California makes efforts to restrict health sector standardization

A controversial push to restrict anti-competitive practices such as inclusion in California’s health sector removed a major hurdle with its approval from the assembly last week. Despite constant disagreements over the provisions of the law, the council eventually passed Assembly Bill 2080 By 45-19 votes. Now he needs to liquidate the Senate.

Aiming to combat High health care costs Associated with industry standardization, the bill prohibits any contract issued, amended, or renewed on or after January 1, 2023, between a health plan and a health service provider or facility from containing non-competitive terms. This includes restricting the health plan from offering incentives to encourage registrants to use high-quality, low-cost providers.

AB 2080 also authorizes the DMHC or California Department of Insurance (CDI) to refer a health plan contract to the attorney general and authorize them to review new contracts that contain non-competitive terms. The bill empowers the attorney general to approve, conditionally approve, or decline to approve these agreements, and requires them to hold at least one public hearing before issuing a written decision on a major deal.

The bill also requires a health plan that intends to acquire or control an entity to obtain prior approval from a DMHC director, and authorizes a DMHC director to refuse any transaction or agreement if it would significantly reduce competition in the health system or among a particular class of health care provider.

The bill requires contracting entities to obtain written approval from the attorney general before executing agreements or transactions worth $15 million or more.

“As mergers reshape the health system on which we all depend right under our feet, these for-profit deals must be subject to appropriate public scrutiny and input on their impact on cost, quality, equity and access,” said Anthony Wright, Executive Director of Health. Access California, an organization that sponsors AB 2080.

Wright explained that mergers can disrupt competition in the health care market and thus increase prices for consumers. He added that health care costs have risen faster than inflation in recent years.

“California health care prices have nothing to do with the cost of providing care, quality of care, or health outcomes, compared to the relative size and market power of health providers so they can charge whatever they can,” Wright said. “AB 2080 is needed for the interest of consumers – and the health of the healthcare market – to be taken into account before the AG agrees to a for-profit merger.”

opposing arguments Centered around the bill giving the attorney general the sole authority to review cases of anticompetitive practices, as expressed by A representative of the California Hospital Association (CHA) and Asm. Chad Mays (I – San Bernardino) when the bill was heard in committee in April.

Sponsor Bill Asm. Jim Wood (D – Santa Rosa) spoke on behalf of AB 2080 in the assembly hall, saying that efforts to reconcile differences between its supporters and opponents had been unsuccessful. He said opponents did not present alternatives to their complaints about the review process outlined in the bill.

“The opposition raised concerns about the attorney general’s review process, and I amended the bill to try to address their concerns,” Wood said. “They don’t like it. But they will not provide feedback. In fact, they will not even provide any editing language for how to improve the review process.”

The opposition also claims that the bill imposes unfair restrictions on contracting practices that will threaten access and increase costs for consumers.

“The Office of the Attorney General and the US Department of Justice already have sweeping authority over the health care market under current law,” reads a statement from the CHA. “AB 2080 will add redundant layers of review to routine partnerships often aimed at expanding or maintaining access to care.”

Wood responded to these allegations during his time in the assembly hall.

“Assurances that this bill limits access — which I’ve heard from some of you — are just fear mongering,” Wood said. “Look at my record. I have spent my entire career trying to find ways to increase access to health care in California.”

After his remarks on the ground, Wood tweeted the following:

A recent example of targeted practices by AB 2080 was last fall Colony Sutter Health is required to pay $575 million in fines for anti-competitive merger practices in the northern part of the state.

“The cost of health care in Northern California is almost double what it is in Southern California because of what happened with Sutter Health,” Wood said. “Do we need this to happen in more and more places before we wake up and look to our system to prevent this kind of thing?”

2021 Report From California Health Care noted that similar consolidation practices are beginning to occur in the southern part of the state. The report states that this is largely due to actions by Cedar Sinai and Providence, which claim to be increasingly boosting the Southern California health care market through acquisitions and mergers.