is piloting a new payment models. you have per preference to be accountable care organization, you will hear more about this from our calf speaker from calpers. this is where you take a disparate parts of the system and put them together and have a team responsible for total cost of care, hospital, ambulatory, tests, and so forth, for a given population. calpers has been doing this for a year its insurer, blue shield hmo, and in the northern part of san francisco, with 41,000 members, and already they have seen $51 million in savings. just by having things work more like a system. i assume this relates partly to the question about health care information technology. if you can make in interoperable, you can make it

better. i think you have an opportunity to do this, and i believe you may be to some planning for that. finally, we just need more transparency. as you were suggesting, mr. chairman, we need to know more about quality and in terms of what we want to know. is there harm in going to its hospital -- this hospital because it's infection rates are too high? are people having trouble after their hip surgery? i am sorry you cannot read this, but if you live in pennsylvania, you can go to a web site sponsored by the state. for hip surgery in this case, you can see the outcomes. over to the right, that is how much it costs at each of those facilities. we cannot have that data today

but we desperately need them. happy to answer any other questions. supervisor campos: i do not think we have any questions for now. thank you. that was eye opening. jane sandoval? >> good morning. my name is jane sandoval and i work at st. luke's hospital as an emergency nurse. st. luke's is an emergency room that treats over 28,000 patients a year. most of our patients are low income or underinsured. in other words, we overwhelmingly treat patients who are marginalized or underserved in our society. as a result, some might think it is a thankless job, but make no mistake, i, along with my

colleagues, believe that every person, no matter who they are, has a right to save, therapeutic, and comprehensive health care. prior to sutter purchasing our hospital in 2007, we prided ourselves as a mission district institution that saved thousands of lives and treated the injured and sick. no different than the 145 years of care provided in st. louis's history. but since the takeover, much of our time has been spent at hearings, meetings, rallies, and protests, just fighting to keep the hospital open. a pattern that has been repeated by minors colleagues in other cities, due to solder's distorted model of how health care should happen in our communities. that business model imposes destructive pattern throughout northern california. sutter purchases as many

hospitals as possible, including public hospitals and makes promises to the community, as they did at st. luke's, to continue running as they have always been run. while making these false promises, they have already targeted which hospitals they will close, which services they will eliminate for not being profited -- profitable enough, which lucrative services they will keep, and which will be consolidated, in which hospitals will remain standing. the implementation of this business model has become their hallmark. its goal to eliminate competition and achieve a monopoly in the health-care market. once they have established their dominance, they use their position to drive up prices and to dump the unprofitable services on county systems that 0 overburdened, forcing taxpayers to foot the bill. already, we pick up a huge load due to solder's non-profit

status. they were recipients of a taxpayer backed credit, like the $800 million in financial assistance awarded to them three months ago from a state financing authority. they have overcharged health plans for public employees, and they deliver among the lowest charity care compared to other corporate hospital systems, making a mockery of their nonprofit status. sutter cost enormous profits also call into question that status. last month after they sent a letter to every employee's home lamenting their potential revenue losses due to health care reform legislation, "the business times" reported net profit rose by an unprecedented 38%, to $837 million. a second letter was then sent to all employees, myself included. despite this profit, sutter was

in jeopardy of not making a profit in the future, and the ceo continue to blame the new health care legislation for this. health care economists have pointed to sutter as a primary force of driving up health care costs in california, specifically in northern california. patients are charged between 37% to 70% more than other providers. i find it hard to believe that any patient, if asked, would describe the luxuries of a five- star hotel, rather than access to cooperative care that includes psychiatric, acute rehab, long-term care, and subacute services. those services were slashed 4 not been profitable enough. we would rather have enough staff and time to provide the care we were trained to provide and we would rather have the ability to nurse all patients,

the matter what their needs are, but to help, then worked into -- in a facility that is like into a five-star hotel. nurses feel the consolidation every day in the work they perform but also with our own health benefits, where we were forced into a health and that makes it too expensive to use non-sutter providers. after setting a high cost, they demand that we help pay to offset the cost. the implementation of this select help plan by california pacific medical center is the subject of ongoing litigation with the california nurses association and the national labor relations board. in other recent litigation this month, the state insurance commissioner david jones intervened in a lawsuit that charges sutter with false billing charges in every facility in the bay area. commissioner jones stated the fraudulent charges are in the

hundreds of millions of dollars, if not more, and that sutter's fraud targets the insurance industry, but ultimately, the burden falls on the shorter it -- shoulders of taxpayers to pay a premium for coverage. there are many layers of casualties as a result of this business model, from the patients whose needs are not met because of cuts services for not being profitable enough, to the patient to simply do not have access because they live in a community where the payer is not what sutter wants. and to all taxpayers to bear the burden of their nonprofit status and divesting of services on to the public safety net. in the emergency room, we are trained to keep a close watch or

exercise restraint on patients or others who might not follow social norms and to act out in ways that could injure others. what we do is minimally necessary to what is socially susceptible conduct, where no one will be harmed. similarly, we ask that our local policy makers restrain a help the corporation whose business model can only do harm to unfold thousands of as locally, and specifically, we ask that our elected officials and ask themselves to be held hostage to sutter's to view on how and who should receive health-care. supervisor campos: thank you. do we have any questions? thank you very much for that. we want to get as many perspectives as possible. thank you for being here. >> i have some pictures.

i tend to use pictures -- they're worth a thousand words. thank you for inviting me to this impressive panel. i am honored to be a part of it. california hospital association represents all the hospitals in california, a broad range of hospitals, general acute-care facilities, stand-alone rehab sites, investor-owned, not-for- profit, public hospitals, safety net hospitals, urban, metro, the full gamut. so we are pleased to talk about some of the drivers impacting the issues you are talking about today. what i want to do in this first chart is -- picture these two bars as being dollar bills. if we look at 1980 how the dollar was separated, hospitals accounted for 43% of that dollar

bill. we can look at the other sectors of health care that have taken their portion. when we move to 2009, you can see the shrinkage in what hospitals have consumed as part of the dollar. you can see other areas where it has grown, specifically, other, including administrative costs, prescription drugs, and other things. an important dynameter know, and i think will be concluded -- included in my later slides, this shows the trend over the last 10 years of the increase in spending for hospitals, but comparatively to other factors within the industry. we looked at hospital care, the blue line on the bottom and how the cost trends have grown. but comparatively to pharmaceuticals and insurance premiums, it is quite a gap in between. another important element to

look at -- and many of the speakers alluded to this before. hospitals are treating sicker patients. there is the aim of treating the patient at the right place at the right time with the right amount of care. i think that shows here. hospitals are seeing sicker patients and the less sick patients are hopefully being seen in of corporate settings -- appropriate settings. with the increase in the acuity of the patient comes an increase in the use of resources for caring for those patients. supervisor campos: a quick question on that. we have heard the number in terms of the difference between what it costs per day for a patient in northern california versus southern california, but we have also heard that that is not necessarily because folks in northern california are less healthy. do you have an explanation for

that? >> i do. if you can bear with me, we will get there. what i do want to mention next is one of the big drivers in health care. if we look at the amount that wages and salaries have grown in the health-care market compared to other industries -- and health care market has grown significantly. we believe a big part of that has to do with the shortages we have seen in the market for skilled labor. here is where we start to go down -- supervisor campos: do those labor costs include health care? health care costs as well? >> yes, all salaries and benefits. supervisor campos: that is an important point. to the extent you are saying salaries are going up, but a reason is the cost of health care, which is the focus of this discussion, and that is an important differentiation.

>> actually, i'd think what i said is part of the reason they are going up is because of the shortage of workers. so let's take a look at what california spends. i will drill down into the geographic areas you are interested in, but it is important to see this context. across the entire nation, this is what each state spends in relation to the national average, just to the right of the middle of the screen. california, to the left, in comparison to other states in the country, california is actually very efficient. i have done one thing with these numbers that some of the others have not. i have cost adjusted for inflation and i have acuity- adjusted these numbers. i am trying to create a level playing field. when you compare just the numbers, you see these vast differences, so i accounted for

the numbers in looking at inflationary costs as well as the acuity of the patient. california spends 90% of the national average on health care costs. and then what i did further was breaking this down into house bill referral region. thousands of little lines and i would not expect you to follow. but the important point to know is the u.s. mean. if you look to the right, there are many hospital regions, and to the left of that, many other regions in california. i want to show you a statistic before we go into specific regions. california state expenditures on a per capita basis are 12% below the national average. but a very important component to also look at is our rate of growth. it is much slower than other

states and the national average. california sees a growth rate of 5.9%. the country over all has seen a growth rate over the last 10 years of 6 but 7%. so despite the fact that health care costs are rising, we are not rising as fast as other states and we are well below the national average. -- 6.7%. there is a reason for that. california is very innovative, not just in health care. we are the greatest state in the country. in terms of health care -- supervisor campos: i agree with you on that >> if you look at how we tried to adhere -- take care of the patient, the number of admissions, hospital visits, a total of outpatient visits, are far below the national averages, when you look at california compared to the national average. we only use a percent of what

the rest of the nation is doing. so we are being very careful in how care is provided. this gets into more of what you're interested in. i took the top 10% of the most efficient health care spending areas in the nation. these are cost adjusted and risk adjusted, as i mentioned earlier. i highlighted for you come in red, all of the california regions. if you go to the left, he was seized on that you like. san francisco, san josé, san mateo. we see a lot of san francisco, east bay, northern california as the most efficient hospital referral region in the country, when you equalize the cost and look at it on a per-capita basis.

the presentation would not be complete unless i did not reemphasize, as others have, wages are a huge component of hospital costs. they represent probably the fastest growing component of cost. so hospital wages have grown at a growth rate of almost 8% over this 2002-2008 period of time, compared to the other factors like supplies, purchased services, depreciation, and interest. i do think we are going to see greater increase. the first speaker talked about external factors. i cannot emphasize enough the impact that the price of oil has on hospitals. you would not think that it would, but hospitals are a very plastic-based industry. when oil goes up, the cost of

plastics and plastic supplies go up. we predict significant increases in the price of supplies. supervisor campos: that wage comparison you are looking at, that includes health benefits that are given to the employees? >> yes, salaries, wages, and benefits. supervisor campos: to the extent that things like hospital consolidation, the practice that hospitals are increasing costs, then the hospitals themselves are implicated, if they are concluding that cost as part of the wage increase that they are citing as the regioreason for te increase. >> i did not bring it today, but i would be happy to bring you to a look at salary versus benefits. we would be happy to bring that to you. i do not think there has been a

big change in the composition. salaries has been a big driver in hospital costs. this next slide just is a graphical depiction. when someone enters the hospital, let's say they are having a heart attack. they encounter so many people in the hospital, from the registration card, technicians in the land, -- lab, then they are in intensive care, discharge planners that get them out the door with their orders to make sure they can take care of themselves. the average salary for a hospital worker in california, average salary and benefits, is over $85,000. these are very good, highly skilled workers. supervisor campos: and who are these workers? who do you include? >> everything -- everybody from the registration clerk to a nurse, mri staff, everybody that

works inside the hospital. supervisor campos: and how does that compare to executive pay in those hospitals? >> those employees would be included. everyone that is under the umbrella of the hospital. supervisor campos: why don't you continue. i have a couple of follow ups. >> i want to point out another component to you, to speak to the expense and driver of labor costs in california, specifically in the northern california market. i have selected the top 11 wage index markets in the entire nation. if we look at what resigns as the top, most expensive place to hire workers, santa cruz, san francisco, san mateo, monterey. northern california greater bay area is right here. that is a big cost driver. i put new york city on there so

that you could see it in comparison. most would assume that new york city is the highest wage area. the next slide -- the speaker before alluded to this. this is a huge component for hospitals across the entire country. that is this cost shift. this is real. the bottom two lines on the graph represent medicare and medicaid funding. the gray line in the middle of the paid represents the actual cost a hospital concurs. this is that $0.15 tylenol, not a $15, not that we no hospitals can charge. actual cost of providing care, medicare, metical, hospitals have no toys but to shift to the private market.

to the extent we can work together and improve the payments for medicare and medical, we can ease that cost shift to the market. it is something that we only consider to be getting worse in the coming years. of course, hospitals, as you know, one of the most highly regulated industries to operate in. very complex, highly regulated and the cost of complying with those regulations are immense. finally, i want to talk about some of the very strong attributes of not just hospitals, but the market in california. i started off by saying we are the greatest state, and i believe that. we do some things very well, very good attributes. over three decades of experience with managed care and with shared risk contracts, where providers come together and share the risk to provide care

to patients, and we're patient -- payment is based on the outcome. as a result, our health care costs are some of the lowest in the nation despite the very high cost of living and wages and doing business in california. so it is a major driver of our ability to keep cost down relative to other states and areas across the country. with that, there are some policy questions that we are always happy to discuss. i am happy to take your questions. supervisor campos: i had a couple of follow ups. going back to the issue of labor costs, acknowledging there is a difference between salary and the employee benefits, but was the average salary that you referenced before? >> statewide, the cost of salary

and benefits for an employee in california is $85,000. supervisor campos: i have to say, one of the things that was eye opening for me was trying to understand how that average salary compares to executive's salary. from my understanding -- for instance, sutter is a not-for- profit. the numbers that i have, and maybe they are incorrect, -- but taking into consideration the $85,000 -- this non-profit hospital, the ceo in 2008-2009 was paid $2.8 million. the senior vice president was paid $1.4 million. the regional president for west bay was paid $1.4 million.

that is about 800,000 more than the year 2006, 2007, which is $1 million-plus more from the prior year. how does that work? how does a nonprofit hospital pay an executive close to $3 million? how does that happen? >> hospitals are not the only nonprofit entities across the country. there are many others. when you look and executive compensation for hospitals, they favor quite favorably to other corporations, even non-profit corporations. >> the question was not -- supervisor campos: the question was not about hospitals, other businesses. but in a hospital setting, who makes the decision on what to compensate the chief executive, senior executives, vis-a-vis

individual employees? >> generally, by the board of directors. supervisor campos: maybe at some point, if we have a follow up here, we can hear from the hospitals themselves. one of the things that was eye opening for me was reading this complained that was filed, and that was joined by the insurance commissioner. i am not sure if you are familiar with the complaint. i am trying to understand what the practices have actually are. one of the things that is alleged in the complaint is, essentially, sutter, in this

case, is charging for services related to anesthesia. basically, they were overcharged, or they are charging for services that were, in fact, not provided to the patient. is that happening? is that part of the reality of what is happening out there? what does the hospital association have to say? that is a pretty serious charge. the california insurance commissioner says hundreds of millions of dollars are being spent that way. i wonder what your response is to that? >> i can respond briefly and say that california hospital association does not condone any fraudulent activity among hospitals in california. we will let the facts speak to the case. we do not represent sutter.

we do not represent them legally and we are not taking a position and legally. we do not know the facts. the facts will come out in the judicial system. supervisor campos: i agree with that. we have to allow the court proceedings take place, but we, as policy-makers, are being asked to make important decisions. one of the things that the complaint points out is a certain type of agreement, or agreements, between sutter and the insurance companies -- this is what the complaint says. "contains provisions which prevent health-care insurers, referred to as payers in the agreement, from challenging the reasonableness of the sutter hospital bill." this is accomplished through audit policies. these policies