Sacramento: Powerful Hospital Systems Dominate a Stable Market
The greater Sacramento area, with a total population of 2.1 million people in 2007 (5.7% of the state’s population), has recently seen strong population growth: 26% in the past decade, compared with a state average of 14%, and 8% in the past five years, double the state average.
Sacramento stands out from the rest of California on one demographic dimension: its racial and ethnic composition. The area has a much higher proportion of white non-Latino residents (60% versus 43% statewide) and a much lower proportion of Latino and foreign-born populations. Sacramento residents, whose age distribution is the same as that of the state at large, have moderately higher education and income levels than the state on average. Overall health status — as measured by the percentage of the population in self-reported fair or poor health — is better among Sacramento residents than Californians overall.
Sacramento’s position as the seat of state government makes it unique. The state is the largest employer in the community, and its presence contributes to Sacramento’s relatively favorable socioeconomic profile and health insurance payer mix. Sacramento residents are more likely to be privately insured and less likely to have Medi-Cal coverage or to be uninsured than state residents overall. Total government employment — federal, state, and local — accounts for more than a quarter of all non-farm employment in the greater Sacramento area.1 In the private sector, Sacramento’s four health systems are among its largest employers.
Over the past year, unemployment has spiked in Sacramento, as it has statewide. The unemployment rate reached 10.4% in Sacramento in January 2009 — slightly lower than the state average of 10.6% — but markedly higher than Sacramento’s January 2008 rate of 6.4%.
Issues to Track
To date, Sacramento’s strong and stable hospital systems have managed to maintain a generally cooperative environment while competing with one another. Their financial strength and Sacramento’s relatively favorable payer mix have made this community better equipped to compensate for a fragmented safety net than other communities with failing hospitals and weaker socioeconomic profiles. But looming problems threaten the Sacramento market’s relative stability — including the economic downturn and sharply rising unemployment; state and local fiscal woes; increasing costs of financing hospital expansion projects; and intensifying commercial payer pushback on rising hospital rates. The following are among the key issues to track:
- Will the current capacity expansions by the hospital systems lead to excess capacity in the future? How will the increased capacity affect the competitive dynamic among the systems, the relative leverage between systems and health plans, and the financial health of hospitals?
- Will the enrollment shift from HMOs to PPOs and CDHPs gain momentum? If so, what effect will there be on the delegated model of managed care?
- Will a new county contract for indigent care, enhanced Medi-Cal rates for health centers, and emerging collaboration to improve the safety net have an impact on access and care for low-income people?
- How will the economic downturn play out for the health care system? Will the state’s budget crisis force it to further reduce Medi-Cal rates? If so, to what extent can hospitals continue to exercise their leverage against a shrinking commercial base to force increased subsidization of public payers and charity care?
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.