Debate over Measure F, a Palo Alto ballot initiative that aims to curb healthcare costs in the city, has intensified as the November election approaches.
The measure would give the city of Palo Alto the authority to mandate that hospitals and other medical service providers reimburse patients and insurance companies who are charged more than 15 percent above the industry-established cost of the services provided.
Sponsored by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW) — the union that represents over 1800 healthcare workers at the Stanford University Medical Center — Measure F collected over 3500 signatures of support in a petition submitted to the City of Palo Alto in May. It only needed 2407 to qualify.
Potential impacts on quality of care
Stanford publicly expressed opposition to the measure, positing that it threatens “Stanford Health Care’s ability to provide top-quality health care to patients from Palo Alto and across the region,” according to a statement published in Stanford News.
Stanford claims that Measure F wouldn’t cut health care costs for insured patients. Instead, SHC warns that the proposal would slash their budget by 25 percent, forcing them to significantly cut back on staff and possibly terminate many of their health care services and programs.
President and CEO of Stanford Health Care (SHC) David Entwistle explained in a Stanford News Q&A that the measure does not factor in additional expenses to the cost of care, such as technology and management expenses, that are critical to its health care provision.
In an email to The Daily, SHC Chief Communications Officer Stephanie Bruzzese conveyed SHC’s view that Measure F would force it to “reconsider how to use the new hospital building [and] eliminate plans to retrofit current facilities.”
Sean Wherley, the spokesman for SEIU-UHW, maintained that the measure is necessary to hold local health care providers and the city of Palo Alto accountable for what the union sees as habitual over-charging for health care services.
“This is about transparency [and] letting people understand how much [they] are being charged, and why [they] are being charged so much more than the clinic down the street or in the neighboring community,” Wherley said. “This is our chance as an organization to get healthcare costs under control.”
Wherley pointed out that though Stanford Hospital is registered as a nonprofit, it continues to turn a profit each year. A 2016 study found that it was in fact one of the top 10 most profitable hospitals in the country, bringing in a profit of $224.7 million in 2013. According to SEIU-UHW, Stanford Health Care reported a $234 million profit last year.
“We are saying, ‘you’re a nonprofit; you are supposed to be serving the community’s needs; you are not supposed to be padding your bank account,’” Wherley said.
According to Bruzzese, these resources are necessary to maintain Stanford Health Care’s top-notch specialists, facilities, research and community benefit program. She wrote that SHC reinvests “100 percent” of their profit margin by the year’s end.
“To be a leader in patient care, we must continuously reinvest in our care delivery system — including highly trained specialists, the latest technology and a new $2.1 billion hospital that complies with seismic safety standards,” she wrote. “Our operating margin allows us to make the investments we need to maintain the highest level of excellence in care, training and research.”
Entwistle also refuted the notion that Measure F would promote health care accessibility and lower patient costs in the community.
“I want to emphasize: This initiative actually does nothing to limit the prices charged to patients with insurance coverage,” he said. “Nothing in the initiative improves health care quality or patient safety. And nothing makes care more accessible to low-income and vulnerable groups.”
Bruzzese explained that this is because the measure would force health care providers to reimburse insurance companies for excess costs without requiring that the savings be passed on to the patients.
Effect on small practices and the city
Palo Alto’s many smaller health care clinics would also be impacted financially by Measure F, and critics fear that these providers may move their practice out of the city if the initiative goes into effect.
James Stephens, a dentist who has been practicing for 36 years in Palo Alto, told the Palo Alto City Council that he likely would move to Mountain View if Measure F is passed.
“The truth is, this ballot measure will limit my ability to have a viable dental practice because of my ZIP code,” Stephens said.
Other small-scale health care practitioners, such as pediatric dentist Chris Lee, argued that the blanket 15 percent cap on markup does not take into consideration the many nuances involved in medical care and billing. He explained to the City Council that his pediatric work is often far more time-consuming and costly than what insurance will cover due to children’s common anxiety about receiving dental care.
“Providing quality services is complicated, and dental billing isn’t as simple as drill, fill and bill,” Lee said.
Measure F has also been criticized for creating a potentially unreasonable burden for Palo Alto. The Palo Alto Weekly editorial board wrote that the measure would “impose unreasonable and expensive burdens on local government and taxpayers.”
Palo Alto City Council members voted unanimously on June 11 to oppose Measure F, citing a lack of adequate bureaucratic infrastructure to regulate the enormous quantity of healthcare charges coming from Stanford and other local health care providers. However, they also voted unanimously to certify the petition that SEIU-UHW coordinated, which confirmed that the measure would appear on the November ballot.
“We’re not equipped to handle this,” City Manager James Keene said at the meeting. “We need to recognize that this has been dropped on us.”
Bruzzese agreed that the measure would be excessively costly for the city of Palo Alto.
“Under Measure F, the city would be required to enforce a new and complex health care regulation, which will require a significant investment of staff time and millions in taxpayer dollars,” she wrote. “This new drain on city resources will siphon money away from other critical public services, such as fire and law enforcement.”
Wherley expressed doubt that Measure F would impose such a large administrative burden on the city.
“That’s an exaggeration, one fed to [City Council] by the health care providers,” Wherley said. “[The health care providers] are already having their books tightly audited and reviewed. This is not going to require an investment of hiring multiple staff; the real work has already been done as part of the requirement of operating a health care entity.”
City Council staff also published a report summarizing the myriad implementation costs and constraints that the measure would impose on the city government, as well as the importance of the medical sector to the Palo Alto economy.
“If the Initiative Measure passes … residents who use affected medical providers could experience a decrease in their health care costs,” the report read. “If these service providers left Palo Alto, however, those cost reductions would not occur, and city residents would need to travel further to obtain medical services.”
The City Council report swayed some members of the Stanford Coalition for Healthcare Reform (SCHR), an activist group on campus that had previously supported Measure F.
“We support the organizing being done by SEIU-UHW, and we’re thankful for all of the work that they’ve had, but there are divisions in our coalition along that measure,” said Hannah Zimmerman ’21, an organizer of SCHR. “Everyone supports institutional change, and while I personally will support the measure, I can’t force divisions into my coalition when we have so much room to do so much important work on health care activism.”
Sarah Chen ’21, another organizer of SCHR, added that the group plans to shift its focus to on-campus institutional health care reform as opposed to the citywide measure, calling this local activism a “better approach to improving Stanford Hospital.”
Contact Katie Keller at ktkeller ‘at’ stanford.edu.