State health care affordability board takes steps toward further regulating local hospital spending. | News

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State health care affordability board takes steps toward further regulating local hospital spending. | News

The board of California Office of Health Care Affordability (OHCA) took a major step last April in approving a 3-percent spending increase cap for the state’s hospitals and medical facilities to be phased in over five years, in an effort to reign in spiraling health care costs. Now the board is taking steps toward limiting spending by hospitals deemed to be high-cost outliers in the state, a move that could directly impact Monterey County’s three largest hospitals.

The local hospitals—Community Hospital of the Monterey Peninsula, Salinas Valley Health and Natividad—were on the board’s agenda on Tuesday, Jan. 28 to consider making those three a sector apart from the rest of the state’s hospitals and medical facilities.

The board instead followed a staff recommendation to make all hospitals in the state a sector, with the option to regulate individual hospitals within it. One board member called creating the sector “a no-brainer,” and others agreed.

Their action could mean California hospitals with spending at a certain percentile—including the three local hospitals—may find themselves required to limit annual spending increases even further below the state average. (The approved spending increase cap this year and next is 3.5 percent. It will be lowered to 3.2 percent in 2027 and 2028, then finally 3 percent in 2029 and beyond.)

The three hospitals could face a further restriction to a lower percentage, based on a yet-to-be determined formula.

The proposal elicited a strong reaction from Montage Health, the parent nonprofit company of CHOMP. Last year, Montage made a couple of polite public attempts to communicate with OHCA but on Tuesday, the gloves were off in testimony from two Montage executives, followed by a written statement that echoed their stern words.

Most of Montage’s ire was directed toward local unions that have spent nearly two years lobbying OHCA to regulate the three hospitals. In a written statement issued by Montage after the meeting, those union efforts were called “blatant political theater.”

The statement concluded with the hint of taking legal action against OHCA should the board vote to put further restrictions on hospital spending.

“We are confident this will not withstand legal challenge,” the statement from Montage Director of Marketing and Communications Cindy Maschmeyer said.

Two Montage executives, Chief Operating Officer Daniel Chibaya and Chief Development Officer Kevin Causey, spoke directly to the OHCA board arguing that a “small, yet vocal” group of union representatives had been pushing “false and harmful rhetoric” about CHOMP over nearly two years since OHCA was created and began holding public meetings.

The written statement accused the Salinas Valley Federation of Teachers and Unite Here Health of having “systematically maligned and misrepresented the cost and pricing challenges faced by hospitals serving their communities throughout Monterey County.”

They also accused the unions of cherry-picking data and using “isolated and dubious anecdotes” and innuendo, to contend that the hospitals, and specifically CHOMP, are the highest-priced in the state, when there is data that shows otherwise.

Chibaya called the OHCA Bboard’s actions arbitrary and capricious, saying staff were using a flawed analysis that resulted in a biased list targeting specific hospitals.

Steve McDougall, president of Salinas Valley Federation of Teachers, shot back in his comments, saying that “arbitrary and capricious” is how health care providers in Monterey County are setting prices.

“Please do not listen to the noise to delay this any further,” McDougall said to the OHCA board.

Montage also took aim at the Municipalities, Colleges, Schools Insurance Group, a locally based health insurance group representing school districts and municipalities, of which McDougall is board president. Facing a growing deficit due to high medical claims by a portion of members—claims in October were $11.6 million—the MCSIG board voted last month to assess its members a total of $6.7 million to cover the unexpected costs.

At the time, McDougall blamed the high cost of health care in the county for MCSIG’s situation, with an emphasis on CHOMP.

The Montage statement accused union leaders of making the nonprofit system a scapegoat for MCSIG’s own mismanagement, stating that MCSIG’s spending at CHOMP was flat over the last two years.

“They should be focused on their management of GLP-1 drug utilization and their stop loss strategy instead of the continued character assassination of Montage Health,” the statement read.

Both Montage and Salinas Valley Health officials argued that it was unfair of OHCA staff to use data from their hospitals only, when those hospitals are part of overall systems. SVH President/CEO Allen Radner argued in a letter to the OHCA board that the services offered through the clinics “are provided at considerable expense to the system while delivering significant financial benefit to our community.”

He pointed out that SVH has invested in additional services like an outpatient surgery center, endoscopy program and urgent care center. “These are cost-effective alternatives for services that would otherwise be performed at a hospital facility,” he said.

“Characterizing our system solely through the lens of our acute care hospital, rather than in the context of our consolidated system, is inaccurate, demoralizing and detrimental to community health and safety,” Radner said.

During the meeting, McDougall dismissed that point, arguing local hospitals were using their profit margins to grow their systems to further consolidate the market resulting in higher costs.

A host of hospital executives and hospital lobbying organizations lined up during the meeting to urge the OHCA board to not take action on categorizing hospitals as a sector. They universally said there isn’t enough data yet and the board was moving too fast. Board members responded that they weren’t moving fast enough.

Now that the board has determined that California hospitals are a sector, next comes deciding the methodology for possibly set further limits on spending increases. The board will continue that discussion at its next meeting on Feb. 25. 

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