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Regional Health Care Market Studies Identify Emerging California Trends

New San Francisco Bay Area and Fresno Market Reports Available

Media Advisory
Dec. 10, 2012

Alwyn Cassil (202) 264-3484 or

WASHINGTON, DC—New market studies of the San Francisco and Fresno areas conducted by the Center for Studying Health System Change (HSC) offer a stark contrast—particularly in preparations for health reform—between one of the most affluent and poorest regions of the state.

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.

San Francisco Bay Area: Health Care Providers Shift Allegiances as Regional Networks Emerge

Health care providers in the San Francisco Bay Area weathered the economic downturn better than providers in most other areas of California, in large part because the downturn was less severe in the Bay Area. Still, a number of market trends and expected effects of health reform have pressured providers, leading to significant organizational change in the provider sector since the region was last studied in 2008. Key developments include:

  • Widened gap between have and have-not hospitals. Large systems, along with a few independent hospitals with geographic monopolies in affluent submarkets, were able to improve already strong financial performance even during the recession. In contrast, most county hospitals and smaller independent safety net hospitals that were struggling in 2008 continue to struggle, and some in the latter group face potential closure.
  • Substantial hospital construction to meet state seismic standards. In a market already considered to have surplus capacity, current and planned hospital construction raises concerns about some hospitals being able to manage their debt burden and adding to excess inpatient capacity. These are particular concerns as health reform moves forward, given that payment levels for inpatient services are expected to decline and the transfer of services from inpatient to ambulatory settings is expected to accelerate.
  • Shifting alignments among providers and growing regionalization of provider networks. Since 2008, dramatic changes have occurred in affiliations among physician organizations—and in some cases, hospital systems. New alignments have formed among major providers as they seek both to consolidate and expand their geographic reach. The result is a growing trend toward regionalization of provider networks across the Bay Area, which historically has had many distinct geographic submarkets.
  • Increased plan-provider collaborations to form accountable care organizations (ACOs). Under pressure to keep insurance premiums in check, health plans and providers began joining forces to form narrow-network ACOs in 2011. It remains to be seen how successful these emerging ACOs will be in managing care—particularly in reducing inpatient utilization—and keeping within their global budgets.
  • Expanded safety net capacity. With the economic downturn leading to increased demand for outpatient services, many safety-net providers expanded capacity. Most notably, federally qualified health centers (FQHCs) won new federal grants to finance growth. In contrast, small private clinics are struggling and may have to merge with other clinics to survive.
  • Increased collaboration, particularly on care delivery improvements, across the safety net. Bay Area safety net providers—such as those participating in Healthy San Francisco—are making strides in implementing the medical-home model, improving care coordination across providers, and introducing other care delivery changes. Strong collaboration within the safety net means that innovations adopted by one type of provider—for example, county clinics—are readily spread and adopted by other providers, such as private clinics.

The San Francisco report is available at

Fresno: Health Providers Expand Capacity, but Health Reform Preparation Lags

The Fresno region remains one of the poorest areas in California, and the economic downturn has driven Medi-Cal enrollment and uninsurance rates even higher. The population has continued to grow, although at a slower pace than during the early 2000s. These factors have strained already inadequate provider capacity, particularly of physicians. Key developments since the last study was conducted in 2008 include:

  • Focus on inpatient capacity. Hospitals are expanding inpatient beds and services to ease overall capacity constraints and to compete aggressively for the shrinking base of commercially insured patients. Most hospitals weathered the economic downturn, although they continue to face financial pressures.
  • Little traction on hospital efforts to align with physicians. Hospitals are making efforts to align more closely with physicians, including developing medical foundations to compete more effectively with other provider organizations in recruiting physicians to the area. Most physicians, however, continue to work in independent solo and very small practices and show little interest in hospital alignment efforts.
  • Expanded clinic capacity still falling short of demand in underserved communities. FQHCs and hospital-operated rural health clinics are expanding capacity and improving patient access, although demand still outstrips supply. As a result of these expansions, competition for Medi-Cal patients in rural areas is heating up and competition to recruit physicians across the region is growing more intense.
  • Limited preparations for national health reform. The region trails other areas of the state in preparing for coverage expansions under reform. Fresno County is one of only a few California counties that have not yet committed to participating in the Low Income Health Plan (LIHP), an optional county program to provide health care services to low-income uninsured adults and transition most enrollees to Medi-Cal once they become eligible in 2014. The second-largest county in the region, Tulare, will get a late start, launching the LIHP in January 2013.

The Fresno report is available at

CHCF published market studies of Sacramento and Riverside/San Bernardino in September, and regional market studies of Los Angeles and San Diego will be published in the coming months.

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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.



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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.