budget and finance committee

meeting good morning. welcome to the san francisco board of supervisors budget and financial committee for november 6, 2013, i'm mark farrel and i'm be doing this meeting and i want to thank supervisor scott wiener for joining us and supervisor mar and avalos will join us in a while. i want to thank victor young and the sfgtv covering this. mr. clerk do we have announcements. >> yes. >> be silent. and phones and electronic devices. completed speaker cards should be submitted to the clerk. itemed acted upon today will be on the agenda unless otherwise stated. >> okay. so we have one relatively longer hearing and we have a number of items before that, so we'll get going with the hearing and the

resolution that i sponsors. clerk, call item number one and 1. >> item number 1 hearing to focus on the overall trends in hospital pricing, the rationale from the hospitals for the setting of these prices, how hospital prices are affecting our governmental accounting standards board unfunded healthcare liability, overall healthcare costs, and how the pricing seems to disproportionately affect the uninsured and underinsured. >> item number 1 hearing to focus on the overall trends in hospital pricing, the rationale from the hospitals for the setting of these prices, how hospital prices are affecting our governmental accounting standards board unfunded healthcare liability, overall healthcare costs, and how the pricing seems to disproportionately affect the uninsured and underinsured. >> item number 2 resolution supporting the health service system for participating in establishment of multi-payer databases that can be used to evaluate and improve the quality and cost of care and resolving to pass legislation to establish full quality and cost transparency in the public interest. >> item number 2 resolution supporting the health service system for participating in establishment of multi-payer databases that can be used to evaluate and improve the quality and cost of care and resolving to pass legislation to establish full quality and cost transparency in the public interest. >> okay. thank you very much. there are two items before this committee today addressing transparency in our health care system. one is a hearing that i called back in may after president obama got the charge data which shows variation across the country and various hospitals charge for common and

patient services. this was the first open data released following president obama executive order making open and machine readable, the new default for government information. and we have a separate initiative out of my office here in our city. the data base itself looks the average chart is the most common impatient chart. and the prices from 2001 is 60 percent of medical cases. the price information that was collected wasn't available to the average consumer. the initial analysis of the data shows that hospitals charge medicare different amounts, even ten to 20 times what medicare reimburses for the same procedure. this initial analysis also raises questions about how hospitals determine prices and why they vary. the first look at this data reveals

there's wide variations around hospitals and here in san francisco. as now also a member of the health service board and as one of the supervisors involved in the snc negotiations, i realized how crucial health care is important. the second item is a resolution to pass legislation to establish full transparency. consumers and employees are asked to pay more and more in premiums and costs. price transparency in the health care market is essential to bring price down. recently the lack of transparency in health karin creases for public employees jeopardizes health care for workers. it's hard to improve rates and we as a board owes to our resident to have more into health care cost so

we begin to move toward competitive pricing that benefits all of our resident. we have a line up of speaker for today's hearing and i want to thank those in attendance and i want to thank stephanie for spending so much time on today's hearing. i'm going to ask lisa to come up who is the acting director over the health service system but i want to thank the members that work with lisa and our union members here in san francisco and public employee unions for their hard work on this issue. again that's something city hall is completely is in agreement with so i want to thank them for their participation and ask lisa to be apart of the process. >> thank you chairman farrel,

supervisor wiener. director of the health system. it's my behalf to speak to you. sorry, victor. this isn't wanting to stay up. >> we're all recovering from election day, here. >> thank you. that's perfect. it's my privilege to speak on behalf of the joint labor management committee on transparency and accountability in health care. as you listen to my voice today, please hear the voices of all the organizations listed on this slide and their membership. it's not everyday that labor comes together and agree. it's notable on this issue, there is consensus and we're speaking with one voice. in the next

few minutes, we're going to talk to you and describe what transparency means and why we need it and what you can do to join our voice in calling for this solution to our health care problems. whether you're a member, individual, patient, family, you need to know where you can get the best health care for your family and it's very difficult to make an informed decision today. you're a 36 year old woman who is pregnant with betweens, do you deliver at uc or should you go to bik who may need an nicu. you have no data and no facts to make that decision. 45 year old man who needs, who has heart problems and needs open heart surgery. do you go to st. mary's, do you go to cpnc or uc. where is the lowest

mortality for that surgery in the city? where is the lowest post operator infectionar yshg. you ask your father in-law who maybe had the surgery, but you don't have any facts or data to make that decision on. so our members need to know what is going on in health care and how they can make the best decisions. they know their cost are going up every year, they're paying higher copays, higher coinsurance, their premiums are going up, what can they do to manage the cost of health care. transparency means helping them make a decision. we pay more every year as an employer and we have really no idea whether the care we're purchasing is better are or worse than the year before.

the lack of data transparency is there for us as well as purchasers. it's more expensive but we don't know what to do. we pay or shift cost to employees and none are sustainable. believe it or not, the people who are providing health care to us have the same problem. they have no more access to to data than we do. the doctors are trying to make decisions on quality, they have little access to data. you don't know what california pacific is charging for a hospitalization. how can you manage health care or be asked to manage or contribute to the solution if you have no transparency into the costs. so what we are all aiming for, everyone in health care, what we're all aiming for is what have been dubbed the

triple care. we want to have lower cost or cost that are sustainable. this is important to the patients, the purchasers and providers and everyone in health care. i'm going to just let you no he what we're asking for and i think supervisor farrel, you mentioned this already. we're going to be asked the board of supervisors to pass the resolution supporting health care in transparency in the public interest. we're going to ask to help us investigate and pursue the legal framework that will do three things. one, support cost transparency, two insure that contracts with the city support accountability and transparency and three, creation of an all payer claim's data base. i'm going

to say more about that, but that's the ask and i want to say a little bit more about why we're asking and why this is so important. let's start the big picture, the global picture. the utah is the dark blue line and the other colors are the rest of the countries -- the developed countries in the world. we pay almost double what every other developed country pays for health care. it's 18 percent of our gdp. if price for health care had grown as quickly as, you know, on other things, a dozen eggs would cost $55, a gallon of milk will cost $48, a dozen oranges would cost $134 and why is that? it's because the health care marketplace is currently a broken marketplace. nobody knows what they're paying for, nobody knows how

much it costs, how much profit is being made, and what the quality of the product is. this is really an important slide, and if you remember one slide, please remember this one because this is the impact on families to this problem. the lower graph numbers are the overall inflation over the last 13 years and workers numbers. the top is health insurance premiums, this is the impact this has had on our families. if we look across the country, the impact hasn't been consistent, and in fact california has seen sometime worse trends, so this is in the past six years, from 2003 to 2009. 2003 -- in 2003, health care premiums as a percent of family premiums was less than

12 percent. as of 2009, it's grown to 18 percent in california. one the highest trends in all the states. if we look specifically to the city and county of san francisco, just over the last ten years, in 2002, 2003, premium health care premiums were 12 percent as a percentage of salary. by 2011, that's over 20 percent. so in less than ten years, we've gone from 12 percent to over 20 percent of health care premiums as a percentage salary. 2012 article titles, who will have health karin care insurance in the future. if the trends continue and no structural change won't be made, the out

of cost will be 50 percent of the average income of 2018. that's five years away. it's worth noting that for all of this money, for spending more than any other country by a long shot, we are not healthier and we're not getting better health care. so this is a us quality scores, other countries compared to the us. the care for chronic conditions. the average is 51. the us rate is 20. we rank 27 out of 28. mortality from stroke, we rank 25 out of 34. patient safety and child birth, we rank 20 out of 30. ' child immunization

is 30 out of 31. on almost every metric of health care you look at, the united states are below. i don't know what the opposite of the triple aim. maybe it's the triple miss, but we have missed on all accounts. we have -- we're not healthier, we're not getting the best health care and we're paying the most. so the question is why? why do we pay more? well, this is what the experts say. rising costs, prices not rising utilization is the primary driver in the recent spending growth. hospitals and markets are able to charge higher prices to commercial insurers. providers growing market power to negotiate higher rates is the elephant in the room that is rarely mentioned. this is a broken marketplace and we're

all responsible for that. all of us have to recognize it's a broken marketplace. the number one reason why we're paying more is because organizations are charging more because they can. the number two reason why we're paying more is that there's any -- there is a big amount of waste. access administrative cost and prices that are too high, fraud, missed opportunities. so the number two reason for paying more than anyone else and getting less health care is the waste and the way to solve this and the way to solve the first cause is transparency and accountability in health care. juft to drive this point home a little further, this is the cost for angie owe mras tea which is opening the clogged

arteries in your heart. in other countries, it's $7,000 and in the us it's 28,000 up to $61,000. what's interesting is if we look at the highs and the lows and we look at california, in california is the home of manage care. we have the department of manage health care. we have the most regulated health care system and the most as we like to say the most advanced management health care in the country and yet we have the highest costs. breathing problem for ventilateers, the average is 62, we 120. cop, the average is 30, we pay 58. so we're heavily regulated, but not around transparency and we have no regulation around

accountability. in san francisco, the variation in health care is significant. you can get a knee replacement and it may cost $68,000 or at another hospital across the street might cost $25,000. lab tests, a chest x-ray may cost $20,000 or $58,000. there is no rhyme or reason to what we are paying for. prices are arbitrary and all over the map. they make no sense and the only way to fix this is transparency and accountability. so you might ask, well, lisa, you're system is the largest in san francisco, the second largest in the state, why don't you ask what the price is. you're

paying the bill? believe it or not, we have. and the answer we get is it is proprietary, we can't tell you. so the contract law is extremely protective when it comes to what's going on in health care. and we're going to have to do something about this if we're going to solve the problem. there's clauses which basically says nobody talks. we sign a contract and you don't talk and you don't talk and nobody talks. there is guaranteed inclusion language that says if you want one of my hospitals, you have to take all of them. and by the way, i just spot three down the street and you have to take those two and by the way you were paying 1,000 for them and now you're paying $3 and if you want any of my hospitals, you have to take them all. that contract language is difficult and makes it impossible to set up a

competitive marketplace. and there's more. there's antior contract prevision that says not only do you have to take all my hospitals but you can't say anything negative to your members about my hospital. if you give another hospital three stars you have to give me three stars. you can't give me one star, even if i have safety violations or if i'm the most expensive, you can't disadvantage me. even if i'm four times more expensive, you can't charge your members more to go to my hospital than you do other hospitals. this is antitiering preventions in contracts and it prohibits fair competition. we have to do something about this. >> could you repeat that for everyone, so if a provider or insurance carrier chargers us more, we can't charge our members more? >> that's correct. not every

contract has this prevision, but many of the biggest hospital systems in the state have antitiering preventions. they say you can't disadvantage any of my hospitals that you contracted for. they have to be on the same playing field as everybody else. >> so it falls on us as a government to pick up those costs? >> the payers have to just pay. our choices are really to pay or a shift cost to members through premium increases. >> okay. >> the catalyst for payment reform and we'll have a speaker later in hearing. she gave california a d on our legislation and our efforts to get to transparency and health care. i think she'll tell you that even the a's, i think were at 60 percent, so it's not like

a d was good. i mean a d was -- i'll let her tell you more about that. what's the solution? transparency is simple. it's just having enough information to hold the other party accountable. we have to be able to insure that we're holding our providers accountable and we're paying for fair price. we're asking to get to that level. what does that mean? pricing and contract transparency will help us contain health care cost and help us reduce unknown and unwarranted price variation. this issue of paying 97 at one hospital and 101,700 for a lab test. shining some light on that will help us solve that variation. and it will also help us reward value driven health care. when it comes to

quality, transparency will help providers improve by bench marking against others. it will especially us reward quality and efficiency and support our patients in choosing better and safer health care. i thank you for your attention and i thank you for calling this hearing today. >> thank you mrs. gopy. i appreciate your presentation. i should have mentioned this up front and i want to thank all the people who will be speaking today. we have professor glen. i want to thank suzanne who is from catalyst of payment reform and david, i see his team professor king who is here as well from the group that is

working at us hasting but cusf and ann from the california hospital association as well as mrs. robage from kaiser who is here as well. i want to thank you for being here and mr. melcom thank you for coming up for this hearing. >> thank you for inviting me for this important session. i'm going to talk about the elephant in the room and the factors that's causing that which is rising prices in our health care system. so some back thing and the things i'm going to cover is the price competition has benefited californians. and this trends provides consolidations and other actions that reduced the competitiveness. there's emerging health insurance

that's going to make problems for consumers in terms of transparency. we're going to need private sectors and despite being an economist, i think we're going to need to mandate minimum disclose laws. this began in 1925 through 2011 and as you can see it grew from $120 in 1995 to 18 plus hundred dollars. the line isn't straight up. the physical -- the first part is flat between 1995 and 1999. we had a lot of price competition in the health care market. plans were able to force provideers to compete

with others to get that contract and they had to keep their prices down. being if early 2000, we saw the emerge of these competitive type policies by some of the large systems where they would contract all as one, force providers to take all of their hospitals that they wanted. the few that they really needed and that began a whole series of actions which reduced competition in the hospital sector. >> can you talk so everyone understands it, taking all the hospitals. >> health plan comes to town and there's five hospitals. four of them are inexpensive and one is very expensive. well, in an open market, they would choose to contract with the four that are less expensive assuming the quality of service was the same. under these models of take all or none, the law systems can say

to the health care, wait a second. we have three other hospitals in another part of the state that you must have if you want to sale health insurance there, so if you want those, you have to take this one. so we're forced to contract with the higher priced provider. as time goes on, the health plan may say we're going to try to implement and restore price competition by saying to our members, okay, you want to go to this really expensive one, 1, $1, you pay 1, you pay the first $1,000 and we'll cover efg else after that. and they say you can't advantage us as talked about from your earlier speaker. there's anticompetitive tactics. >> thanks.

>> so you'll see from 1999 to 2011, for capital hospital spending has doubled in california. there's some competition that don't have large systems, keep in mind what we need to have a competitive market, it's choice and transparency. if the consumers have the information, they have choices and they can move their spendings to one place to the other and force the market to be responsiblive. we have neither of those and it's getting worse. >> here's another slide which talks about the same spending pattern but tries to break it down and so on the left-hand side, you look at total spendings between 1995 and 1999 grew 15 percent, that's the red bar, and that's decomposed into

volume, and that's the blue bar and volume grew by five percent and the cpi grew by six percent, so if you take those out, price increases during that time for hospital care in california, relatively small. that was the era of competition. >> all right. questions for you on this chart. as we were going through the cpc discussions earlier this year or last year at this point, a lot of it -- is cpi the right measure. we talk about the medical inflation and a different matrix and forgive me ignorance, what's more relevant in this discussion? >> the problem -- one problem with the medical cpi, that measures the prices of medical, so it's circular. so there's a whole literature on what's the right index. i think for our purposes here, the cpi is not bad because basically you want to measure -- what are the

input prices that providers have to pay to deliver the services and that includes wages and other things that they have to purchase as input. now, what this slide doesn't show is improving in quality and the mix of patients that's being seen. there's some evidence that the population is getting sick overtime. i'm unable to control over that here. >> this is an issue that affects us as a station and as a state, and the people that's speaking in this room has a lot of that background and data that you look at. from my perspective i'm focused on san francisco and the health of our city and the heath of our resident and the health of how economy here in the city and our budget as a city. we talk about -- you talk