Regional Health Care Market Studies Identify Emerging California Trends

New Sacramento and Riverside/San Bernardino Market Reports Available

Media Advisory
Sept. 20, 2012

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON, DC—Increased pressure on hospitals to contain costs, growing concerns about physician shortages and strained safety nets are among the trends identified in new market studies of the Sacramento and Riverside/San Bernardino regions conducted by the Center for Studying Health System Change (HSC).

Funded by the California HealthCare Foundation (CHCF) and based on interviews with local health care leaders in 2011-12, the regional market studies assess how the organization, financing and delivery of health care are changing across the state. A previous round of California site studies funded by CHCF was conducted by HSC researchers in 2008.

Sacramento: Health Providers Collaborate and Weather Economic Downturn
While hospitals and physicians in the Sacramento region weathered the economic downturn fairly well, a number of market trends have posed challenges for the area. Key findings of the market report include:

• Increased pressures on hospitals to contain costs. Hospitals reported deteriorating payer mixes because of declining commercial coverage; an uptick in public coverage; smaller commercial payment rate increases; and rising rates of uninsured patients. Despite these pressures, most hospitals continued to have strong financial performances.
• Increased use of narrow-network arrangements. The market is developing new health plan-provider collaborations, including accountable care organizations and narrow networks of providers that accept lower payment rates in exchange for exclusivity.
• Growing concerns about an inadequate supply of physicians—especially primary care physicians. In the words of one respondent, the coverage expansions under health reform will result in a “tsunami of unmet need” among both privately and publicly insured people.
• Increased dominance of Kaiser. Kaiser is viewed as an even more formidable competitor now, especially given the perception of Kaiser Permanente Health Plan as a lower-cost option
• Increased pressure on outpatient capacity at safety net providers. With the economic downturn driving up the proportion of uninsured people, the fragmented safety net’s outpatient capacity is insufficient to keep pace with demand, in spite of considerable growth in community health centers.

The Sacramento report is available at http://www.chcf.org/publications/2012/09/regional-market-sacramento.

Riverside/San Bernardino: Vast Region, Market Fragmentation Add to Access Woes
The vast Riverside/San Bernardino region is recovering slowly from the economic downturn, and access to care continues to be a challenge. Key findings of the market report include:

• Improved overall hospital financial performance. Many hospitals maintain bargaining clout on payment rates because health plans must ensure access in each of the region’s many submarkets, some of which are underserved. This has helped maintain and even improve financial performance at the same time that hospitals have struggled with a declining payer mix as people lost private health coverage.
• Increased presence of Kaiser. Kaiser Permanente’s presence has expanded, with other providers—both hospitals and physicians—viewing the integrated delivery system as their biggest competitive threat.
• Growing concerns about physician supply. The per capita physician supply in the region is low compared with other California markets, and some observers reported that demand for physicians continues to outpace supply.
• Growing efforts by hospitals to align with physicians. Physicians remain largely independent in solo or small practices, although some are joining larger physician-owned organizations. Hospitals are seeking to align more closely with physicians—both to gain patient referrals and inpatient admissions and to prepare for new payment arrangements under national health reform.
• Increased pressures on safety nets. County-run safety net organizations face capacity and financial pressures to care for growing numbers of Medi-Cal and uninsured patients. Both counties are trying to work more with federally qualified health centers (FQHCs) and other private community clinics and health centers, especially as they prepare for reform.

The San Bernardino/Riverside report is available at http://www.chcf.org/publications/2012/09/regional-market-riverside-san-bernardino.

In the coming months, CHCF will publish additional regional market studies of the San Francisco Bay Area, Fresno, Los Angeles and San Diego.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.