we are on a swing with increasing funding for health care but it is important to maintain competition. increasing competition between doctors and hospitals and entities, all of which basically have an interest in maximizing their own income, is never going to successfully control costs. we have seen evidence of this consistently over time. for now, the main threat to health care costs and affordable health care is a from consolidation. a report by one business group pointed out hospitals are largely nonprofit firms, but when bestowed with market power, use that to drive prices and revenues higher.

they spend their monopoly rents on business augmentation strategies and enhancements of dubious value. hospital consolidation in the 1990's resulted in raising prices at least 5% when the hospitals were closely located, increases were 40% or more. when the firms raise prices, it's easier for competitors to follow suit. in one community, prices went up 23% for emerged hospital and 23% for its competitor relative to control. we know well that summer hospital's business plan is explicitly to consolidate and create a monopoly in particular geographic areas. their own business plan says it is critical for them to secure

25% to 30% of the market share. this is a vital if they're going to be indispensable to major health-care plans. consolidation has resulted in higher hospital prices in northern california in particular. in california, there is an average increase of 10.6% between 1999 and 2005, double the national rate. the article we mentioned compared hospital costs between northern and southern california and found we pay $7,349 per patient on average compared with los angeles county where it was $4,389 and san bernadine know where it was $4,393. according to the article, much

of the reason for higher cost allies was sutter which has groups throughout the northern california region. we can see the strategy at play in several other areas. they have proposed the same kind of game plan that they are proposing now to consolidate with a provider in a low-income area and they have done this with a public entity created to operate a hospital for the benefit of citizens living in and around castro valley. the hospital district purchased a hospital in 2004 using public funds owned by the district and those who question the arrangement were sure it was

negotiated for the express purpose of ensuring funding for the continued operation of the hospital, however they negotiated a provision by which they had the option to cease its operating commend its net revenues fell below a certain level, which was determined after accounting for operating losses to be calculated by setter itself. this hospital, like st. luke's, services and less affluent population and the related hospital in castro valley. sutter has now made its intention known to close in months, rather than years, leaving residents scrambling to find options for keeping the facility open and operating as an acute-care hospital. it is likely that cathedral hill will continue to attract successful physician practices

to include a health insurance plan they can contract with. the same scenario that it will then seek to close a competitive hospital in this case, looking at st. luke's as a competitor that not only provide services but might pull down its rates, we can see a similar game plan in the east bay with the merger between summit hospital in oakland and in berkeley. a more balanced division of beds would guarantee that we keep the capacity we currently have and maintain the kind of competition between health providers that will give some guarantee as we enter into this time is set up by the affordable

care act that we will maintain both the competition we need temporarily to help moderate prices and capacity in neighborhoods to provide services to our population. san francisco and california have been on the cutting age -- cutting edge to find ways to reduce costs and expand access and quality. the city's access -- the city's actions in this important matter should continue to move us forward. supervisor mar: thank you. any questions? supervisor cohen: just a couple of questions. he noted that consolidated hospitals drive up prices and it is a safe assumption we can't have a hospital in every single corner. what do we need to do? >> in the long term, we have to recognize we have to give power to the public sector and figure out how to set and control rates

separate from setting providers competing with each other so we have duplicative purchases of mri machines and duplicative services. we need to use the tools that are available to figure out how to provide and determine what services we need, provide and pay for those. i think it is a much longer-term project. we need to look at putting information and power to set rates and determined where facilities should be located in hands of us in the community and the public sector. we have paid very able department of public health. this is an intermediate step along the road. i think we need to recognize, and i have seen other

information? acts. i think the combination of system reforms we are starting to put in place may, in fact, may be bringing down costs. is important to keep our options open. there are neighborhoods in san francisco where there is literally no access to prenatal care. there is not a provider in the neighborhood. we need to continue looking at those issues as we think about the expansion and the consolidation and support of maga hospital systems. -- mega hospital systems. >> your answer sounds like hundreds of more hours. >> we have been asked this for hundreds of years. >> the health-care system is in

a transitional point. the key to make our health care system as transparent as possible and not lock on to an unsustainable configuration that we cannot afford, that will preclude future progress. speaking about the lack of infant health care, prenatal health care in some neighborhoods. i would assume my neighborhood would be at the top of the list. >> absolutely. supervisor cohen: it would be an important discussion given the examples or suggestions on ways we can make that happen. >> how we can make that happen. we have the health care services system master plan task force, which has revealed a tremendous wealth of information at the city -- that the city and county

can act on. we certainly can demand, and a short-term -- in the short term, greater transparency and information. if we are paying providers hospitals, doctors, for health care, we should know what their unit rates are. i think it would be perfectly reasonable to request a much higher degree of transparency, to understand what goes into the dollar -- $1.81 cost of a couple of aspirin. there are answers to that. there are answers to that that reflect the fact that nobody knows. in san francisco, hospitals, insurers charge a price which most folks don't know about. kaiser facilities charge a little bit less than that. we really have no good idea of

what is contributing to these charges. in the short run, knowing more, and i think in the long run, really understanding and demanding that we as consumers take control of the health care system. we can -- i know this is a long answer. i think we can look to, and there are examples of rate settings and other states. in maryland, for example. we can start to explore here. maybe it is something we can do on the county level. supervisor cohen: are you suggesting beginning a conversation to have some kind of a uniform payment for hospitals? >> it seems like something that could work. supervisor mar: if the ucla

study is true and sutter charges 37% higher than other chains, with consolidation allow them to go even higher? >> i would think that it certainly would. supervisor mar: any other questions for dr. schaefer? thank you so much. the next speaker is tom moore, jr. >> thank you very much. i was invited year -- i was invited here by mr. campos office. we are an unusual organization and that we are committed to

developing and improving the strategies used by purchasers of health benefits, rather than efforts to directly transform delivery systems or bring down prices. the reason we focused on purchasers is over many years, in my case, decades of work in this field, i've become convinced that the only thing that is less orderly, more dishonest, more deceiving then functions of a broken delivery system is the way we purchase care. we have a market of enormous strength and economic power, which is full of money, almost without challenge or question into the billions of dollars without knowing the cost of what we are paying for, the quality of what we are paying for. or whether there were cheaper or better alternatives. we are absolutely ignorant of

where we stand in the market. that is what we believe has to come to an end. i will spare you the rest of my ranch, although i have copies of its -- rant, although i have copies of it here. i promise to be brief. the difficulty we face as purchasers, especially the unions, which i represent primarily. we worked as a 501-3c. what we have encountered, and ability to develop a consensus of what states -- of what steps to take on. the last few years, however, have been periods of enormous change in the information and quality of information that is available about the quality of care. beginning with the institute of

medicine report, 2009, which is estimating 40% of the cost of for medical care is for services that are either dangerous or do no good. that is 40%. we have set out to test whether or not that is a valid number. we have done studies for oregon health authority, the organization for local governments in montana. calpers, the local 1245, and what we have found is that 40% is about right. that is to say, within a large population, the range of error or inappropriate care is going to probably account for about 40% of cost. that presents a special opportunity as well as a problem for all of us.

it means that regardless of knowing that, without knowing exactly where these cost occur, where this waste exist, it is impossible to focus the health plans or the providers on remedies. our history boils down to this strategy. we have recommended that we begin the development of a voluntary, multiple-pear data set capable of recording in great detail the actual financial transactions, the claims and other transactions that are the structure of what we pay for and the benefits we received. the reason i say voluntary is that we have been waiting a decade or more for the state

legislature to do this and they have failed. there is no evidence inside the bair going to produce such a system. on the other hand, they did there is no evidence they are going to produce such a system. they do not have been listed you said it. we have a situation where we could build a data organization that would provide almost real time basis monitoring data of the quality and cost, the actual cost paid in the claims process for care. that would become a tool. if you want to see competition, i guarantee you, let us bring to the table recorded cost and quality data side by side and put it in front of our members' families and working people of the bay area.

you get competition. it will be set in and swift because we have seen what happened on a small scale in other situations. i want to do one other thing. i want to tell you that you should listen to dr. schaffer for more than 10 minutes. she brings such a wealth of understanding to this. she has paid attention to the quality as the underwriting court issued to be resolved. we will not stable costs without improving the quality of care. we will probably not improve the quality of care, however, until we change the way we pay for it. they're linked fortunes. that can only happen if it happened at the local level. this federal legislation, which i applaud, does not provide a

remedy for the cost and quality issues that the community level. that is up to us. that is why we're trying to organize unions into force is to take control of their own payment, to take control of the position they are in when they face these increases. we are looking at increases of 8 or 9% in premiums around the state. that means there will be roughly a doubling of premium cost in less than 10 years. the cost of medical benefits will be equal to the medium -- median family income of californians. that cannot happen. we will start with the information. we cannot move legislation in this environment without better

information. we cannot depend on the legislature to require that we get it. we will have to do it ourselves. i ask you to take this step of adopting a simple policy. if you want to do business in the health care in the city, agreed to full disclosure of all -- full disclosure of all actual cost, charges, and a full reporting system that will allow a purchasing committee to evaluate the quality of the care you are providing. neither is available now except to long delays at the fact at great expense. supervisor mar: thank you so much. i should they'd said burke -- supervisor david campos for providing suggestions for expert speakers. the last expert speaker is dr. rene shoaw.

she is a published author on numerous impacts of provider consolidation. she is going to focus on the impact of the emergency services, keeping emergency services accessible. >> i am an emergency physician at san francisco general. i am assistant professor at ucsf. i am not speaking on behalf of any of these entities. i published ostensibly in the area of emergency department closures. i was looking at over 2400 hospitals over the past 20 years and the united states.

hospitals that serve low-income and poorly insured patients are twice as more likely to close their emergency rooms than their counterparts. this is even after controlling for things that market competition, profit margins, and ownership, and population density. my team performed a state analysis to determine if these national trends are similar within california. hospitals serving a higher proportion of minority patients and poorly insured patients had a highly -- a higher rate of closure. there is a federal law that states that all emergency departments must see patients regardless of their ability to pay. this is the only place where you can get care regardless of your ability to get -- paid. as a result, what happens is you have two different types of emergency departments. if you are a hospital and your e r is located in a geographically affluent area, a highly insured

patient care mix, that emergency department is the revenue center for the hospital. it is the entry point for admissions. however, if you're hospital is located in an area where the patient care mix is poor, the hospital is more likely to close its emergency room. what happens when the emergency rooms close, when somebody has an emergency and their nearest yard is closed, it does not mean there emergency disappears. they go find the next emergency room. that can cause crowding. last year, i presented a piece of research at the national scientific meeting at the academy of health. we showed using data from the bay area, san francisco, part

attack patients who were admitted on crowded days actually had a 21% higher death rate at 30 days. even when you control for all factors. patients who were admitted on noncredit days. we used to think, if the hospital is crowded, a means that patients to have a sore throats, instead of waiting three hours, they wait six hours. we have increased morbidity and mortality from serious conditions when you are admitted on a crowded day. it is clear the hospital and emergency department crowding enclosures are not isolated to a single zip code or neighborhood. they certainly affect a larger community. i will provide a few pieces of data regarding emergency care that may be relevant to this discussion. even though st. luke's account for less than 5% of inpatient

beds, they saw over 10% of the traffic in the city, a 26,000 patients. in terms of prodding, one proxy we use is ambulance diversion. if you are in an ambulance, you go to the nearest hospital to seek care. that hospital is crowded, there is no in patient capacity, but hospital is on diverge. ambulance needs to be rerouted to the next nearest hospital. when you look at the data, in all of california, san francisco is in the top four counties with the highest diversion rate. in all the hospitals combined, the number of hours on diversions was more than 4300. on average, everyday in san francisco, we had 11.5 hours of diversion each day. during these times, each patient that had to go to the hospital in an ambulance had to be rerouted because one of the hospitals was so crowded.

of course, crowding is not evenly distributed across all hospitals. if you look at were crowding happens, it happened most in hospitals located in the southeast part of the city. san francisco general, because -- we are on divert 25% of the time. santa lips was third highest in their version -- st. luke's was third highest in the diversion. if someone in my neighborhood needs to go to the hospital, they have to drive further to the next hospital. it is not only that patient to is affected, it is everybody else. it is clear that closures affect emergency care for all, insured and uninsured. these closures affect access to care through increased distance and also by increasing the patient load at neighboring hospitals. er crowding degrades quality of care.

it can also set the stage for additional closures by displacing tens of thousands of poorly insured patients to other hospitals. as you are aware, this discussion of st. luke's is only one consideration and it is part of a much larger discussion. supervisor mar: any questions, colleagues? thank you for the presentation. [applause] colleagues, we are ready to move towards public comment. i also mentioned the last hearings, if there are seniors and people with disabilities, i would ask them to come forward

first. i will start reading the names of the people who have signed up. [reading names] i will call the rest in a moment. >> thank you. i am kind of flabbergasted to hear all these conversations about markets and competition and lowering costs. it is a fundamental rule of capitalism that competition leads to a monopoly. cpmc rebuild is a perfect example of that.

this kind of monopoly is going to lead to more charges, higher charges for health care. it will directly hit city workers and retirees since the city seems to be determined to pass these increased cost from the cpmc rebuild on to the current and future workers. in march of 2011, at the l.a. times roadwrote, " northern california's most populous counties collect 56% more revenue per patient per day then hospitals in southern california's largest counties. northern california hospitals say their prices are going up for labor, supplies, and other necessities. leading health care economist leading health care economist said that most of the disparity