CalPERS cuts 38 "high-cost" hospitals from its network

Physicians see the move by California's powerful public employees group as a potential disruption to care and say it highlights the power of purchasers.

By Katherine Vogt, AMNews staff. June 14, 2004.

An effort by the largest purchaser of employee health care in California to cut costs by excluding dozens of hospitals from its largest HMO network has some physicians up in arms about the potential disruption to patient access to care.

Directors of the California Public Employees' Retirement System (CalPERS) voted May 19 to exclude 38 "high cost" hospitals from its basic HMO Blue Shield network beginning in 2005. The pension fund said the narrower network would save up to $36 million next year and $50 million per year thereafter.

In a written statement, CalPERS board President Sean Harrigan said premiums had increased more than 50% in the last three years that and almost half of the cost increases had been driven by hospital charges. He said the trend was unsustainable. "We have a fiduciary responsibility to make sure health care is affordable, and the time has come for this system to take this bold action," he said.

But physicians and other observers expressed concern that the move could disrupt established patient-physician relationships and might even leave some patients without access to specialized care.

"Some doctors will be affiliated with only one or two hospitals, and if those are knocked off the list, they no longer have a place where they can take their patients," said Jonathan Chang, MD, an orthopedic surgeon in the Los Angeles area.

He said the move also might be an economic hardship to physicians who only refer to hospitals on the list because they could lose patients. "From the physician's standpoint, we can only hope that this is simply a negotiating ploy so they can get hospital prices down," he said.