'It's Just Too Much': Why Many Insured Californians Avoid Hospitals in This County

Every three months, Bernie Medina takes a day off of work and drives an hour from Salinas to San José to see her oncologist. She was diagnosed with uterine cancer two years ago and needs regular checkups. Medina lives in Monterey County, but her health insurance forbids her from using any local hospital.

Medina and her wife Jeannie are both Salinas Union High School District teachers. They’re enrolled in a local government employee health insurance plan created a decade ago to save employees and employers money. To do that, it excludes all Monterey County hospitals and their affiliates. As the hospitals have gobbled up local doctors’ offices and urgent care centers, seeing specialists like Medina’s oncologist and getting emergency care have become more difficult.

“I think that the community would probably be shocked if they knew that the teachers, the people in our school districts, were not able to access our hospitals,” Jeannie Medina said.

They live in one of California’s most expensive health care markets, where experts said geographic isolation and lack of market competition combine to drive up prices at especially steep rates. Three hospitals in Monterey County — Community Hospital of the Monterey Peninsula, Natividad Medical Center and Mee Memorial Healthcare System — are in the top 10% of highest-priced hospitals in California, according to data collected by the research think tank RAND.

A fourth hospital, Salinas Valley Health, is in the top 15% of highest-priced hospitals. The RAND data is compiled through voluntary disclosures from employers and includes price information for about 90% of California’s hospitals.

“Monterey is the definition of a market failure,” said Ivana Krajcinovic, an economist and vice president for a union health plan that supports hotel workers in the county.

Though Monterey elicits images of pristine coastline, swanky restaurants and golf resorts for tourists, it is squarely a blue-collar county. The average annual salary is less than $58,000, and fishing and agriculture comprise the county’s largest industry.

Residents and labor advocates said the hospitals are so expensive they’re causing an access and “affordability crisis” on the Central Coast. They said the prices saddle thousands of people with medical debt and compel others to travel hours to give birth or have surgeries.

They’ve taken their complaints to the state’s new Office of Health Care Affordability, a department created by a 2022 law that’s intended to curb extreme price increases. But the deal lawmakers struck with the industry to get the bill through the Legislature limits the office to looking only at future price increases, leaving Monterey County residents with little recourse for the existing medical costs there.

Hospital executives blame insurers for Monterey County’s affordability woes and argue that the rates hospitals charge are the only way to stay in business at a time when one in five California hospitals is at risk of closure, according to a report commissioned by the California Hospital Association. Essential services would be cut, and jobs would be lost if prices were lowered, executives at two hospitals told CalMatters.

But, independent economists said Monterey hospitals have healthy profit margins and charge patients more than four times the amount needed to break even, based on a comparison with Medicare billing rates.

The cost of living in Monterey is high but “not as expensive as San Francisco or Los Angeles, and you see higher prices in Monterey,” said Christopher Whaley, a health economist and lead author of a RAND hospital price transparency study.

Even nationally, Monterey is an outlier, Krajcinovic said. Krajcinovic runs UNITE HERE HEALTH, a national insurance plan for the UNITE HERE hospitality workers union. The health plan pays the medical bills of more than 200,000 members across the country, and Monterey is far and away the most expensive place in the network, Krajcinovic said.

For comparison, the average price for one night in the hospital in Monterey was $12,300 in 2022, the health plan’s hospital payment data shows. In New York City, it was less than $7,000, and in Chicago, it was $3,500. The price reflects just the cost of the hospital room and does not include the cost of treatment, Krajcinovic said.

“We’d be better off putting people up at the Pebble Beach Lodge,” Krajcinovic said.

Tough choices for Salinas families

Things would be a lot easier for the Medina family if Bernie could use the hospital and treatment center just a couple of miles from where the family lives in Salinas, Jeannie Medina said.

On New Year’s Eve 2021, the Medinas drove more than 60 miles north to San José for Bernie’s cancer operation. For the next six weeks, as Bernie lost her hair and strength, Jeannie shuttled her to chemotherapy appointments about 20 miles from their home. The chemotherapy center was located in Monterey County, but it was difficult to find one that wasn’t owned by one of the four hospitals, they said.

In one instance, early in Bernie’s treatment, she was incorrectly told by the treatment center that a procedure to place a chemotherapy port would be covered by insurance at the Community Hospital of the Monterey Peninsula. She walked away from the procedure with a $25,000 bill, Jeannie Medina said.

Both of the Medinas said they wish they could use the local hospitals and be supported by loved ones and people they know.

“We can’t use the hospitals that some of our spouses work at, that our children and our aunts and our uncles work at,” Jeannie Medina said.

If the Medinas opted for an insurance plan that includes the local hospitals, they would pay an extra $3,000 per month in premiums, about $30,000 annually.

“It’s just too much,” Jeannie Medina said.

They get insurance through a local plan called the Municipalities, Colleges, Schools Insurance Group, which serves government employees. It has about 10,500 members, 40% of whom are enrolled in the plan that excludes the local hospitals, group Executive Director Neddie Sarmiento said. That’s about 4,500 people, most of whom are teachers. The number grows every year, Sarmiento said.

Uninsured patients using the hospitals in emergencies are often on the hook for the full cost of medical care.

Farmworkers Araceli Ruiz and her husband do everything they can to avoid going to the hospital. They already have medical debt, and they can’t afford more.

In 2018, a kitchen accident left Ruiz badly burned and sent her to Natividad Medical Center, where treatment cost $5,000. In 2020, wracked by debilitating stomach pain, Ruiz went to Salinas Valley Health for an emergency gallbladder surgery. She was terrified of dying alone in a hospital overcrowded by COVID-19 patients, she said but believed she would die at home without medical care.

She said she now owes the hospitals $17,000. Faced with the choice between paying medical bills or paying rent and buying groceries, Ruiz and her husband can only cover their basic needs, she said.

“It is very, very difficult,” Ruiz said in Spanish. “All of this should be more accessible.”

Monterey hospitals defend costs

Local hospital executives fired back at critics of their prices, saying charging less would erode their financial stability and jeopardize health care delivery in the region.

“Discounting our rates to a level that does not sustain the long-term viability of our local hospital would be irresponsible. Buckling to rates that could result in large-scale layoffs or cutting vital services would be management malpractice,” said Matt Morgan, vice president and chief financial officer for Montage Health, the parent company of Community Hospital of the Monterey Peninsula, in a statement.

Morgan pointed to two financially distressed hospitals in neighboring counties as examples of cheaper hospitals that could not remain viable. Hazel Hawkins Memorial Hospital in San Benito County declared bankruptcy in May, and Watsonville Community Hospital in Santa Cruz County which emerged from bankruptcy in 2022 after years of financial trouble.

Today, more than half of the state’s hospitals are operating in the red, according to a report from the California Hospital Association, the industry lobby. Fears of hospital closures became a reality when Madera Community Hospital in the San Joaquin Valley shuttered one year ago, prompting lawmakers to create a $300 million bailout loan fund for distressed hospitals.

In an unsigned statement to CalMatters, Natividad Medical Center, the Salinas hospital managed by Monterey County, also said it would be “irresponsible for the hospital to operate at a loss.” Reducing commercial prices would result in “significant annual deficits” and jeopardize services, the statement said.

“For Natividad’s essential services to continue, we need adequate reimbursement,” the statement said. “Our community needs us to remain viable, accessible and fully operational.”

Salinas Valley Health, a publicly-run district hospital, did not respond to multiple requests for comment. County officials also declined to speak on the record.

Mee Memorial Healthcare System, a private hospital on the southern edge of the county, did not respond to requests for comment by the deadline. Mee Memorial has faced immense financial difficulties in recent years but posted significant profits in 2022.

Krajcinovic, with UNITE HERE HEALTH, said it’s shocking that the county’s taxpayer-supported hospitals, Natividad Medical Center and Salinas Valley Health, charge the same prices as the private hospitals.

“Frankly, how is a county hospital doing this?” she said.

Morgan with Community Hospital of the Monterey Peninsula also blamed insurers for passing high premiums onto consumers. The hospital has kept price increases below 5% annually for the past five years, he said in his statement.

But according to the California Association of Health Plans, the industry lobby representing insurers, premium increases are directly tied to hospital prices. Hospital spending accounts for 37% of health care cost, the single largest share, spokesperson Mary Ellen Grant said.

“The best two examples of ever-increasing costs are prescription drugs and hospital costs,” Grant said.

Sarmiento, with the local government and school insurance group, said Monterey County hospital prices are the primary driver for premium increases for its plans. For example, the plan that excludes the local hospitals saw a 2.8% premium increase for 2024. In contrast, the plan with the next highest enrollment that allows members to use the hospitals had a 13.3% premium increase.

Rates four times greater than Medicare

Hospitals, including those in Monterey County, often argue that public insurance programs like Medicare don’t pay enough to make ends meet. When a hospital serves lots of patients with public insurance like Medicare or Medi-Cal, the state’s insurance program for Californians with very low income, they say they have to charge commercial insurers more to make up the difference.

According to state data, the county-run Natividad serves the highest proportion of Medi-Cal patients at 63%. Community Hospital of the Monterey Peninsula serves the fewest at 18%, but it serves the highest proportion of Medicare patients at 46%.

RAND economist Whaley said research proves the hospital argument to be only partially true: Relatively efficient hospitals operate near Medicare rates. It isn’t quite enough to pay all the bills, but reimbursement isn’t so inadequate that private insurance needs to make up five times the difference. Medicare rates are also calculated regionally to account for local cost of living and labor expenses.

The RAND data shows Monterey hospitals routinely charge more than four to five times the Medicare rate.

“The general consensus is (Medicare) is probably paying 80 to 85% of their costs,” said Patrick Pine, an administrator for an insurance plan that supports farmworkers in California. “How does a hospital justify charging three, four, five, six times or more Medicare?”

So, what is happening in Monterey County? Simply put, there’s not enough competition, said Glenn Melnick, an expert in health economics and professor at USC’s Sol Price School of Public Policy.

“We don’t have enough competition to make competition work,” Melnick said. “Prices rise to the environment they’re in. If I’m one of these … hospitals, why would I give you a discount?”

Health plans save money with travel

Local labor advocates said they’ve dealt with high hospital prices for decades and now want answers from the state.

For months, Office of Health Care Affordability board meetings in Sacramento have been filled with anecdotes during public comment of working-class residents in Monterey hit with exorbitant hospital bills, hounded by collections officers, and filing for bankruptcy.

Kati Bassler, president of the Salinas Valley Federation of Teachers, travels monthly to the meetings to share stories of her union members’ struggles to afford health care. More than 70% of the teachers in her union are enrolled in the health plan that excludes Monterey County hospitals, she said.

“Their practices are predatory,” she said. “They’ve been developing a monopoly-like practice… They’re unchecked.”

Pine, chief administrative officer of the Robert F. Kennedy Farm Workers Medical Plan, which insures about 7,000 United Farm Workers union members, has also started sharing data and stories with the state board.

Like the UNITE HERE HEALTH fund, the Robert F. Kennedy Farm Workers Medical Plan pays the medical bills directly for its members and can see the prices hospitals charge — a level of transparency that is unusual for most employer-sponsored health coverage, which typically uses health insurance companies to broker deals. The prices negotiated between hospitals and health insurers are usually a closely guarded industry secret.

A United Farm Workers analysis of billing codes showed Salinas Valley Health charged more than $420,000 to treat a farmworker’s parasitic infection while Watsonville Community Hospital, 25 miles to the north in Santa Cruz County, charged around $126,000 for the same treatment over the same number of days, Pine said. That’s more than three times as expensive, and it’s not unusual, Pine said.

The plan has saved money by paying for the transportation and lodging of Monterey County members who have procedures done in other counties.

“The California coast from Santa Barbara to about Marin County is the most expensive health care market in the state,” Pine said. “Monterey is an anomaly even among the most expensive.”

There may be little the new state agency can do. Officials can conduct a market analysis, but the law that created the Office of Health Care Affordability limited its power to control future price increases.

Elizabeth Landsberg, director of the state department of Health Care Access and Information, where the office is seated, declined to comment.

Advocates said they hope shining a light on the issue during board meetings will force hospitals to lower prices. The week before Christmas, Montage Health, which operates the Community Hospital of the Monterey Peninsula, forgave $40 million of medical debt for 29,000 patients who utilized the hospital between 2020 and 2022.

“We’re hoping with bringing this to light, the hospitals will take a second look and say 200% of Medicare is enough. Let’s take double what it actually costs to run a hospital,” Krajcinovic said. “500% is highway robbery.”

CalMatters reporter Nicole Foy contributed to this story.

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.