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Health care workers file ballot initiative to limit hospital overcharges

Measure would limit providers from charging more than 15 percent for services

More than 3,500 Palo Alto voters have signed a petition supporting a ballot initiative submitted to the city for the November election seeking to prevent hospital overcharges, a health care workers union announced Wednesday.

The Palo Alto Accountable and Affordable Health Care Initiative, which was signed by 3,506 voters, would modify the Palo Alto Municipal Code governing health and sanitation, according to Service Employees International Union United Healthcare Workers West. The measure would limit hospitals, children's hospitals and medical clinics operating in the city from charging patients more than 15 percent above what it costs the facility for patient care.

Beginning Jan. 1, a hospital, medical clinic or other provider would have to issue a refund with interest and a reduction in a billed amount within 180 days of each fiscal year to payers for all charges in excess of the 15 percent, according to the initiative. A 5 percent fine of the refunded amount would be levied on facilities providing rebates to 50 or fewer patients in a fiscal year. Facilities providing rebates to more than 50 patients in a fiscal year would pay a penalty equal to 10 percent of the required rebate or reduction. The fines would be no less than $100 and no more than $1,000 per rebate or reduction. Facilities that do not issue the rebates or reductions after the 180-day deadline would accrue a new violation and fines for each day they haven't issued the refund or cost reduction.

The fines would be paid to the city's Administrative Services Department to implement and enforce city laws governing hospitals, medical clinics and other providers. Within 150 days after the end of the fiscal year, each facility would be required to submit information to the department identifying the reasonable cost of direct patient care for each patient. The ballot initiative goes on to the define some of the reasonable costs, such as salaries, wages and benefits of non-managerial staff and costs directly associated with running the facility.

In a press release, the Oakland-based union specifically called out Stanford University Medical Center for alleged overcharges. Stanford currently charges up to two, three or four times more than the statewide average for some procedures, the union claims.

"Stanford University Medical Center charges 264 percent more than the statewide average to treat a patient for alcohol or drug abuse, 141 percent more to treat a patient with chest pain and 120 percent more to treat a patient with kidney failure. Despite these higher prices, Stanford University Medical Center struggles in certain aspects of patient care when compared to other hospitals in California and across the country. The number of patients acquiring infections at the hospital is so high that Medicare penalized the facility each of the last three years," the union said in its statement.

The workers union said the measure would make health care more affordable for patients and encourage health care providers to invest more in purchasing new medical equipment, making facility improvements and improve staffing levels. The union has expressed an ongoing concern regarding staffing levels, which it claims affect patient care.

Stanford Health Care is a nonprofit system with reported operating profits last year of $234 million and reserves of more than $700 million, the union said.

The union plans to submit similar ballot measures in Redwood City and Livermore, where Stanford operates additional medical facilities, no later than May 31.

In a statement issued Wednesday evening, Stanford Health Care officials disapproved of the initiative, which they said "punishes the residents of Palo Alto in the process" and the community's access to health care "will be unnecessarily jeopardized."

"The measure's fine print reveals that it does not actually limit prices charged to patients, but instead targets local hospitals, medical clinics and doctors, and forces them to pay rebates to insurance companies without any requirement that the rebates be passed on to consumers," according to Stanford Health Care.

Stanford Health's statement goes on to claim that local government will carry the weight of enforcing the measure at the expense of taxpayers, "potentially putting other public services at risk."

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Editor's note: An earlier version of this article incorrectly stated who signed the petition.

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Comments

12 people like this
Posted by Abuse of Democracy
a resident of Old Palo Alto
on May 24, 2018 at 10:46 am

This is just the Union using the ballot box to bludgeon Stanford.

Our system of Democracy should not be used as a tool for negotiation. Have some respect for the people of this town. Solve your Union labor disagreement at a table.


6 people like this
Posted by Concerned
a resident of Professorville
on May 24, 2018 at 11:18 am

Where would the money come from to pay for the costs the city of Palo Alto would incur to administer this program, which is certain to be substantial? At a time when the city budget is strained this is a waste of taxpayer dollars.


5 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 24, 2018 at 11:27 am

@Abuse,
No, I'm afraid this is citizens finally doing something to stop the abuse of patients. One of the worst thing that happens is that people without insurance or whose insurance companies reject coverage (after a patient receives care) gets billed the non-insurance rate which can be 5X, 10X, even 20X what is charged under insurance. I've seen lab negotiated values that were even more.

If there is some control of profits, it might be possible for patients to have more choices, too, because they might be able to choose care they need simply because they can afford it whether or not there is an insurance battle, particularly for people with skimpy plans.

The worst situation is imaging, facilities charge way, way more than is necessary for the cost of care. If facilities want to make more money, they might extend the hours of those imaging facilities for the convenience of patients, instead of just tacking on bigger bills.

Medical facilities should be entitled to make money. But comparing it to the car dealer down the road who makes between 4-8% of the cost of the car, and the much lower margins in grocery, 15% is pretty generous. The impact will not be refunds, probably, it will be facilities ensuring that they mostly keep the profits below that.

More importantly, it gives the public a better ability to scrutinize the actual cost of care. The trouble is that most patients don't get either an accurate accounting of what they will owe under their own insurance plans before the actual service. You can, through great effort, sometimes get a quote, but more often, you get providers sending you to insurers who send you back to providers, and then ultimately both say you have to have the service first before they can say. There certainly never is a binding quote the way you get for most other expensive services.

If this goes through, it then makes it more possible for patients to look up the cost of care from one facility to the next and compare.


1 person likes this
Posted by Me 2
a resident of Old Palo Alto
on May 24, 2018 at 1:29 pm

"If there is some control of profits, it might be possible for patients to have more choices, too"

That never happens under price controls.


7 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 24, 2018 at 2:40 pm

@Me2
Actually, it does. In Japan, for example, the government sets a maximum price for what imaging like MRIs can charge. So the different companies compete to provide the best and cheapest within that constraint. It has led to much lower cost MRI services in Japan than here, by an order of magnitude.

The patient in our system, especially in an emergency situation, is essentially a hostage. It's tricky to create competition when the customer is a hostage. That's why we don't privatize water delivery and other essential services. And it's why monopolies are illegal.

If the prices are more transparent and there is less gouging in medicine, patients can afford to get the healthcare they need when they need it rather than being hostage to their insurance paperwork processes, too. Patient choice is an important democratization of quality control. It's not possible under our current system in which patients aren't given a practical way to have a binding promise of costs before they get the care.


Like this comment
Posted by Me 2
a resident of Old Palo Alto
on May 24, 2018 at 2:54 pm

You're mixing up price controls with price transparency. Two different things.


12 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 24, 2018 at 3:04 pm

@Me2,

Also, this bill is not proposing to set a value for reimbursement without some acknowledgement of the cost of the care. It's limiting the profit.

The main flaw in this bill is that there is no incentive to keep down the actual cost of the care. If the provider profits as a percentage of the cost, then there is every incentive to keep the actual cost of care high. This is really why our system is so expensive in this country. The rest of the world does NOT all have single payer, as is commonly believed.

The rest of the first-world all have low-cost, universal coverage. They do this through a variety of very different systems, some all government care, some all private care and all government insurance (single payer), some all private care and all private insurance with regulations on costs, some with the that and private supplemental insurance, etc. Many of these systems get better outcome and have vastly better service than our system, all have dramatically lower per capita costs, including Germany which is the next largest population/economy (they have all private insurers and insurance companies). Many of these systems use for-profit providers, including hospitals, labs, doctor services, etc.

What all of those countries share in common, that is different than our system - and really the only major difference between us and them -- is that they don't allow for-profit insurance. That's it.

Insurance, whether public or private, is entirely non-profit in the rest of the first world. People working in those insurance companies still make good salaries, CEOs still make good salaries, everyone has an incentive for the organization to succeed. But what they don't have is insurance as an investment opportunity that must pay investors, as we do here. When insurance profits, the insurance companies have an incentive (really, a legal duty to investors) to keep the cost of the whole healthcare economy as high as possible, because they profit as a percentage of that economy. The insurance denials are not for the purpose of saving money, but for the purpose of maximally extracting their profits under the largest healthcare economy we can bear, the most important thing is CONTROL. This also favors consolidation over competition.

When Obamacare limited health insurance company profits, it ensured that drug costs would skyrocket - I wrote this to my representative as a prediction - because insurance companies could most easily control that aspect of the healthcare economy to keep it the same size while they figured out what else to do when the rest of us caught up with how to control the runaway drug prices.

Our own healthcare system in this country began skyrocketing cost-wise when we allowed for-profit insurance. The trouble is that when you have for-profits and non-profits together, the non-profits have to behave like for-profits (including cherry picking) to survive, and exhorbitant administrative costs become inevitable. Look at the history of non-profit Blue Cross Blue Shield per the IRS, and you will see a company that pretty much behaved as a for-profit, they had to. We spend hundreds of millions annually on paperwork because we have for-profit insurance. This is not because the private for-profit sector is just inherently so much less efficient than Medicare, which has dramatically lower administrative costs, but because the for-profit insurance companies benefit from keeping the healthcare economy high and need the paperwork to extract their profits.

One country, Switzerland, runs its health system with all private insurers, but by law they have to handle healthcare as non-profit. They tried allowing those insurers to profit but suddenly costs skyrocketed and people started going bankrupt from health costs, something that only happens here in the US. So they held a referendum and stopped the for-profit aspect of insurance, and predictably, stopped the skyrocketing.

There isn't exactly a parallel with for-profit medicine, because the mission of the local hospital is not to pay investors the most amount of money, and is much more patient centered. So, this kind of capping of profit relative to actual costs may actually work. At least, it will be better than what we have now.


3 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 24, 2018 at 3:09 pm

@Me 2,
I am not mixing up price controls with price transparency, I am bringing up both subjects, and how they can impact one another.


3 people like this
Posted by Patient Choice
a resident of Old Palo Alto
on May 24, 2018 at 4:21 pm

@Patient - why not take your business to another Hospital?

Why clog our local government with overseeing Stanford s business and billing? What a waste of our city’s time.


Like this comment
Posted by Me 2
a resident of Old Palo Alto
on May 24, 2018 at 10:36 pm

Sorry @patient. TL;DR

“Our own healthcare system in this country began skyrocketing cost-wise when we allowed for-profit insurance.”

Uh no. [Portion removed.] The basic problem we have is tying healthcare to employment *and* allowing employers to call them expenses instead of allowing them to be taxed like a salary. Cadillac plans, which the unions don’t want to lose, are the biggest issue. This for-profit and non-profit insurance is nonsense. [Portion removed.]


3 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 25, 2018 at 1:22 am

@Me 2,
You are wrong again. It's clear you really want to believe certain things about our healthcare system, but your beliefs just aren't supported by any reasonable familiarity with the fact. I "read" what I said about our own system becoming more expensive by looking up historical information on insurance and our healthcare system, something you clearly have never bothered to do. The situation in Switzerland is just a historical fact. "Liberal think tank" - what a hoot. I think most liberal think tanks are pushing single payer, which I think is a bad idea for our country since, as I mentioned, choice allows democratizing of quality control.

We cannot solve things when people just operate from ideology rather than understanding facts. For example, you think the problem is tying healthcare to employment, but that's the case in Germany and Japan, and why they use competing private nonprofit insurance companies today (because of their plans' historic association with employers), yet they cover everyone, get better outcomes in many sectors, at a fraction of the cost - and allow people to buy supplemental coverage if they want Cadillac coverage. You think "Cadillac plans" are a problem? In many European countries, if you have surgery or cancer treatment, chances are your healthcare covers you to go recover in a spa somewhere so that you can rest and recover emotionally, too. We don't have the best outcomes here by a long shot, we pay twice per capita as the next most expensive plan in the world even though we don't cover everyone, and even someone with the most expensive coverage couldn't dream of such things. I have "Cadillac" insurance and had over $30,000 in unreimbursed costs last year. Even people with insurance, good insurance, often end up with huge out of pocket costs. That, too, is a non-partisan, verifiable fact.

The issue isn't for-profit/non-profit - everywhere in the world, there area systems with various providers who profit. That doesn't seem to impair having a universal high-quality system that costs way less per capita than ours. But the single commonality between all the other first-world systems, aside from the fact that they all provide universal care for a far lower per capita cost than we do here (and they don't have medical bankruptcies like we do), is that in every other system in the first world, they have non-profit insurance. Just insurance. Again, that's a verifiable fact. It doesn't have to be non-profit providers. Insurance just can't be an investment vehicle. That's it. When insurance is an investment vehicle, it creates a fundamental and irreconcilable conflict between legally serving the investors and paying for healthcare. The profits legally must be maximized, but the only way to do that is to keep the overall size of the healthcare economy high -- that doesn't necessarily have to be done through overt actions because of the upward pressure on costs being constant, but there is no incentive to minimize the overall costs, and every incentive to consolidate and maximize control, hence the exorbitant healthcare administration costs that may have changed some under Obamacare, but before that were something like a third to almost a half of every healthcare dollar spent, largely because of for-profit insurance.

It is a nonpartisan fact that our nation has the highest healthcare administration costs in the world, largely due to for-profit insurance companies. Medicare has a lower administration cost by an order of magnitude. And so do all the other first-world countries who, again, do not all have single payer, it is a hodgepodge of different kinds of setups.

You can read all about this from reporters who have gone all over the world and studied different systems. Or do you think serious journalism and facts is "fake news? by any chance?


3 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 25, 2018 at 1:31 am

@Patient Choice,
"@Patient - why not take your business to another Hospital?
Why clog our local government with overseeing Stanford s business and billing? What a waste of our city’s time."

Tell me what hospital in the area gives all patients a binding quote before one gets the care, for costs that are reasonably close to the cost of providing that care, and I will definitely go there. If you can't name one, your question makes no sense, because any other hospital would have the same problems discussed above.

Have you looked at the cost of medical care for our employees and retirees? The cost of ensuring vulnerable people are treated fairly and life and health are protected are jobs of government. We will be saving money in the end.


3 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 25, 2018 at 2:43 am

@Me 2,
"TL;DR"
I could refer you to any number of nonpartisan (un-partisan, factual) scholarly or journalistic sources to back up what I have been writing [portion removed.]

Healthcare is a serious subject that involves life and death, people going bankrupt and spending all their time doing billing paperwork (one of my enduring memories of a father dying of cancer weeping before Congress, there to testify about his medical billing paperwork burden, just wanting to be able to spend his time with his children instead of the paperwork-your-money-or-your-life game that happens so often to vulnerable patients.)


3 people like this
Posted by Abuse of Democracy
a resident of Old Palo Alto
on May 25, 2018 at 8:29 am

If this issue is about health care costs in general, why not go after all medical providers in Palo Alto?

Here’s why: it has nothing to do with healthcare cost. This is simply the Union trying to attack Stanford financially with a ballot measure.

Heck, it’s probably illegal: the city cannot put cost controls on one provider and not others. This is so narrowly aimed at Stanford, and its profit that it’s laughable. It is not even clear that the city can implement price controls - I doubt they have legal authority to do so.


1 person likes this
Posted by Me 2
a resident of Old Palo Alto
on May 25, 2018 at 4:53 pm

@Patient

I am way more familiar with our healthcare system that you might imagine.

[Portion removed.]


3 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 25, 2018 at 7:16 pm

@ Me 2,
[Portion removed.]

If you would like to verify what I have written, such as that other systems are not all single payer, you can start by examining the healthcare systems around the world.

[Portion removed] T.R. Reid's Healing of America is good, it summarizes the structure of different first-world healthcare systems and how they developed. You may be able to find interviews on the radio or magazine articles [portion removed.]

I stand by everything I have said above on factual grounds. [Portion removed.] You seemed unfamiliar with the fact that the United States is the only first-world nation without universal affordable coverage, and that there are other systems around the world that have employer-based systems. Those in and of themselves do not appear to be associated with necessarily higher costs, as you have posited. [Portion removed.]

The reason I think people even on the extreme end of the ideological spectrum should care about what really is going on is that if you don't start getting real, we will eventually end up with single payer, which may end up entrenched because it will be cheaper, even though it is a bad match for this country and a definitely not a way to get the best quality or innovation.

The biggest way we differ from the many systems around the world that offer universal low-cost care is not that we aren't single payer, it's that we have for-profit INSURANCE. It doesn't seem to matter whether healthcare providers are for-profit, other systems have those. But when other systems have reintroduced for-profit insurance (Switzerland), it caused costs to skyrocket. The problem with for-profit insurance is that they profit as a percentage of the healthcare economy and thus haven no incentive to keep that economy low but rather to extract as much as they can while keeping it as high as we can bear. The only thing we lose by joining the rest of the first-world is insurance as an investment opportunity. That's it. All-non-profit insurance.

Would we be able to walk on water then? No. Every system struggles with costs. But ours is currently the most expensive per capita while also being the only one in the first world that doesn't provide universal affordable care. But the way we could almost immediately save hundreds of millions annually -- starting with hundreds of millions in paperwork/bureaucracy largely due to private for-profit insurance (or the effects of having for-profit insurance in the system which then requires nonprofit insurers to do the same things to survive) -- the way we could most easily save hundreds of millions of dollars while improving access to care, is to start with all-nonprofit health insurance.

@Abuse,
Stanford is a nonprofit, and yet there have been many reports of it having some of the highest patient markups. I think there probably are many avenues the City and other governmental entities could use to rein in excessive costs.

Hospitals are not like other healthcare providers. When you are in the middle of an emergency procedure, you have no way of knowing what you'll be charged, and you certainly are in no position to demand being instantly transported at no cost to another emergency room if you don't like the cost.


3 people like this
Posted by Joe C
a resident of Downtown North
on May 26, 2018 at 12:09 pm

"No, I'm afraid this is citizens finally doing something to stop the abuse of patients."

This isn't citizens doing something to stop the abuse of patients, it is the union trying to make tools out of the people of Palo Alto. The SEIU is looking out for its own interests, not ours. Healthcare costs would be lower without unions. Let them co-opt someone else.


5 people like this
Posted by Patient
a resident of Another Palo Alto neighborhood
on May 26, 2018 at 5:22 pm

@Joe C,
I don't follow you. That seems a broad and nonspecific attack against unions intended to make it seem as if a bill curtailing excessive profits that local nonprofit hospitals can charge is bad because of some ulterior motive. Controlling excessive charges is in everyone's interest, especially when patients are charged after they get the care and the process of getting information about what they will be charged is neither easy nor transparent.

Imagine you had to buy a car that way. You had only one choice, and the company sent you a bill for whatever they wanted to charge after you drove the car home and could no longer return it. Imagine what cars would cost then, people would be going bankrupt like, oh, they do with medical bills. Of course, you could choose not to get the car, but in the case of emergency hospital care, there really isn't a choice. As a patient, you are effectively a financial hostage.

The hospitals are nonprofits anyway. I don't understand why anyone would want to protect their ability to charge excessive profits at the expense of patients.


Like this comment
Posted by Curmudgeon
a resident of Downtown North
on May 26, 2018 at 9:07 pm

"Health care workers file ballot initiative to limit hospital overcharges"

Limit overcharges? Why not ban them?


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