Nonprofit Newswire | Is Nonprofit Hospital Chain Using Market Clout to Raise Prices?

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August 26, 2010; Source: Bloomberg Businessweek | Some nonprofits aren’t all that nonprofit-y. According to Businessweek, Sutter Health, a nonprofit that owns Sutter Davis Hospital in California, charges 40 to 70 percent more than its nonprofit and for-profit rivals for typical medical procedures (such as $1,271 for an MRI on a knee that would have cost $696 if done by a competitor in Sacramento)—and it requires the insurers to keep its rates secret. Insurers say that Sutter Health’s control of some 24 hospitals, 17 outpatient surgery clinics, and a 3,500-doctor network in the San Francisco/Sacramento corridor gives it a level of market control that allows it to “stare down insurers and employers.” Sutter’s response? Not true, because “the market has a lot of room to make a lot of decisions” regarding choice and cost of health providers. Sutter also says that its potentially higher “unit costs” of healthcare are offset by the “more efficient care” that emanates from its “integration of
hospitals and doctor groups” that it controls or owns.

To its critics, it’s not efficiency, it’s monopoly control and pricing. Criticizing the control of a monopolistic entity is difficult for consumers and employers who might feel that they don’t have the market alternatives Sutter Health claims they do. But public sector entities can push back with less to fear. In Marin County, the Marin Healthcare District has gone to court charging that Sutter Health improperly transferred $30 million in assets from Marin General Hospital since 2006 when Marin and Sutter started taking steps toward ending Sutter’s management contract for MGH. According to the District, once it became clear that Sutter and the District would be ending their partnership agreement, Sutter began moving cash out of the hospital. According to Sutter, how silly, it never happened, and they’ll defend themselves vigorously in court.

A recent report from Standard & Poors concludes that nonprofit hospital finances are back to their pre-recession financial strength and therefore constitute a good credit risk, even though most nonprofits have a long road to hoe before they’re back to their earlier fiscal condition. When nonprofit hospital groups such as Sutter Health show the ability to play financial hardball with patients, employers, insurers, and public sector institutions, and when the nonprofit hospital sector shows a financial resiliency that evades the bulk of 501(c)(3)s in the nation, one wonders whether nonprofit hospitals are really a very different, distinct kind of nonprofit animal.—Rick Cohen