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Q&A with Sarah Varney and Jordan Rau: Hospital Power, Insurer Woes

Q&A with Sarah Varney and Jordan Rau: Hospital Power, Insurer Woes

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Jordan Rau of Kaiser Health News and Sarah Varney of KQED Public Radio recently collaborated on a project examining what some hospitals' newfound market power means for health insurance costs – and your pocketbook. You can find Varney's piece here and Rau's story here.

The never-ending power struggle between hospitals, which set rates for the patient care they provide, and insurers, who decide whether to pay those rates or exclude the hospitals from their networks, has been a longstanding issue in American healthcare. Only recently, however, has the balance of power shifted to a few hospital chains to the extent that it's affecting consumers' health care costs and influencing the health reform debate, Varney and Rau found.

They focused on one Northern California health system, Sutter Health, as an example of that power shift. Here, Varney quotes a Sacramento-area insurance broker:

"In this Roseville market, which is a big suburban area, the hospital is Sutter," says John Murray, a veteran insurance broker. "It's a lock right now. Because Sutter dominates the market, major insurance companies, like Blue Cross and Aetna, can't sell policies that exclude Sutter hospitals and doctors. That dependence means the hospital chain can dictate high prices."

The veteran health journalists talked with me recently about their project, what they learned, and how other journalists can follow up on this issue. Our conversation has been edited for length and clarity.

Q: How did you decide to report these stories, and how did you join forces?

JORDAN RAU: There was an article in Health Affairs that talked about Northern California and (health care) provider clout. It got a lot of attention in wonky circles. We decided to look at Northern California for two reasons. One: there was lots of anecdotal evidence. Two: California is very unusual in that it requires hospitals to report a lot of data that other hospitals in other states don't.

I knew Sarah from my days at the Los Angeles Times. We thought, NPR is one of our main partners and Sarah has a depth of knowledge about health care in California that few other reporters have.

Q: How did you divide up the work on this project? 

SARAH VARNEY: Kaiser Health News got the data, teed it up, and did all the analysis. I came in and localized it. Jordan did the interview with the CEO of Sutter corporate. We didn't really have much overlap. All of Jordan's reporting informed my piece, but it was a different beast.

RAU: I was like a researcher. Sarah did all the human stuff that her piece was all about. We ran a wonkier piece on the KQED site.

Q: What kind of data did you use to find out that Sutter's hospital care was more expensive than other chains'?

RAU: We used hospital financial data from the California Office of Statewide Health Planning and Development (OSHPD). It allows you to take a look at the different hospital systems, and the other thing which is really unusual, the state requires hospitals to break down revenue by third party payers, such as private insurers, Medicaid, Medicare. Then within each category they break it down by fee for service and managed care types.

I was turned on to (the data) by the insurers who use to figure out what's up with their competitors. There have been academics who use it to track price increases in the private market.

It's really hard data to work with. You have to be really careful to take risk adjustment into account. It took a lot longer than I wish it had. The best way to work with it is to bounce it off people, including the people who are more likely to be critical of it – we sent the data to all the hospital systems (to get their comments).

Q. How did you humanize all this data?  

VARNEY: We wanted (to report in) a community that was small enough to have distinct players, but not so small that no one was willing to piss people off. We wanted to make sure we could interview employers who were small enough to articulate the pressures they were under, but not so big that we'd get pushed into a HR department.

I'd talked to some of the big insurers who'd only talk off the record. After talking with them and confirming the general thesis of the story, I asked, who are some of your trusted brokers? Who would know this area really well? Who could talk about what's happened as Sutter came to dominate that market?

For radio, it's tough – you've got to have someone who can explain it in a radio friendly way. We landed on a guy who was an everyman, garrulous and articulate. He was also willing to open his books.  and not willing to piss people off.  I asked him – who are your clients who might be willing to talk? He put me in touch with policyholders, all businesses.  

To find the family I profiled, I called a young professionals group in the Roseville area and chatted with the guy who ran it. He hooked me up with several individuals, including Christina Anderson, who was very talkative and willing to talk about her family's finances.

RAU: We toured Sutter facilities for a week. It wasn't that helpful. A lot of the stuff they showed us was on the expense side, new facilities and medical technology. But the stories we were doing were really on (hospital revenues). If you look at Sarah's story – there's no one who's in the hospital. It's about the privilege of getting access to that hospital.

Q. Obviously health provider clout is a key issue in health reform. How did you incorporate the health reform angle into your stories without getting bogged down?

VARNEY: My story didn't focus too much on health reform, except to the extent that health reform encourages accountable care organizations and what happens when (one of those organizations) becomes a juggernaut.  In this whole run-up to health reform, the focus had been so much on insurers themselves, their crazy salaries, the trips to Cancun. Insurers now are saying, we get sweet profits sometimes, but we're also paying more for health care from high-priced hospitals. 

RAU: We tipped our hat to health reform. But health insurers were telling us they are excited about health exchanges that require them to justify rate increases. Insurers are going to have to say, here's what we're paying. The regulators can say we don't think you can justify those rates. It'll put some pressure on hospitals to own up to their part in (rising premiums), at least in the individual market.

Q: What suggestions or story ideas do you have for other journalists who are interested in doing their own reporting in this area?

RAU: One of the things you can do with OSPHD data is that you can take a look at particular hospitals. You can break them down in a particular market. You can look at Oakland or California's Central Valley, for example. You can see easily what market share is and who has what piece of what business. For the Bay Area News Group, we showed how a hospital system that had the largest market share of patients was actually the most expensive. The one that had the smallest share wasn't. You can work with the hospital revenue stuff, too, but it's a big investment of time to do it right.

They have these nice pivot tables – you don't have to use spreadsheet. You can choose how to do what you want – you can look at operating margins. That's where Sarah got that 17 percent operating margin for Sutter Roseville – and you didn't have to do one calculation – it's just fabulous.

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