California legislation aims to reduce anticompetitive practices by state's largest hospitals

State legislators introduced Senate Bill 538 Tuesday which aims to prevent California's largest hospital organizations from engaging in consolidation that may encourage anticompetitive practices and prove harmful to patients, according to The Mercury News.

State Sen. Bill Monning, D-Carmel, said the goal of the legislation is to prevent larger hospitals and health systems from engaging in consolidation practices and "introducing gag clauses in health plan contracts which prevent employer groups from sharing pricing data that could encourage more cost-effective care for employees," according to the report.

To explain why he believes the bill is necessary, Sen. Monning cited a 2016 study conducted by researchers at the University of Southern California in Los Angeles which suggested hospital chains with greater market share increased their prices by higher rates than smaller systems.

Using claims data provided by Blue Shield of California, researchers discovered the costs patients paid for inpatient admission at facilities such as Sacramento, Calif.-based Sutter Health and San Francisco-based Dignity Health — two of the state's largest hospital chains — increased 113 percent between 2004 and 2013, while the price of inpatient admission to all other hospitals in the state increased 70 percent.

"These academic studies show with consolidation of networks, the prices are going up, not down, and that is the classic sign of once you control a market, you can monopolize cost and cost-setting," Sen. Monning told The Mercury News Monday.

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