State investigating medical consolidations


A wave of consolidation among hospitals and physician groups has drawn scrutiny from the California attorney general’s office amid concerns that these alliances could boost medical prices.

Some hospital chains and insurance companies in the state said they have received civil subpoenas from the attorney general’s office seeking information about market concentration among medical providers and the effect on healthcare pricing.

Sharp HealthCare, which runs seven hospitals and two affiliated medical groups in the San Diego area, said it was contacted by investigators, as were some insurers such as Health Net Inc. of Woodland Hills.

“We know that a number of other health systems and hospitals in California also received subpoenas in connection with the attorney general’s inquiry,” Sharp said in a statement.

A spokeswoman for California Atty. Gen. Kamala Harris declined to comment. The Wall Street Journal first reported on the inquiry Friday.

The federal healthcare law pushes medical providers to collaborate more on patient care in hopes that that will reduce costs in a fragmented industry. That has driven much of the acquisition activity across California and nationwide as hospitals and large medical groups merge.

Some healthcare experts, however, worry that this consolidation will raise costs as competition lessens in certain markets.

The California Hospital Assn., an industry trade group, said it’s essential for hospitals and physicians to work more closely. “Criticism of hospitals that are responding to the demands of federal and state laws is unwarranted,” said C. Duane Dauner, the group’s president.

Dignity Health, the state’s biggest hospital chain, and Sutter Health, which has 24 hospitals in Northern California, are also under investigation, according to the Journal report. The hospital chains declined to comment.

The insurance industry supports consolidation that promotes efficiencies, according to Patrick Johnston, president of the California Assn. of Health Plans, but not if it “raises prices with no clear benefit.”