Health care consolidation bill passes Assembly Committee on Health hearing

Assembly Bill 2080, also known as the Health Care Consolidation and Contracting Fairness Act of 2022, passed its hearing in the Assembly Committee on Health on Tuesday in a 11-3 vote and was re-referred to the Assembly Committee on Judiciary. The bill’s sponsor, Asm. Jim Wood (D–Santa Rosa) said the bill intends to combat the increasingly high costs of health care as a result of consolidation, especially in Northern California.

 

Get the latest state-specific policy intelligence for the health care sector delivered to your inbox.

 

This bill would prohibit a contract issued, amended, or renewed on or after January 1, 2023 between a health plan or health insurer and a health care provider or health facility from including anti-competitive terms. These terms include  restricting the health plan or insurer from offering incentives to encourage enrollees or insureds to utilize higher quality, low cost health care providers. 

The bill also authorizes the Department of Managed Health Care (DMHC) or California Department of Insurance (CDI) to refer a health plan or insurer’s contract to the Attorney General (AG) and authorizes the AG to review a health care practitioner’s entrance into a contract that contains anti-competitive terms. The bill authorizes the AG to consent to, give conditional consent to, or deny consent to that agreement, and requires the AG to conduct one or more public meetings before issuing a written decision on a major transaction. 

The bill also requires a health plan that intends to acquire or obtain control of an entity to seek prior approval from the DHMC Director, and authorizes the DMHCS Director to disapprove a transaction or agreement if it would substantially lessen competition in the health system or among a particular category of health care providers. 

He cited research showing that consolidation in Northern California has led an average cost of in-patient procedures to be nearly twice that of Southern California, and that health care costs are projected to increase from $4.1 trillion in 2020 to $6.2 trillion in 2028.

“Consolidation continues in the health care marketplace, and prices are going up,” Wood said. “We need to provide more oversight in general, and more oversight and authority in consolidations. Health care is growing at twice the rate of inflation, and that’s simply not sustainable.”

Gerri Burruel, representing the Purchaser Business Group on Health (PBGH), spoke in favor of the bill. She said this is not only a health care bill, but a wages and job growth bill as well.

“The bottom line is that high prices for health care services driven by industry consolidation and anti-competitive practices have dramatically increased health care premiums for employers, workers, and their families,” she said. “This has resulted in lower wages for workers and slower job growth.”

Beth Kapell, representing Health Access California, also spoke in favor of the bill, emphasizing the importance of AG oversight in protecting against anti-competitive behavior. 

“We know from 30 years of working with [AGs] of both parties on non-profit hospital mergers that the AG has used their authority to keep hospitals open, to protect emergency rooms, labor and delivery, cardiology, [and] reproductive services … AGs have also imposed conditions to prevent anti-competitive behavior and to moderate close consolidation price increases,” Kapell said.

Dietmar Grellmann, representing the California Hospital Association (CHA), testified in opposition to the bill. He voiced CHA’s concern that the bill “… imposes broad contract prohibitions that would disrupt countless relationships between payers and hospitals, physicians, and other partners, permanently altering long-standing arrangements that are fundamental to organizing coordinated care.”

“This bill eliminates the value of managed care networks and also eliminates the benefits of coordinated care and taking care of patients,” Grellmann said.

He also voiced concerns related to the AG having “significant discretion to impose conditions on these terms.”

Asm. Chad Mayes (I–Yucca Valley) echoed these concerns, stating his worry regarding one individual having the power to accept or reject these contracts. 

Kapell attempted to clarify this point.

“We have 30 years of AGs using this authority in what I would say is a responsible way, always subject to review by the courts,” she said. “There’s always the opportunity for the court to step in and say the AG has overstepped their bounds. In my dealings with AGs over these decades, they’re very mindful that they have to be within the parameters of the law.”

The bill’s three opposing votes came from Asm. Frank Bigelow (R–O’Neals), Asm. Heath Flora (R–Ripon), and Asm. Marie Waldron (R–Escondido). Having passed its hearing in the Assembly Judiciary Committee on Thursday in a 7-3 vote, the bill has now been re-referred to the Assembly Committee on Appropriations.