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Consolidating California: Concentrated Provider Markets and Rising Prices

By Jack O'Brien  
   April 09, 2018

Breeding anticompetitive behavior

Bill Kramer, MBA, executive director for national health policy at the Pacific Business Group on Health, told HealthLeaders Media the consolidation trend in California is a “serious problem” that employers have been dealing with for years.

Kramer said large health systems, physician groups, and health plans recognize that consolidation leads to increased market power, which in turn provides the opportunity to raise healthcare service prices above what is allowed in a competitive marketplace.

Two weeks ago, California Attorney General Xavier Becerra sued northern California's Sutter Health, for anticompetitive practices. Sutter, a health system with $12.4 billion in operating revenue in 2017, is charged with foreclosing price competition on its competitors, imposing prices for healthcare services exceeding a competitive market value, and restricting negotiations with insurers to an “all-or-nothing” basis.

Since 2014, Sutter has also been the focus of a class-action lawsuit filed by a grocery workers' health plan alleging violation of antitrust and unfair competition laws.

“When a provider or any other healthcare entity gains significant market share, it can use that power to negotiate higher prices,” Kramer said. “But they also can put in place mechanisms that strengthen their market power further. That’s what [Becerra] and complainants in this other lawsuit have alleged, that anticompetitive behavior further strengthens their market power and their ability to raise prices. It’s all part of the same picture.”

Related: Healthcare M&A: Is It Different This Time?

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

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