Building Imagination: PLAY

Behind every public uproar are some hidden facts. Here’s one about rising health insurance rates in California: Sharp jumps in hospital costs are a big part of the story.

Hospitals are charging insurance companies, and by extension their customers, billions of dollars for expenses not directly related to care. These include new hospital wings, new technology and services for the uninsured.

Sacramento-based Sutter Health has negotiated rates with “markups” more than double what it costs them to provide services. Memorial Medical Center and Sutter Gould Medical Foundation in Modesto are part of the Sutter Health system.

Hospitals say their charges to insurers are justified and necessary. Under law, hospitals must report the total amount of money they spend to provide services to insured patients each year, how much they bill insurance companies and how much they wind up collecting.

Based on those numbers, California hospitals charged insurers 53 percent more than what they told the state it cost them to provide services. In 2005, the gap was 40 percent.

Sutter Health has faced scrutiny for its pricing practices. Five years ago, Cal-PERS, the state’s largest buyer of health services, forced one of its key insurers to drop 13 Sutter Health hospitals from its stable of providers because CalPERS deemed the Sutter facilities too expensive.Insurers and hospitals negotiate discounted rates, and hospitals have different price structures for each insurance network they decide to join. In some cases, hospitals have blocked efforts to shed more light on their pricing policies. Revealing the information, they say, could reduce competition in the industry.

In approving an overhaul of the health care system, Congress seemed to write a prescription for a place like Stanislaus County, with its large numbers of residents who are uninsured or in government health programs.

The federal government, starting in 2014, will offer subsidies to help families and individuals buy affordable health insurance and will expand the federal and state Medi-Cal program now serving almost 124,000 county residents.

Some county health-care providers praised the bill, saying it will provide security for consumers and expand the base of patients able to pay for medical care.

Some predicted, however, a shortage of doctors to serve the newly insured.

Dr. Amarjit Dhaliwal, a cancer specialist in Modesto, praised the section of the bill that will prevent insurers from dropping or rejecting patients who have ongoing medical conditions. He said he has seen women with breast cancer dropped from insurance coverage in the middle of treatment. “That is not going to happen any more,” the oncologist said.

The California Primary Care Association, representing more than 800 community health centers in the state, believes the Medi-Cal expansion will add 1.7 million people to the health program, and an additional 2 million to 3 million will buy health insurance.Carmela Castellano-Garcia, the group’s chief executive officer, said the impact on the Central Valley will be profound, although the region’s undocumented population won’t be able to buy subsidized insurance.

Besides giving Medi-Cal benefits to childless adults for the first time, the bill includes $9.5 billion to help community health centers expand services and hire health care providers. An additional $1.5 billion is set aside for paying the education loans for new doctors agreeing to work in medically under-served areas such as the San Joaquin Valley.