Hospital pricing abuse is squeezing Californian employers and workers

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OPINION- As a healthcare researcher and business owner in California, I’ve seen first-hand how rising health care costs impact business and bottom lines. I’m concerned by the upward trend of rising premiums and cost-sharing and the role that large hospital systems play in driving up these costs in our communities.

Despite cost containment efforts, such as prospective payments implemented by CMS, hospital pricing practices have continued to fuel healthcare inflation, destabilizing the system and shifting costs to employers and the commercially insured. As these large hospital systems continue to drive up healthcare costs in California and across the country, providing robust health benefits to the millions of working families covered by employer sponsored health plans could soon become financially unsustainable, according to survey data from the National Alliance of Healthcare Purchaser Coalitions.

Employers are growing increasingly frustrated by hospitals that actively hide the true costs of care, masking prices behind opaque billing practices and tacking on hidden “facility fees.” RAND pricing data show that hospitals in California charge employers more than triple what they charge Medicare, and prices can vary wildly from one facility to the next for the exact same services. So-called “gag clauses” keep these prices hidden, leaving employers and working families in the dark. It’s folly to think that these rising healthcare costs initially shouldered by employers do not trickle down to employees through higher health insurance premiums, lower wages, and diminished worker benefits.

We’ve seen time and again that these same well-resourced hospitals are taking advantage of this opacity to mark up the prices of goods and services –– exploiting safety-net programs meant to protect our most vulnerable communities. One of the most egregious examples of this occurs in the 340B program, which half of California hospitals participate in, allowing them to purchase drugs at a steep discount. Although hospitals claim to pass these savings along to patients, in practice many invest these funds in already profitable services, further padding their bottom line. In the last decade, 7 out of 10 audits conducted by the Health Resources & Services Administration (HRSA), the federal agency that oversees the 340B program, have uncovered wrongdoing by 340B covered entities in California, such as distributing 340B drugs to ineligible patients and claiming duplicate discounts.

And what’s worse: Big hospital systems are deepening their hold on California’s hospital market through predatory consolidation. A single hospital system now controls the entire hospital market in one in four California counties –– including in many predominantly rural counties. This has given hospital conglomerates the power to raise prices and absorb competitors, leaving patients with fewer choices and higher bills. The impact is particularly acute for rural and underserved communities, which already have fewer alternatives and longer travel times to access care.

Californians deserve better. Lawmakers must act now to address these hospital pricing practices and deliver real solutions that bring transparency, competition, and accountability to the system. The future of affordable care –– and the health of California’s workforce –– depends on it.

Shane Desselle, RPh, PhD, FAPhA is Owner/President of Applied Pharmacy Solutions, Associate Dean for Research, Department Chair and Professor at Touro University College of Pharmacy.