SB 538 (Monning) – OPPOSE

Dear Senator Lara:
The District Hospital Leadership Forum (DHLF), on behalf of California’s district and municipal public hospitals (DMPHs), is opposed to SB 538 (Monning).
The contract provisions this bill seeks to prohibit are tools used to negotiate fair contracts on behalf of California patients served by these hospitals.   By preventing health plans and hospitals from reaching certainty in how their contractual relationships are governed, the unintended consequences of this bill would disrupt healthcare services and increase costs for patients served at all California hospitals, including district and municipal hospitals.
This bill provides an unfair contracting advantage to large, sophisticated health plans. California’s district and municipal hospitals range in size; some serve urban populations and others offer access to acute and long-term care in rural communities. California’s district and municipal hospitals are primarily stand-alone hospitals, more than two-thirds are rural and half have a critical access hospital (CAH) designation. Imposing additional onerous administrative requirements diverts resources away from the provision of health care. Many DMPHs do not have staff dedicated to contract negotiations while California’s large health plans have significant resources for this purpose.
The California market is dominated by a handful of insurance companies. Allowing market dominant health plans to negotiate with small, independent hospitals in a manner that disrupts their healthcare delivery systems will harm consumers and compromise access to care. The inequitable advantage given to health plans under this bill, especially in negotiations with non-system, often rural hospitals will result in the loss of critical healthcare services in underserved communities; the discontinuation of new healthcare services; increased healthcare costs; and a new surge in out-of-pocket expenses for patients.
SB 538 allows “cherry-picking” by monopolistic health plans of healthcare services. Many DMPHs have invested in creating integrated systems to best serve their communities. These “systems” (not to be confused with the large hospital systems that are prevalent in California’s urban areas) include the hospital, outpatient clinics, medical groups and other providers to ensure the patients are able to have the full spectrum of their care coordinated. Prohibiting DMPHs from negotiating on behalf of clinics and other healthcare providers making up this system that serves a community will result in costly, confusing care for patients. This would have the unintended consequence of uncoordinated care rather than the coordinated care all healthcare stakeholders agree is the goal.
Supporters of SB 538 paint the bill as a solution to reducing healthcare costs and dismantling what they perceive as “market dominant” providers. DMPHs are the opposite of “market dominant” providers and would be seriously harmed in negotiations with “market dominant” health plans.
For these reasons, we respectfully ask for your “NO” vote on SB 538. For further information, please contact the DHLF legislative advocates, Kathryn Scott at or 916-812-4706 or Meghan Loper at or 916-446-7843.
Sherreta Lane
Vice President, Finance Policy
cc:          The Honorable Bill Monning
Honorable Members of the Senate Appropriations Committee
Brendan McCarthy, Consultant, Senate Appropriations Committee