Los Angeles: Fragmented Health Care Market Shows Signs of Coalescing
Illustrating the fragmented nature of the Los Angeles (LA) health care market, scores of hospitals and numerous physician practices are scattered across a vast and congested area that is home to 10 million people. With the exception of Kaiser Permanente, hospital systems and physician organizations tend to operate in isolated silos without an extensive footprint across the county. Emerging market trends and expected changes under national health reform are prompting many providers to pursue new strategies to ensure their viability.
Key developments since the last study was conducted in 2008 include:
- Intense competition for physicians. Physician organizations, hospitals, and others are seeking new, tighter affiliations with physicians to gain patients, compete with Kaiser Permanente, and prepare for health reform. The two largest physician organizations, HealthCare Partners and Heritage Provider Network, are growing both their medical groups and independent practice associations (IPAs). In November 2012, national dialysis provider DaVita purchased HealthCare Partners, which also operates in other states.
- Growing interest in affiliations among hospitals. Although the market is generally considered to have excess inpatient beds, some hospitals face capacity constraints. Hospitals are starting to consider affiliating or even merging with each other, in part to help adjust capacity, expand referral bases, organize service-line strategies, and improve care coordination. The more prestigious and financially healthier hospitals (including UCLA) have been at the forefront of these activities.
- Physician organizations leading integration efforts. Given their experience in accepting financial risk for patient care, LA physician organizations are spearheading efforts to develop accountable care organizations (ACOs). For example, HealthCare Partners and Heritage Provider Network are participating in Medicare ACOs, while HealthCare Partners is also working with Anthem Blue Cross in a commercial ACO.
- Fresh leadership for the county’s safety net. New health department leadership is redesigning the extensive county-operated delivery system, which includes hospitals, outpatient centers, and primary care clinics, and collaborating with private hospitals and community health centers. These changes are intended to help both public and private safety-net providers remain financially viable, use existing capacity efficiently to serve more patients, and improve patient care, especially as the county prepares to enroll many uninsured residents into Medi-Cal under reform.
- Safety-net interest in ACOs. Unlike other markets studied, there has been substantial ACO activity for the Medi-Cal population, with two such entities under development that include safety-net hospitals, community health centers, and Medi-Cal health plans.
Since 2009, CHCF has published a series of regional market studies that examine the health care markets in specific regions across California. These studies highlight the range of economic, demographic, and health care delivery and financing conditions in California. They are published as part of the CHCF California Health Care Almanac, an online clearinghouse for key data and analyses examining California’s health care system.