Oxnard, Torrance and in the San Francisco Bay Area. If this employer chose a health plan with either UCLA or Providence, where would the employees go who do not live in the Los Angeles area? Will they have to find doctors near where they work rather than where they live? What about their school age children that need to see the pediatrician? Will they have to pick them up from school and then drive to the Valley to see their doctor? What about the employees in San Francisco? Let me close by addressing economy of scale and the reasoning that claims consolidation will lower costs. Currently UCLA Medical Center; University of California, Irvine; University of California, San Francisco; and University of California, Davis, and their Sacramento hospital have negotiated individual contracts with major health insurance carriers such as Anthem Blue Cross and Blue Shield. It has been reported that in mid-2013 they are planning to renegotiate their contracts as a single entity. Four large hospital groups will band together to leverage their position with the health insurance carriers to obtain better reimbursements. In almost every case, those with leverage get better pricing. Does that sound like lower health care costs to you? It sure doesn’t to me! Barry Cohn is chief executive of RGEB, Really Great Employee Benefits, a group insurance agency and employee benefits firm in Woodland Hills.

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