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Cedars-Sinai and UCLA cut from Los Angeles health plan

About 2,200 city workers and family will lose their doctors as Anthem Blue Cross pares pricey providers.

September 21, 2012|By Chad Terhune, Los Angeles Times
  • Cedars-Sinai has long captured the public's attention because celebrities have sought out treatment there for years.
Cedars-Sinai has long captured the public's attention because celebrities… (Rick Meyer, Los Angeles…)

Two of the most prestigious names in Southern California healthcare — Cedars-Sinai and UCLA — are getting shut out of a major insurance plan for being too expensive.

In a bold cost-cutting move, Anthem Blue Cross has eliminated doctors affiliated with the hospitals from a health plan offered to about 60,000 employees and dependents at the cash-strapped city of Los Angeles.

The city opted for Anthem's plan because it will save $7.6 million in annual premiums next year by excluding physicians from the two institutions known for tending to the Southland's rich and famous. About 2,200 city workers and family members are expected to lose access to their doctors under the plan.

This dramatic step shows that even some of the most-respected names in medicine can't get by on reputation alone at a time when the U.S. is grappling with a $2.6-trillion healthcare bill annually. Major hospitals and medical groups face growing pressure to justify their charges. And employers increasingly are willing to risk the ire of workers by cutting popular providers to clamp down on costs.

"Purchasers are sending a signal that certain prices are just unaffordable," said David Lansky, chief executive of the Pacific Business Group on Health, which represents large companies such as Walt Disney Co. "We want great teaching and medical research institutions to survive. Whether that should happen by charging everyone in society a higher rate for routine services is more debatable."

City officials are sending letters this week to employees informing them that their Cedars-Sinai and UCLA doctors will no longer be covered under Anthem's Select health plans, effective Jan. 1. About 27,000 city workers and their families are enrolled in Anthem. Of those, the city said less than 10% have UCLA or Cedars physicians.

An additional 32,000 city employees and family members with Kaiser Permanente aren't affected, and most Los Angeles police officers, firefighters and retirees are covered by separate contracts.

"Implementation of the narrow network was a difficult choice, but one made necessary by the city's fiscal constraints," a city spokesman said. Los Angeles is expected to be the biggest employer to offer Anthem's Select plan.

Officials at Cedars-Sinai and UCLA criticized the rationale for the move, saying the increased costs are tied to their world-class medical research and cutting-edge treatments in areas such as cancer or organ transplants that benefit the entire community.

Thomas Priselac, chief executive of Cedars-Sinai Medical Center, said these exclusions offer a "false economy" because they don't reduce costs in the healthcare system overall.

"It just pushes the cost onto those who continue getting care at those facilities," Priselac said. "Secondly, it doesn't recognize the reason why places like Cedars and UCLA are more expensive than the typical community hospital."

For its part, UCLA said its hospitals treat a large number of patients in Medi-Cal, the government program for the poor and disabled.

"Other providers don't have to deal with the expenses UCLA has to deal with," said Santiago Muñoz, chief strategy officer for the UCLA Health System.

But he said UCLA is also committed to eliminating unnecessary costs because "we know employers and health plans are concerned with affordability, and so are we."

Cedars and UCLA have long captured the public's attention because celebrities have sought out treatment there for years. Anthem Blue Cross told city officials that the public often perceives care is better there because Hollywood stars such as Jodie Foster, for instance, went to Cedars to have her baby.

But their costs are up to 50% higher than competitors and the quality of care isn't measurably better, according to Steven Scott, general manager of group sales for Anthem Blue Cross.

Scott told city officials recently that Cedars and UCLA are among "the most notorious" for higher costs and "taking out those physician groups produces a substantial difference in cost."

Anthem isn't alone in pursuing this strategy. Many insurers are aggressively pitching these sharply limited networks, which offer fewer choices and lower-priced doctors and hospitals, as a cost-cutting tool at a time when U.S. health insurance premiums have climbed three times as fast as inflation and wages over the last decade.

Healthcare experts say these tougher tactics could help push down rates.

"Organizations like Cedars and UCLA are going to have to make some substantial changes to get their prices more in line," said Cheryl Damberg, a senior researcher at Rand Corp., a nonprofit think tank in Santa Monica. "My guess is Cedars and UCLA are hoping employees will raise Cain and create a backlash."

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