San Francisco Bay Area: Regional Health Systems Vie for Market Share

A CHCF Regional Market Study

Caroline Davis
Katrina Connolly


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Regional Markets Study

The San Francisco Bay Area is one of seven markets included in the Regional Markets Series. This is the fourth round of the study; CHCF published the first set of regional reports in 2009. The markets included in the 2020 release — Humboldt/Del Norte, Inland Empire, Los Angeles, Sacramento, San Diego, San Francisco Bay Area, and the San Joaquin Valley — reflect a range of economic, demographic, care delivery, and financing conditions in California.

Health care systems in the San Francisco Bay Area — which is healthier, wealthier, and has higher rates of insurance, on average, than the rest of California — continue to focus on building regional networks to support population health strategies and compete with market leader Kaiser Permanente. Over the past 20 years, the Bay Area health care market has consolidated and, as a result, is dominated by four systems: Kaiser; Sutter Health; University of California, San Francisco (UCSF) Health; and Stanford Health Care. At the same time, smaller systems, such as John Muir Health and El Camino Health, play key roles in geographic submarkets, making them attractive partners for the larger systems seeking to expand market share.

In response to the region’s high health care costs and employer requests for affordable, high-value options, new models and contracting structures are emerging in the Bay Area, including providers contracting directly with employers. Despite the region’s relative affluence, more than one in five residents are covered by Medi-Cal or uninsured, and county-based safety-net health systems and Federally Qualified Health Centers (FQHCs) play critical roles in providing access to care for vulnerable populations, including the growing number of people experiencing homelessness.

The region, defined in this study as the five counties of Alameda, Contra Costa, San Francisco, San Mateo, and Santa Clara, has experienced a number of changes since the previous study in 2015–16. Key developments include the following:

  • High health care costs and competition among large systems prompt interest in population health management. Bay Area health care costs remain among the highest statewide, creating interest in the adoption of population health strategies long used by Kaiser that stress prevention and care coordination to avoid costly hospital stays. New contracting models and alliances that shift greater financial risk to providers also are emerging in the market.
  • More physicians align with large health systems as the independent private practice model erodes. While physician supply in the Bay Area is strong, the share of independent physicians in private practice continues to decline. Physicians increasingly are joining medical groups affiliated with the large health systems. Two of the largest independent practice associations (IPAs) in the Bay Area — Hill Physicians Medical Group and Brown & Toland Physicians — are pursuing strategies to keep private practice viable.
  • Numerous public hospitals and local Medi-Cal health plans help to anchor the health care safety net. The Bay Area’s locally based public health plans cover the majority of the region’s Medi-Cal enrollees. The region’s public hospitals also play a critical safety-net role. Medi-Cal accounts for approximately two-thirds of revenue at Santa Clara Valley Medical Center (SCVMC), Zuckerberg San Francisco General Hospital, and Alameda Health System (AHS). While AHS continues to struggle financially, SCVMC has expanded its footprint with the acquisition of two community hospitals.
  • FQHCs play an important safety-net role. The role of the region’s FQHCs in caring for Medi-Cal enrollees and uninsured residents is growing. Across the five Bay Area counties, between 2014 and 2018, the number of FQHC patient visits per capita grew by 28%, and the number of clinic sites increased by 15%.
  • Access to and coordination of behavioral health care services for vulnerable populations is a challenge. Inpatient psychiatric beds are in especially short supply, with one estimate indicating the region needs to add thousands of beds to meet demand. While the Bay Area has more psychiatrists per capita than elsewhere in California, psychiatrists to treat Medi-Cal and other safety-net patients remain scarce.
  • More people are experiencing homelessness across the region. Along with efforts to coordinate physical and behavioral health care services and link vulnerable people to social services, local officials are leveraging federal coronavirus relief funds to add both permanent and interim housing units to address growing homelessness across the five Bay Area counties.

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.

About the Authors

Caroline Davis, MPP, is president of Davis Health Strategies and a Blue Sky Consulting Group affiliate, and Katrina Connolly, PhD, is a senior consultant at Blue Sky Consulting Group. Blue Sky Consulting Group helps government agencies, nonprofit organizations, foundations, and private-sector clients tackle complex policy issues with nonpartisan analytical tools and methods.