CALIFORNIA Health Care Almanac REGIONAL MARKETS SERIES FEBRUARY 2021 Sacramento Area: Large Health Systems Grow in a Pricey and Tumultuous Market the state Department of Health Care Services (DHCS) Summary of Findings added two health plans to the Sacramento County The Sacramento area - a region spanning El Dorado, Placer, market, which had four existing plans. One new entrant, Sacramento, and Yolo Counties - stands out among other UnitedHealthcare Community Plan, ended its contract inland California localities in boasting relatively high house- prematurely and exited the market in 2018, causing hold incomes and a stable economy. Yet the region has nearly 8,000 Medi-Cal enrollees to move to other plans also experienced troubling developments in recent years, and networks. The state plans to recontract with health including higher health costs and more people experiencing plans serving the county starting in 2021, so the field of homelessness. Four large health systems - Dignity Health, participating plans in Sacramento may change yet again. Kaiser Permanente, Sutter Health, and UC Davis Health - continue to dominate the Sacramento area hospital market, ▶ The market experienced increased consolidation a trend that likely contributes to the region's high private between hospitals and medical groups, with hospi- health insurance premiums. The region's hospitals post the tals' operating margins increasing substantially. By highest average operating margins of the seven regional 2019, 70% of primary care physicians and 80% of spe- markets studied and negotiate among the highest com- cialists belonged to practices controlled by a hospital or mercial payment rates in the state. All four systems continue health system. Increases in the health systems' commer- to expand their footprints, building new office and hospital cial payment rates and operating margins have coincided space while affiliating with a growing number of medical with this consolidation. groups. ▶ Health systems and Federally Qualified Health The region has experienced a number of additional Centers (FQHCs) expanded capacity. Hospitals and changes since the previous study in 2015–16 (see page 28 FQHCs alike added new facilities and expanded exist- for more information about the Regional Markets Study). Key ing ones. Many are replacing aging infrastructure: Kaiser, developments include the following: Sutter Health, and Dignity Health all plan to replace hospi- ▶ The market for Medi-Cal managed care plans in tals to comply with the state's 2030 seismic requirements. Sacramento County became more crowded and FQHCs also expanded their scope of services, particularly chaotic, and more change is likely coming. In 2017, for behavioral health care. This paper is one of seven included in CHCF's 2020 Regional Markets Study. Visit our website for the entire Almanac Regional Markets Series. ▶ Providers engage in a range of value-based payment and El Dorado Counties lie to the east of Sacramento and models. Large hospital and health systems in the region include more affluent suburbs near their western borders. are increasing capabilities to manage risk-based pay- Roseville, with a population of 141,500, is the largest city ments. These systems often share risk with their medical in Placer County and lies roughly 20 miles northeast of the groups and affiliated independent practice associations city of Sacramento. In El Dorado, the unincorporated El (IPAs). Dorado Hills area, with a population of 42,108, also sits on the Sacramento County border and is the largest commu- ▶ FQHCs are caring for more Medi-Cal patients as other nity. At these counties' eastern edges are Lake Tahoe and the providers decline to contract with Medi-Cal managed state of Nevada. Finally, Yolo County is more rural and has a care plans. FQHCs increasingly serve as primary care higher proportion of residents with low incomes. It sits in the homes for Medi-Cal enrollees as small medical clinics Sacramento Valley to the capital's west, on the other side of close and large medical groups shift patients to FQHCs. the Sacramento River. Yolo's largest city, Davis, with a popu- ▶ A complex behavioral health services system for lation of 69,413, is the home of the University of California, Medi-Cal enrollees is making strides to meet service Davis (UC Davis Medical Center, however, is in Sacramento). needs amid insufficient inpatient capacity and work- Of the seven study regions, Sacramento experienced the force shortages. To bring care to populations in need, fastest population growth between 2014 and 2018, with its counties' mental health providers collaborate with crimi- population increasing by 5.8% while the state population as nal justice agencies and organizations providing services a whole increased by only 3.2%. Several factors may explain to people who are unsheltered. The implementation this trend, including the region's relatively robust economy. As of the Drug Medi-Cal Organized Delivery System pilots of 2018, the Sacramento area's 3.9% unemployment rate was across the region has expanded substance use disorder a half percentage point below the statewide average, while (SUD) services. its median household income, levels of educational attain- ment, and poverty rate were all in line with statewide levels ▶ Health information exchange is siloed and limited. (see Table 1 on page 3). Roughly 12% of the region's workers Health systems typically exchange data internally through are employed in state government, which may help explain electronic health record (EHR) systems, with limited data Sacramento's relatively mild economic downturn during the sharing with FQHCs and health plans. Health systems and COVID-19 pandemic.1 The region's economy is also diversi- clinics are not prioritizing broader data exchange given fied among several other sectors, including finance, health other demands on time, resources, and leadership. care, and education. The region's relatively affordable housing stock and prox- Market Background imity to job centers in the Bay Area have also contributed to The Sacramento area, which encompasses El Dorado, Placer, economic success. The Sacramento region became a frequent Sacramento, and Yolo Counties, is home to more than 2.3 destination for "Bay Area refugees" fleeing the high housing million people and spans 5,200 square miles, including a costs in San Francisco and Silicon Valley. An abundance of robust urban core, farmland, and national parks and forest land in the region has kept home prices low enough that land. Sacramento County, anchored by the state capital, 44% of households can afford to purchase a median-priced accounts for two-thirds of the region's population, including home. (In the Bay Area and Los Angeles, just 24% and 27% more than 500,000 residents in the city of Sacramento. Placer of households, respectively, can afford this purchase.) The California Health Care Foundation www.chcf.org 2 COVID-19 pandemic, which has made remote work more TABLE 1. D emographic Characteristics Sacramento Area vs. California, 2018 possible for many white-collar workers, may accelerate this Sacramento Area California trend, as more buyers become willing and able to live farther POPULATION STATISTICS from San Francisco and Silicon Valley.2 Total population 2,345,210 39,557,045 Five-year population growth 5.8% 3.2% Despite the region's strong economy and growing popu- AGE OF POPULATION, IN YEARS lation, significant intraregional disparities remain. While the Under 18 22.8% 22.7% city of Sacramento as a whole has undergone revitalization 18 to 64 61.7% 62.9% over the past decade, these benefits have not been uniformly 65 and older 15.5% 14.3% shared, as the city experienced a substantial increase in the RACE/ETHNICITY number of neighborhoods where at least 40% of four-person Latinx 21.8% 39.3% families earn an annual net income of less than $25,100.3 White, non-Latinx 51.8% 36.8% Black, non-Latinx 7.0% 5.6% Homelessness is much more pervasive in the region than Asian, non-Latinx 13.7% 14.7% in other major California noncoastal metropolitan areas. Other, non-Latinx 5.7% 3.6% There were 3.7 homeless individuals per 1,000 residents in BIRTHPLACE the region in 2019; in the San Joaquin Valley and the Inland Foreign-born 15.8% 25.5% Empire regions, these counts were only 2.2 and 1.2, respec- EDUCATION tively.4 Elsewhere in the Sacramento region, Yolo County is High school diploma or higher 85.3% 83.7% College degree or higher 41.5% 42.2% one of only two counties within the regional markets studied ECONOMIC INDICATORS where the poverty rate - at 21.6%, nearly 70% higher than Below 100% federal poverty level (FPL) 13.3% 12.8% the rate statewide - increased between 2014 and 2018. 100% to 199% FPL 15.7% 17.1% Finally, in at least one important respect, the Sacramento Household income $100,000+ 35.6% 38.0% region is very different from the rest of California: the region Median household income $74,060 $75,277 is the least diverse of the six study markets with a large urban Unemployment rate 3.7% 4.2% center. Latinx individuals account for 22% of the region's Able to afford median-priced home (2019) 44.2% 31.0% HEALTH STATUS population, a level 17 percentage points below their state- Fair/poor health 16.8% 18.5% wide share (though in more agricultural Yolo County, they Diagnosed with diabetes 8.2% 10.1% account for 31% of all residents), while Whites account for Has asthma 19.3% 15.7% more than half of all residents. Has heart disease 6.3% 6.8% Sacramento residents' health status remains, with few Sources: "County Population by Characteristics: 2010–2019," Education by County, FPL by County, Income by County, US Census Bureau; "AskCHIS," UCLA Center for Health Policy Research; exceptions, in line with statewide trends. Estimated rates of "Employment by Industry Data: Historical Annual Average Data" (as of August 2020), Employment Development Dept., n.d.; and "Housing Affordability Index - Traditional," California Association of heart disease and diabetes are below statewide rates, though Realtors. All sources accessed June 1, 2020. asthma, which affects 15.7% of Californians statewide, has a prevalence in the region of close to 20%. California Health Care Foundation www.chcf.org 3 Health Coverage Sources and Trends Cross - to compete for market share. In El Dorado County, Health coverage and trends in the Sacramento area mirror California Health & Wellness insures 59% of Medi-Cal those statewide.5 Between 2015 and 2019, the region's unin- managed care enrollees, with Anthem Blue Cross account- sured rate fell slightly, from 5.9% to 5.3% (see Table 2). A ing for an additional 34%. In Placer County, Anthem has 61% significant decline of more than one-half in the uninsured of the market, while California Health & Wellness accounts rate occurred between 2013 and 2014, when the imple- for 20%. In both counties, Kaiser covers the remaining Medi- mentation of the federal Affordable Care Act significantly Cal enrollees, most of whom were holdovers from the former expanded Medi-Cal enrollment. Between 2015 and 2019, Healthy Families program and their family members. New Medi-Cal enrollment declined slightly both statewide and Medi-Cal members in El Dorado and Placer Counties cannot in Sacramento. Relative to other regions, Medi-Cal covers a choose Kaiser as their plan except in limited circumstances. smaller share of people, while private insurance covers more Medicare Advantage (MA) enrollment continues to than 50% of residents - a figure 4 percentage points higher increase and remains more popular in the region than than the statewide average. statewide, with 47.5% of beneficiaries opting for MA, com- The region's counties employ several Medi-Cal managed pared with 43.8% statewide. Kaiser is the dominant MA plan, care models. Sacramento is one of two counties in the state - accounting for between 64% and 70% of MA enrollees in San Diego is the other - operating a Geographic Managed El Dorado, Placer, and Sacramento Counties and for 44% in Care (GMC) Model, under which multiple commercial health Yolo County. UnitedHealthcare is typically the next largest plans offer coverage (see Table 3). Five plans participate in plan, with 17% of the MA market in El Dorado and Placer the Sacramento GMC Model, with Anthem Blue Cross at 41% Counties and 10% in Sacramento County. market share, Health Net at 25%, and Kaiser at 21%. Molina Along with Kaiser, the major plans offering commercial and Aetna have smaller shares. products in the region include Health Net, Anthem Blue Yolo County uses a County Organized Health System Cross, Blue Shield of California, Aetna, and UnitedHealthcare. model, under which one plan, Partnership HealthPlan of In addition, regional health plans, Western Health Advantage California, covers all Medi-Cal managed care enrollees. El (WHA) and Sutter Health Plus, offer coverage in the Dorado and Placer Counties both participate in the Regional Sacramento area. Sutter Health Plus, part of Sutter Health, Model, which allows two commercial plans - California is an HMO with a network that includes Sutter Health hos- Health & Wellness, a Centene subsidiary, and Anthem Blue pitals, other facilities, and affiliated medical groups. WHA's TABLE 2. Trends in Health Insurance, by Coverage Source TABLE 3. M edi-Cal Enrollment, by Plan Sacramento Area vs. California, 2015 and 2019 Sacramento Area, October 2020 Percentage of SACRAMENTO AREA CALIFORNIA Members Total Enrollment 2015 2019 2015 2019 Anthem Blue Cross 186,525 41.0% Medicare* 16.3% 17.8% 14.4% 15.9% Health Net 111,428 24.5% Medi-Cal 26.9% 25.5% 29.1% 28.7% Kaiser 94,558 20.8% Private insurance † 50.8% 51.4% 47.8% 47.7% Molina 50,617 11.1% Uninsured  5.9% 5.3% 8.6% 7.7% Aetna 11,918 2.6% *Includes those dually eligible for Medicare and Medi-Cal. Total Sacramento Medi-Cal enrollment 455,046 † Includes any other insurance coverage (excluding Medicare and Medi-Cal). Source: "Medi-Cal Managed Care Enrollment Report," California Health & Human Services Agency Source: Calculations made by Blue Sky Consulting Group using data from the US Census Bureau, the Open Data Portal, accessed November 18, 2020. Centers for Medicare & Medicaid Services, and the California Department of Health Care Services. California Health Care Foundation www.chcf.org 4 coverage area extends beyond the Sacramento region to Medi-Cal GMC Model Continues to Struggle in Sacramento Solano, Sonoma, Colusa, Marin, and Napa Counties. In 2019, Established in 1992, the Sacramento GMC Model sparked WHA had about 128,000 commercial enrollees across the concerns about access and quality challenges during the Sacramento and Bay Area regions. Sutter Health Plus also previous market study. In 2016, DHCS issued a proposal to offers commercial products in the Sacramento region and add two more plans, for a total of six, with the intention extends into some Bay Area and Central Valley counties. of increasing enrollee options and improving access and Sutter Health Plus, established in 2013 as a licensed Knox- quality through competition. Aetna and UnitedHealthcare Keene health plan, has grown considerably from 8,000 lives Community Plan won contracts and began enrolling Medi- statewide in 2014 to 94,000 in 2019. 6 Cal members in early 2017. By November 2018, however, Across the Sacramento region in 2019, 70,700 people UnitedHealthcare Community Plan ended its contract for were enrolled in Covered California plans, an increase of nearly 8,000 enrollees with DHCS and exited the Medi-Cal 14.5% from 61,740 in 2015. Covered California silver plans in market in Sacramento, leaving five plans. Respondents attrib- the Sacramento area in 2019 were roughly 17% more expen- uted UnitedHealthcare Community Plan's departure to high sive than the average silver plan statewide (for a 40-year-old costs resulting from low enrollment and adverse selection, individual). Adjusting for local wages, of the seven study or sicker enrollees than average. One respondent observed markets, only the Humboldt/Del Norte region has higher that adding plans and then losing a plan was disruptive for average premiums (see Table 4). As noted in subsequent sec- Medi-Cal patients and providers, creating new challenges for tions, health systems in the Sacramento region obtain higher an already struggling program. commercial payment rates for inpatient and outpatient ser- A recent study funded by the California Health Care vices compared with statewide averages, and those higher Foundation found that the GMC Model has not resulted in payment rates likely contribute to higher commercial premi- the increased quality and lower costs that were expected ums in the Sacramento area. from having multiple plans compete on cost and quality to gain market share.7 Respondents in that study character- TABLE 4. Covered California Premiums and Enrollment ized the GMC Model as a confusing maze of plans, providers, Sacramento Area (Region 3) vs. California, 2015 and 2019 benefits, and services, with significant transaction costs for SACRAMENTO AREA CALIFORNIA both enrollees and providers. The study also found that the 2015 2019 2015 2019 GMC Model, when compared with urban counties' County Monthly premium* $387 $532 $312 $454 (Silver Plan on the exchange for a Organized Health System or Two-Plan Model, did not provide 40-year-old individual) better access to care, and the quality of care was generally Population enrolled ▶ Percentage 2.7% 3.0% 3.0% 3.1% poorer. ▶ Number 61,740 70,700 1,190,590 1,233,360 Among the FQHC respondents interviewed for this *Rating Region 3 covers the same four counties included in the Sacramento region for this study. The price for Rating Region 3 is weighted by the number of enrollees in each of the four counties. market study, all lamented having to contract for and imple- Sources: Blue Sky Consulting Group analysis of data files from "Active Member Profiles: March 2019 Profile" (as of May 31, 2020) and "2019 Covered California Data: 2019 Individual Product Prices for All ment individual capitated payment and incentive programs Health Insurance Companies," Covered California. for four different GMC Model plans (Kaiser, an integrated delivery system whose health plan has a closed provider network, does not contract with FQHCs). Noting the chal- lenges of dealing with multiple plans, one FQHC leader remarked, "it feels like we're having the same conversation California Health Care Foundation www.chcf.org 5 multiple times per month." Each plan has different incen- Other forces may bring more substantive change. tive priorities, innovation ideas, data-reporting requirements, Legislation proposed in the 2019–20 legislative session, and payment approaches. Another clinic leader referred to Senate Bill 1029, would have authorized Sacramento County this muddle as the "Wild West" and noted that the financial to establish a Two-Plan Model, with a newly established incentives underpinning value-based payment models have health authority given the power to operate a local initiative become too diluted to make a meaningful difference in care plan or contract with a commercial health plan to operate delivery. a local initiative plan.9 The bill also would have empowered the health authority to determine the number of commercial Contracting Turmoil Pushes Medi-Cal Enrollees to FQHCs for health plans, with a minimum of two, contracted by DHCS Primary Care to participate in the GMC Model starting in 2024 until the From the enrollee perspective, challenges related to the county can establish a Two-Plan Model and local initiative structure of the GMC Model have been compounded by plan. The proposed legislation was not passed, and several changes to health plan networks and participating providers. respondents said that providers remain skeptical that the Numerous respondents, including advocates, health services county can successfully operate or contract for the local ini- researchers, and providers, pointed out that health systems tiative plan. While proposed state legislation was not enacted, and medical groups - Sutter Health, Dignity Health, and the Sacramento County Board of Supervisors passed an UC Davis Health - have reduced or eliminated capitated ordinance in mid-December 2020 creating the Sacramento primary care contracts for Medi-Cal enrollees in recent years. County Health Authority Commission and giving it the same As a result, many Medi-Cal enrollees were shifted to FQHCs duties as detailed in Senate Bill 1029.10 for outpatient care, giving Medi-Cal enrollees what one advo- cate characterized as "whiplash" as they were forced to move Financially Healthy Systems Replace Hospitals between health plans, medical groups, and FQHCs. and Expand Along with the three large hospital systems - Dignity Health, Changes to Sacramento GMC on the Horizon? Sutter Health, and Kaiser - the Sacramento area is home to a According to study respondents, the Sacramento GMC large academic medical center, UC Davis Medical Center, and Model likely will see changes as the state plans to put con- two small independent hospitals in the Sierra foothills. The tracts out to bid for commercial health plans participating in region does not have any county-operated public hospitals. all managed care models. A request for proposals is expected Against a backdrop of robust population growth, the region in 2021, with new contracts anticipated to start in January has seen a slight decline in the ratio of acute care beds to res- 2024. While it is unclear how the mix of plans may change 8 idents, which fell to 157 beds per 100,000 residents in 2018 through competitive selection, numerous respondents (see Table 5 on page 7). Compared with the other six areas in speculated that DHCS may reduce the number of plans the regional market study, only the San Joaquin Valley region participating in the GMC Model because of the challenges has a lower bed-to-population ratio across acute care hospi- for patients and providers in working with so many plans. tals. Overall, hospitals in the Sacramento region are financially One respondent voiced frustration with the model but con- strong, with an average operating margin more than twice ceded that providers have adapted to myriad challenges and the statewide rate. acknowledged that abandoning the GMC Model altogether might be "throwing the baby out with the bathwater." California Health Care Foundation www.chcf.org 6 TABLE 5. Hospital Performance (Acute Care) county's discharges and 340 staffed beds. In Sacramento Sacramento Area vs. California, 2018 County, Kaiser's two hospitals together provide roughly Sacramento one-fifth of all county discharges. All Kaiser's hospitals are Area California Beds per 100,000 population 157 178 staffed by physicians employed by the affiliated Permanente Operating margin* 10.5% 4.4% Medical Group, which has more than 9,000 primary care and Paid FTEs per 1,000 adjusted patient days* 17.5 14.8 specialty physicians across Northern California, including Total operating expenses per adjusted patient day* $4,425 $4,488 about 1,900 in Sacramento and Placer Counties. At Kaiser's *Excludes Kaiser. South Sacramento Medical Center, plans have been filed to Note: FTE is full-time equivalent. Sources: "Hospital Annual Financial Data - Selected Data & Pivot Tables," California Office of Statewide more than double the hospital's ED capacity, from 41 to 88 Health Planning and Development; "County Population by Characteristics: 2010–2019," US Census Bureau. All sources accessed June 1, 2020. beds.13 Kaiser is also doubling ambulatory care capacity in Roseville with the opening of a new medical office building.14 Major hospitals and systems in the region include the In downtown Sacramento, as part of the Railyards redevelop- following: ment project, Kaiser plans to build a medical campus that Sutter Health. Based in Sacramento, the nonprofit includes a 420-bed hospital and medical office building.15 Sutter Health system operates 24 hospitals across Northern This new hospital will replace the aging Sacramento Medical California, including four hospitals in the Sacramento area. Center on Morse Avenue. The largest is Sutter Medical Center, Sacramento, with 523 Dignity Health. Part of a large multistate system, Dignity staffed beds; this hospital accounts for about one-fifth of Health operates 29 hospitals (28 acute care and one psychi- the county's inpatient discharges. In Placer County, Sutter atric facility) in California, including five in the Sacramento Health's two hospitals - Sutter Roseville Medical Center area. In Sacramento County, Dignity Health's four facili- and the smaller Sutter Auburn Faith Hospital - have a com- ties - Mercy General Hospital, Mercy Hospital of Folsom, bined 392 staffed beds and account for just over half of the Mercy San Juan Medical Center, and Methodist Hospital of county's discharges. In Yolo County, 48-bed Sutter Davis Sacramento - collectively have 1,224 beds and account Hospital accounts for nearly half of the county's discharges. for roughly 38% of discharges in the county. In Yolo County, Sutter Health plans to make $5.63 billion in capital invest- Dignity Health's Woodland Memorial Hospital, with 108 beds, ments systemwide through 2024, covering seismic retrofits accounts for 57% of all county discharges. In early 2019, and expansions.11 In 2020, Roseville Medical Center added Dignity Health merged with Catholic Health Initiatives (CHI) 24 intensive care unit beds and 34 beds in its emergency to form CommonSpirit Health, creating a network of more department (ED).12 than 137 hospitals across 21 states. CHI was based in Denver, Kaiser Permanente. Kaiser's model - a health plan and Dignity Health was based in San Francisco. The two com- taking full financial risk for all patients, coupled with an panies jointly formed a new company, CommonSpirit Health, integrated delivery system of Kaiser-owned hospitals and which is based in Chicago. Dignity Health is building a new affiliated physicians - relies on population health strategies hospital in Elk Grove and will close Methodist Hospital once that stress prevention and care coordination to avoid costly the new hospital is complete.16 The new 200,000-square- hospital stays. Kaiser serves mostly commercially insured foot facility will have 100 staffed beds, fewer than the 169 and Medicare patients and operates three hospitals in the currently at Methodist. At Dignity Health's Mercy San Juan Sacramento area. Kaiser's Roseville facility in Placer County Hospital, plans are underway to significantly expand the neo- is the largest of the three hospitals, with nearly half of the natal intensive care unit.17 California Health Care Foundation www.chcf.org 7 UC Davis Medical Center (UCDMC). The only academic Health's vast 21-state system and draw clinical expertise and medical center in the region, UCDMC is the largest hospital in resources for community-focused initiatives such as address- Sacramento County by beds and discharges, with 605 beds ing homelessness. In contrast, another respondent remarked and nearly a quarter of discharges in the county. Along with that Dignity Health's mission and focus in California will be the region's only Level I trauma center and burn center, the diluted by other organizational priorities and leadership from medical center's Sacramento campus is home to the 129-bed afar. It remains to be seen how CommonSpirit Health's $550 UC Davis Children's Hospital. UCDMC is staffed by physicians million operating revenue loss in fiscal year 2020 will impact in the UC Davis Medical Group, which employs more than Dignity Health's Sacramento region operations.19 1,100 physicians who split their time among clinical service, Several respondents observed that Marshall Medical teaching, research, and often clinical work outside of UC Davis Center and Barton Memorial Hospital in El Dorado County Health. The group collaborates with and supports staffing at remain "fiercely independent." Barton Memorial is more Shriners Hospitals for Children–Northern California, which is financially sound than Marshall, which in 2018 had a nega- located near UCDMC. Additionally, UC Davis Medical Group tive operating margin. Barton Memorial benefits from a more physicians, mostly primary care, staff the Sacramento County robust tourism-driven economy in the South Lake Tahoe FQHC, which also serves as a physician residency teaching area. However, with increasing regulatory requirements, site. staffing challenges, care delivery in rural areas, and financial Independent hospitals. Other hospitals play a rela- strain from the COVID-19 pandemic, these independent hos- tively small role in the Sacramento region. Two nonprofit pitals may find it more and more challenging to go it alone. hospitals, 125-bed Marshall Medical Center and 111-bed Barton Memorial Hospital, operate in El Dorado County, Dignity Health Serves Large Number of Medi-Cal Enrollees with Marshall accounting for nearly 70% of discharges in With no county-operated public hospitals in the region, all the county and Barton the remainder. A new independent hospitals provide inpatient care to Medi-Cal enrollees and academic medical center is slated to come to the region in the uninsured. Dignity Health serves the largest number the next few years. In 2018, California Northstate University, a of Medi-Cal patients, covering 39% of the region's Medi- private for-profit institution, announced plans to construct a Cal discharges (see Table 6 on page 9), with Sutter Health new 400-bed teaching hospital in Elk Grove, a suburb of the accounting for 24% of Medi-Cal discharges. UC Davis Medical city of Sacramento. The university's filing is currently under Center accounts for 22% of Medi-Cal discharges across the city review. 18 region. Kaiser plays a relatively small role, with only 11.3% of the region's Medi-Cal discharges. El Dorado's independent Only Two Independent Hospitals Remain in the Region hospitals - Barton Memorial and Marshall Medical Center The Sacramento hospital market is relatively consolidated - provide care to Medi-Cal patients roughly in proportion into three large health systems - Kaiser, Sutter Health, and to their share of all-payer discharges. Dignity Health. Respondents voiced different opinions about the local impact of Dignity Health's interstate merger. One hospital leader observed that Dignity Health will reap financial and administrative economies of scale from CommonSpirit California Health Care Foundation www.chcf.org 8 TABLE 6. Hospital Medi-Cal Discharges, Sacramento Area, 2018 TABLE 7. Acute Care Hospitals, Sacramento Area, 2018 Medi-Cal as a Share of System's or Share of Region's Share of Region's Facility's Discharges Medi-Cal Discharges Staffed Beds Discharges Dignity Health 36.7% 39.1% Dignity Health 1,332 28.6% Mercy General Hospital 30.3% 8.2% Mercy General Hospital 419 7.3% Mercy Hospital of Folsom 17.0% 2.1% Mercy Hospital of Folsom 106 3.3% Mercy San Juan Hospital 41.7% 16.0% Mercy San Juan Hospital 370 10.3% Methodist Hospital of Sacramento 49.3% 9.5% Methodist Hospital of Sacramento 329 5.2% Woodland Memorial Hospital 34.6% 3.2% Woodland Memorial Hospital 108 2.5% Sutter Health 24.0% 23.6% Sutter Health 963 26.4% Sutter Auburn Faith Hospital 14.0% 0.8% Sutter Auburn Faith Hospital 64 1.6% Sutter Davis Hospital 27.3% 1.9% Sutter Davis Hospital 48 1.9% Sutter Medical Center, Sacramento 30.2% 14.5% Sutter Medical Center, Sacramento 523 12.9% Sutter Roseville Medical Center 16.9% 6.4% Sutter Roseville Medical Center 328 10.1% Kaiser Foundation Hospitals 12.4% 11.3% Kaiser Foundation Hospitals 844 24.7% Roseville 10.1% 4.3% Roseville 340 11.4% Sacramento 12.7% 2.8% Sacramento 287 5.9% South Sacramento 15.6% 4.3% South Sacramento 217 7.4% UC Davis Medical Center 36.4% 22.2% UC Davis Medical Center 605 16.4% Independents 25.7% 3.8% Independents 286 4.0% Barton Memorial Hospital 23.1% 1.0% Barton Memorial Hospital 111 1.2% Marshall Medical Center 26.9% 2.8% Marshall Medical Center 125 2.8% Source: "Hospital Annual Financial Data - Selected Data & Pivot Tables," California Office of Statewide Source: "Hospital Annual Financial Data - Selected Data & Pivot Tables," California Office of Statewide Health Planning and Development, accessed June 1, 2020. Health Planning and Development, accessed June 1, 2020. Hospital Market Concentration However, within individual counties in the region, hos- Across the Sacramento region, hospital markets remain rela- pital market concentration is high (data not shown). The tively fragmented according to a commonly used measure four Dignity Health facilities account for nearly 38% of called the Herfindahl-Hirschman Index.20, 21 Across the region Sacramento County discharges, followed by UCDMC (23.6%), (see Table 7), Dignity Health captures the largest share of the Kaiser (19.2%), and Sutter Health (18.6%). Hospital market market, though accounting for only 28.6% of all discharges; concentration is higher in less densely populated El Dorado, Kaiser and Sutter Health are each responsible for about one- Placer, and Yolo Counties. In El Dorado County, Marshall quarter of the region's discharges, and UCDMC provides Medical Center is responsible for nearly 70% of all discharges 16.4%. Kaiser's market share across the region has grown by and Barton Memorial for the remaining 30%. In neighbor- more than 4 percentage points since 2014, from 20.4% to ing Placer County, Kaiser splits the market equally with two 24.7% of all discharges, while market shares for Sutter Health Sutter Health hospitals. Within Yolo County, Dignity Health and Dignity Health have declined by 1 percentage point accounts for roughly 57% of all county discharges and Sutter and 2.8 percentage points, respectively. Over the same time, Health for the remainder. market shares for UCDMC and El Dorado's two independent hospitals remained unchanged. California Health Care Foundation www.chcf.org 9 Hospitals Continue to Align with Medical Groups Sutter Medical Foundation includes a network of Sutter Over the past decade, Sutter Health and Dignity Health have Health–affiliated physicians extending beyond the immedi- continued to align with physicians, both by employing phy- ate Sacramento area into Yuba, Sutter, Amador, and Solano sicians through medical foundations and through affiliations Counties.25 The network includes the Sutter Medical Group, with independent physicians. This trend intensified between which employs more than 800 physicians, and Sutter 2016 and 2018, with the number of physicians affiliated with Independent Physicians (SIP), an IPA with nearly 600 phy- Dignity Health increasing nearly fourfold and the number sicians who remain independent and retain their group of Sutter Health–affiliated physicians nearly doubling.22 By names. SIP serves Sacramento, Placer, Amador, Solano, 2019, 70% of primary care physicians in the region belonged and Yolo Counties, and the Sutter North Medical Group to practices controlled by a hospital or health system - a serves Yuba and Sutter Counties. With SIP, Sutter Health figure that is 27 percentage points higher than the statewide has expanded its outpatient network and referral pathways average (see Table 8). The specialist market (which in the to inpatient care. The affiliated physicians and practices assessment included cardiology, hematology/oncology, benefit from discounted management services, including orthopedics, and radiology) is similarly concentrated within billing, data management, and EHR support. Moreover, these hospitals and health systems. affiliates also benefit from Sutter Health's considerable nego- tiating power with health plans. Like Dignity Health Medical TABLE 8. Physicians in Practice Owned by a Hospital or Health System Sacramento Area vs. California, 2019 Foundation, Sutter Medical Foundation has been expanding Primary Care Physicians Specialists by purchasing small practices in the region. Sacramento Area 70% 80% California 43% 53% Some Independent Physicians Remain Note: Specialty care physicians include physicians practicing cardiology, hematology/oncology, While the vast majority of physicians are affiliated with health orthopedics, and radiology. Source: Blue Sky Consulting Group calculation of population-weighted regional and state averages systems, as discussed previously, several large IPAs remain in from Richard M. Scheffler, Daniel R. Arnold, and Brent D. Fulton, The Sky's the Limit: Health Care Prices and Market Consolidation in California, California Health Care Foundation, October 2019. the region, including the following: River City Medical Group is the second-largest IPA in Dignity Health works with affiliated physicians through the region and one of the largest IPAs in Northern California. a variety of models. These include an exclusively contracted The IPA's Sacramento regional network serves some 280,000 medical group (Dignity Health Medical Foundation), affili- members and includes more than 1,900 physicians, 1,000 ated medical groups such as Mercy Medical Group, clinically midlevel providers, and 600 locations.26 Some River City phy- integrated networks, and IPAs.23 Dignity Health has been sicians are also members of other IPAs, notably Hill Physicians purchasing affiliated independent physician practices and Medical Group. River City serves mostly Medi-Cal managed incorporating them into its medical group. These indepen- care patients through delegated risk contracts with health dent practices were already referring patients to Dignity plans in both GMC Model and Regional Model counties. Health facilities. Dignity Health Medical Foundation oversees Of the more than 330,000 Medi-Cal enrollees delegated by some 950 physicians and another 800 affiliated provid- four plans to IPAs in Sacramento in early 2019, River City ers throughout California. 24 Mercy Medical Group in the had 71%.27 River City also is expanding into the MA market Sacramento region directly employs nearly 500 physicians through Health Net. across specialties. Nivano Physicians is an IPA with more than 1,400 phy- sicians, including 500 primary care clinicians. Nivano has California Health Care Foundation www.chcf.org 10 delegated risk contracts for Medi-Cal and commercially Specifically, physicians are incentivized to manage inpatient insured enrollees and some MA enrollees. A direct competitor admissions carefully; to do so, physicians receive data on to River City IPA for Medi-Cal enrollees, Nivano had responsi- inpatient length of stay, infection rates, and other quality- bility for less than 10% of health plans' delegated Medi-Cal of-care metrics. This approach has incentivized a movement enrollees in early 2019. In recent years, Nivano faced finan- of care to outpatient settings. Dignity Health has a similar cial compliance challenges that resulted in corrective action contractual arrangement with Hill Physicians. A respondent plans required by the state Department of Managed Health involved in these models observed that care coordination Care.28 These financial issues resulted in the loss of contracts between the hospitals and physicians is still developing and with UnitedHealthcare, Blue Shield, and Anthem Blue Cross has yet to reach maturity. and the transfer of nearly 50,000 enrollees to other medical Dignity Health recently created an internal group, Value groups.29 Based Operations, tasked with managing care for enrollees Hill Physicians Medical Group, an IPA serving 11 associated with risk-based contract arrangements, including counties in the Sacramento, Bay Area, and San Joaquin MA and Medi-Cal managed care. Four interdisciplinary com- Valley markets, is the largest IPA in Northern California.30 In mittees - operations, financing, clinical, and strategy - will the Sacramento region, Hill has 700 physicians, including work with the team to monitor service metrics and support 250 primary care physicians. The group's broader Northern operational decisions. California network includes some 4,000 independent phy- Sutter Health is growing its value-based payment con- sicians and serves more than 350,000 patients enrolled in tracting and enrollments with commercial plans and is Medi-Cal, MA, and commercial health plans. Hill has a close increasing MA enrollment. Within Sutter Health Plus, capita- alliance with Dignity Health and, by extension, Dignity Health tion for professional services is delegated to the Sutter Valley Medical Foundation and the Mercy Medical Group. Mercy Medical Foundation and can cascade further out to IPAs and provides hospitalists and specialists for Hill's patients. physicians participating with SIP. Sutter Health also has a joint venture with Aetna offering a commercial PPO product Health Systems, Physician Groups, and Risk- to self-insured employers. While not a risk-bearing product, Based Payment Arrangements it includes targets for total cost of care and pay-for-perfor- Large hospital and health systems in the region are increas- mance incentives for providers. ing capabilities for risk-based payment as payers move in this Hill Physicians has been moving toward accepting full- direction. Kaiser, with its integrated health plan and hospi- risk capitation and recently received a limited Knox-Keene tal system managing global risk for all enrollees, is seen by license in June 2020 from the state Department of Managed study respondents as the model to emulate and the target Health Care, a designation that allows Hill to take full risk and of competition. contract with hospitals and other providers. Hill Physicians At Dignity Health, more than half of commercial patients now has a global risk contract with Health Net for a small are in some form of value-based contract. Dignity Health number of MA enrollees. The contract creates a provider-spe- works with its medical group partners to share risk and cific plan, an HMO model with a restricted provider network; manage the total cost of care. Dignity Health is clinically Dignity Health is Hill's hospital partner but does not share integrated with the Mercy Medical Group, and in the HMO financial risk. As an IPA, Hill Physicians offers an integrated contract with Western Health Advantage, capitated pay- clinical network to health plans and self-insured employ- ments are split between the hospital and medical group. ers through PriMed, its management services organization. California Health Care Foundation www.chcf.org 11 PriMed offers all member physicians care and quality man- Office of the Attorney General and agreed to repay $575 agement, discharge planning, pharmacy services, EHR and million of overcharges due to anticompetitive behavior.34 population health tools, and claims processing. The lawsuit alleged that Sutter Health engaged in unlawful Currently, UC Davis Health engages in "total cost of care" practices such as conditioning the participation of a must- contracting with several commercial health plans, accepting have Sutter Health provider on the participation of other risk-based payments for physician professional services and Sutter Health providers that might otherwise be excluded; fee-for-service (FFS) payments for hospital services. Under antitiering provisions that prohibited plans from putting these arrangements, UC Davis Health and the plan negoti- Sutter Health providers in any tier other than most favored; ate an annual budget and reconcile the total cost of care at and confidentiality restrictions on price and quality data the end of the year. Savings are typically shared between UC that restricted effective provider comparisons. As part of the Davis Health and the plan, but UC Davis Health must reim- settlement, Sutter Health will end these and other anticom- burse the plan for any losses. For HMO contracts, UC Davis petitive practices; a court-appointed monitor is charged with Health accepts risk only for professional services, while PPO ensuring Sutter Health adheres to the terms of the settle- contracts are exclusively FFS. UC Davis Health also oper- ment for at least 10 years. ates an accountable care organization (ACO) responsible for about 25,000 Medicare beneficiaries. Currently, the ACO High Inpatient and Outpatient Payment Rates assumes no financial risk for losses but is eligible to share As research into provider consolidation has demonstrated, savings with Medicare and plans to transition to sharing both horizontal consolidation among hospitals, as well as verti- losses and savings in 2022.31 cal integration between hospitals and physician groups, The two small independent hospitals, Barton Memorial has in recent years driven increases in health care payment Hospital and Marshall Medical Center, participate in Medicare rates across the country.35 Both horizontal consolidation and ACOs through the Medicare Shared Savings Program with no vertical integration offer the hospital (or the hospital-physi- downside financial risk. As noted for UC Davis Health pre- cian pairing) greater negotiating leverage with commercial viously, the Medicare ACO risk-sharing arrangements will health plans. change in 2022 to include both upside and downside risk. Respondents' understanding of the region's market Barton is a member of Caravan Health, a nationwide firm dynamics supports the broader findings of researchers. One specializing in managing ACOs. Both independent hospi- respondent observed that the loss of independent physicians tals report plans to grow their risk-based contracting and to system-affiliated groups resulted in reduced utilization of relationships. lower-cost independent diagnostic and ancillary services and increased use of hospital-based services. Numerous respon- Sutter Health's Competitive Tactics Lead to dents noted that the large hospital systems in the region Legal Trouble were "very expensive" and cited the vertical integration with Sutter Health has been building market share and negotiat- physician groups as a major factor. Another respondent went ing leverage in the region and Northern California for well as far as to describe the hospital systems in the region as oli- over a decade.32 One market observer noted that Sutter gopolies with significant leverage over payment rates. Health had profited handsomely from commercially insured A study by the Rand Corporation explored negoti- patients from 2009 to 2018.33 In December 2019, Sutter ated rates between hospitals, self-insured employer plans, Health settled class-action antitrust charges with the state employer-sponsored commercial plans, and individual California Health Care Foundation www.chcf.org 12 market plans in selected states.36 The study identified negoti- FIGURE 1. Payment Relative to Medicare, by Commercial Plans Selected Sacramento Region Hospitals, 2016–18 ated payment rates as a percentage of what Medicare would have paid for the same services and found that employers Outpatient facility services and commercial plan payers often pay triple and sometimes 429% four times as much as Medicare. Negotiated rates between 408% Sacramento-area hospitals and commercial health plans are 365% particularly high. Compared with the average rates of all 279 331% California hospitals included in the study, the Sacramento Outpatient services region's hospital payment rates are higher across the board 393% (see Figure 1). 375% 352% Health Systems Achieve Healthy Operating Margins 301% The region's hospitals in recent years have further strength- ened their already solid balance sheets. Across the 12 acute Inpatient and outpatient services care hospitals in the Sacramento area in 2018, the average 309% operating margin (10.5%) exceeded the statewide average 337% by more than 5 percentage points (see Table 9). Nearly all 293% 257% systems' operating margins improved between 2014 and 2018, with the largest increases occurring at Dignity Health Inpatient facility services (5.2% to 8.3%) and UC Davis Health (12.7% to 15.0%). UC Davis 283% Medical Center's performance has been particularly strong; 302% in 2018, the hospital posted a 15.0% operating margin. Only 257% Marshall Medical Center's operating margin, at –‍0.9%, was 251% below the regional and state averages in 2018. Inpatient services TABLE 9. O perating Margins at Hospitals and Health Systems 266% Sacramento Area vs. California, 2014 and 2018 291% 2014 2018 252% Sutter Health (all facilities) 11.9% 8.2% 234% Dignity Health (all facilities) 5.2% 8.3% UC Davis Medical Center 12.7% 15.0% Professional inpatient and outpatient services Marshall Medical Center –1.7% –0.9% 195% ■ Dignity Health Barton Memorial Hospital 20.4% 23.9% 223% ■ Sutter Health ■ UC Davis Medical Center All Sacramento hospitals* 9.9% 10.5% 256% ■ All California hospitals Statewide average 2.9% 4.4% 155% in the study (N = 279) *Excludes Kaiser. Source: "Hospital Annual Financial Data - Selected Data & Pivot Tables," California Office of Statewide Notes: Payment rates are calculated based on allowed amounts, including amounts paid by the health Health Planning and Development, accessed June 1, 2020. plan and the patient. Kaiser is not included. Source: "Nationwide Evaluation of Health Care Prices Paid by Private Health Plans," RAND Corporation, accessed November 6, 2020. California Health Care Foundation www.chcf.org 13 FQHC Growth Continues region's relatively strong economy, in part, explains the lower The region is home to numerous FQHCs, all with large foot- FQHC utilization. Only a quarter of the region's population prints in the Sacramento metropolitan area and several is covered by Medi-Cal, the largest source of FQHC patients. extending into adjacent counties. FQHCs continued to By contrast, in the San Joaquin Valley, 44% of the population expand across the region between 2014 and 2018. According is covered by Medi-Cal, and FQHCs there are responsible for to the Office of Statewide Health Planning and Development, 1.1 patient visits per capita. between 2014 and 2018 seven new FQHC sites were added TABLE 10. Federally Qualified Health Centers in the region. The main FQHCs in the region include the Sacramento Area vs. California, 2014 to 2018 following:37 SACRAMENTO AREA CALIFORNIA Increase from Increase from ▶ WellSpace Health, the largest FQHC in the region, oper- 2018 2014* 2018 2014* ates 22 service sites across Sacramento County and Patients per capita 0.1 56% 0.2 28% Encounters per capita 0.3 55% 0.5 35% served more than 83,000 patients in 2018. WellSpace Operating margin 0.4% –92% 2.1% –32% Health also has a site in Folsom, in El Dorado County. *Reflects the percentage change in patients/encounters per capita, and the absolute change in margins. ▶ Sacramento Community Clinics, including nine sites Notes: Includes FQHC Look-Alikes, community health centers that meet the requirements of the Health Resources & Services Administration Health Center Program but do not receive Health Center in the city of Sacramento and one in North Highlands, Program funding. Patients may be double counted if the same person visits more than one health center. served nearly 40,000 patients in 2018. Sources: "Primary Care Clinic Annual Utilization Data," California Office of Statewide Health Planning and Development; "County Population by Characteristics: 2010–2019," US Census Bureau. All sources accessed June 1, 2020. ▶ CommuniCare Health Centers, with six sites in the cities of Sacramento, Davis, and Woodland, served nearly FQHCs' Growing Responsibility for Medi-Cal Enrollees 20,000 patients in 2018. FQHCs have taken on a growing role in the region, particu- ▶ Elica Health Centers, operating 11 service sites in and larly in Sacramento County, for providing care to Medi-Cal around the city of Sacramento and in Yolo County, served patients and uninsured people. As discussed previously, more than 27,000 patients in 2018. the major health systems have worked to limit capitated Medi-Cal enrollees. In addition, FQHCs have assumed care ▶ One Community Health, with two locations in the city of Medi-Cal enrollees from financially struggling private of Sacramento, served nearly 10,000 patients in 2018. practices. In some cases, the FQHCs have taken over these ▶ Sacramento Native American Health Center, a clinic practices' physical clinic spaces as well. in Sacramento's midtown, served nearly 9,000 patients in The changes and disruptions within the Medi-Cal GMC 2018. Model in Sacramento pushed many Medi-Cal enrollees to FQHCs. In 2017, Anthem Blue Cross shifted 10,000 Medi-Cal ▶ Sacramento County has one location that is largely enrollees from Sutter Health to Sacramento Native American staffed by UC Davis physicians, including residents. The Health Center and other FQHCs for primary care.38 In late 2018, county clinic served nearly 9,000 patients in 2018. UCDMC was entangled in UnitedHealthcare Community While the number of FQHC encounters, or patient visits, Plan's terminated participation in GMC, and some 4,000 Medi- per capita in the Sacramento area increased by more than 50% Cal enrollees lost UC Davis as their primary care provider, from 2014 to 2018, FQHCs' utilization remained lower than with many enrollees shifting to FQHCs.39 UC Davis Health did, the statewide average in 2018 (see Table 10). The Sacramento however, begin a new primary care contract with Health Net California Health Care Foundation www.chcf.org 14 for 5,000 capitated Medi-Cal enrollees in late 2018, serving working together with the county and hospitals on initia- most through the Sacramento County FQHC. In early 2019, tives targeting mental health and homelessness. As primary Anthem Blue Cross ended its contracts with Sutter Health for care homes offering integrated behavioral health and other Medi-Cal and MA over payment issues, forcing some 12,000 services for patients with complex needs, FQHCs play an enrollees to find new primary care providers, with many instrumental role in addressing the myriad needs of people landing with FQHCs as their medical homes. 40 experiencing homelessness. Second, the upcoming recon- WellSpace took responsibility for about 30,000 Medi- tracting of managed care plans for the GMC Model has Cal enrollees from private medical groups in early 2019 as rallied FQHCs to coalesce around influencing how the model three Golden Shore Medical Group clinics closed their doors. evolves. A respondent observed that FQHCs have relation- Later in 2019, WellSpace took more Medi-Cal patients from ships with each of the participating plans and their provider five Sacramento Family Medical Clinics that were also strug- networks and therefore have a stake in how plans prepare gling financially.41 An FQHC leader observed that private for the recontracting. FQHCs also have a collective stake medical clinics serving Medi-Cal patients without the benefit in the newly created Sacramento County Health Authority of cost-based prospective payment system (PPS) rates can Commission, which will play a role in Sacramento County's face financial challenges. Moreover, another respondent Medi-Cal managed care future. The county ordinance remarked that most providers do not have the benefit of requires that three of the 20 commissioners represent non- such cost-based reimbursement for Medi-Cal enrollees, cre- profit community health centers serving Medi-Cal enrollees. ating a disincentive to serve them. One respondent observed that in the future, FQHCs will A respondent remarked that health systems' and medical face the challenge of successfully balancing two distinct and groups' movement away from Medi-Cal has caused a "dif- sometimes contrary organizational objectives: to remain ferent kind of consolidation," with FQHCs now shouldering community-based systems, in which patients feel "known," responsibility for most outpatient care for Medi-Cal enrollees. while also being sophisticated organizations that work This movement has accelerated FQHCs' capacity and service across multiple sites with multiple lines of service. The same expansion, especially for behavioral health and SUD treat- respondent proposed that FQHCs might consider mergers ment services. or shared administrative infrastructures to reap economies of scale and scope but, in the same breath, lamented the pros- FQHCs Moving Toward Collaboration pect of losing organizational identity and personality that Numerous respondents remarked that FQHCs, which have allows for a personal touch with patients. historically been more competitive, are slowly working toward more collaborative relationships. Some are partici- FQHCs Expand Their Behavioral Health Services pating in the Central Valley Health Network (CVHN), an FQHC In addition to physical site expansion, FQHCs have also membership organization that provides technical assistance expanded their scope of services. Many formerly focused and learning networks. The CVHN convenes regular calls for largely on primary care or narrow specialties such as HIV FQHC chief operating officers, chief medical officers, and care but have added dental services, mental health and human resource directors to share best practices and discuss SUD services, and even optometry. In expanding behavioral common issues. health services, some FQHCs have contracted as provid- Two particular issues in the Sacramento metropolitan ers with Medi-Cal managed care plans' provider networks area have fostered increased collaboration. First, FQHCs are for less severe mental health conditions (also referred to as California Health Care Foundation www.chcf.org 15 "mild-to-moderate" conditions). Some FQHCs are also con- marriage and family therapists) cannot. Finally, FQHCs con- tracting with counties as specialty mental health and SUD tracting with county mental health plans or drug and alcohol service providers.42 Many of the larger FQHCs focus on pro- programs to provide SUD and specialty mental health ser- viding integrated physical and behavioral health care and vices must maintain a separate billing infrastructure from have invested in care management staff, quality improve- their physical health PPS billing infrastructure. While a clinic ment, and information technology infrastructure to improve may use its own EHR system for clinical documentation care coordination. One FQHC leader said that 70% of the and share some data with the county Avatar system, billing FQHC's more than 40,000 patients need some type of behav- may still be done on paper. An independent review of Yolo ioral health service. County described this approach as an "inefficient and error- El Dorado Community Health Center (EDCHC) has 10.5 prone process which would benefit from automation."43 full-time equivalent (FTE) employees dedicated to medica- tion-assisted treatment (MAT), which combines medication Behavioral Health System Stretches to Meet with counseling to treat SUDs; EDCHC has another seven Service Needs FTEs for counseling services and offers psychiatry services The share of the region's residents reporting frequent mental 30 hours per week. It also has a relationship with Marshall distress (11.8%) is slightly higher that the statewide percent- Medical Center, which has a CA Bridge program, and collabo- age (11.0%).44 The region's suicide rate, however, is more than rates with Barton Memorial for MAT. EDCHC provides these 30% higher than the state average (Table 11). While opioid- behavioral health services without managed care or county related ED visits were higher than statewide rates, the rate of contracts and instead relies on PPS-funded encounters and opioid-related deaths - 3.3 per 100,000 residents in 2018 - grants. EDCHC coordinates with the county for patients was below the statewide average of 5.8 per 100,000. Several needing specialty mental health services. area hospitals - Marshall Medical Center, Mercy San Juan, A few FQHCs in the region have contracts with county and UCDMC - participate in the CA Bridge program. The mental health plans to provide specialty mental health ser- program addresses care for persons with opioid use disorder vices (to adults with serious mental illness or children and (OUD) in the acute care setting by prescribing buprenor- youth with serious emotional disturbances) and SUD ser- phine and connecting patients to community treatment vices. For example, WellSpace Health is one of the largest SUD services. Buprenorphine to address OUDs is prescribed twice and MAT contractors for Sacramento County. CommuniCare as often in the Sacramento region (30.3 prescriptions per contracts with Yolo County to provide both specialty mental 1,000 people) than statewide (14.5 prescriptions per 1,000 health and SUD services. In Placer County, Chapa-De Indian people).45 Health has a contract with the county to provide specialty mental health services. TABLE 11. B ehavioral Health Measures (age adjusted per 100,000 people) Sacramento Area vs. California, 2018 While FQHCs have stepped in to provide behavioral Sacramento Area California health services, several statewide billing constraints can Suicide 13.3 10.4 make such service delivery challenging. First, FQHCs cannot Opioid deaths 3.3 5.8 bill for a physical health and mental health visit on the same Opioid emergency department visits 23.5 21.4 day. Second, only certain types of clinicians can bill the clinic's Amphetamine-related overdose hospitalizations 5.5 5.6 PPS rate (e.g., physicians, psychiatrists, licensed clinical social Sources: "California Opioid Overdose Surveillance Dashboard," California Department of Public Health; Centers for Disease Control and Prevention; "Vital Records Data and Statistics," California Department workers [LCSWs], and clinical psychologists); others (e.g., of Public Health. All sources accessed June 1, 2020. California Health Care Foundation www.chcf.org 16 As in other counties, behavioral health services for Medi- These shortcomings result, in part, from the capacity Cal enrollees in the Sacramento region are provided through challenges county MHPs have, notably with psychiatric ser- a complex system of organizations and provider networks. vices. For example, in Sacramento County, about a third of Medi-Cal managed care plans contract with providers to Medi-Cal enrollees authorized for services were discharged deliver services for less severe mental health conditions (also from the MHP without receiving any services.48 The inde- referred to as "mild-to-moderate" conditions). County behav- pendent review recommended that the El Dorado County ioral health departments are responsible for services to those MHP improve follow-up appointments after hospital dis- with more serious mental health needs (generally, serious charges. In Yolo County, challenges with transportation for mental illness for adults and serious emotional disturbances patients were identified for improvement.49 One respondent for children and youth), as well as those with SUD. Medi-Cal observed that the increasing demand for behavioral health enrollees needing services often have to navigate a complex services as a result of the COVID-19 pandemic, an economic array of systems and providers. downturn, and growing homelessness will outpace available funding and capacity expansions. County Mental Health Plans Wrestle with Capacity but Despite these challenges, the region's MHPs have made Make Improvements progress monitoring care capacity for patients and connect- External quality reviews of the region's mental health ing them with available providers and resources. All of the plans (MHPs) identify strengths as well as opportunities for region's MHPs use standardized assessment tools for adults improvement. Each of the four MHPs (Placer and Sierra have 46 and children to inform treatment and monitor progress. In a joint MHP) in the region reports a penetration rate - the addition, the MHPs have increased efforts to add and fill percentage of Medi-Cal enrollees receiving specialty mental psychiatry positions and add other staff to address capac- health services - below the statewide average (Table 12). ity challenges. In 2019, Yolo County doubled the size of its These rates suggest that there are Medi-Cal enrollees with program providing mental health and SUD services to those unmet needs in the region. El Dorado County's penetration involved with the criminal justice system, increasing avail- rate is lower than the average for other small counties and able slots from 15 to 30. Sacramento County has increased is particularly low for Latinx populations.47 The independent outreach and engagement through community care teams reviews also noted shortcomings with meeting standards for to help patients navigate to their first appointments once timely access to care in Sacramento, El Dorado, Placer, and referred for services. In addition, Sacramento has six mobile Sierra Counties. crisis units working throughout the county. The independent review praised Yolo County as a TABLE 12. P enetration of Medi-Cal Enrollees Using Specialty Mental Health Services, Sacramento Area vs. California, 2016–2018 "model of collaboration" between criminal justice agencies 2016 2017 2018 and mental health and homeless services to support those Sacramento Area 3.8% 3.6% 3.7% needing mental health and other community services. ▶ Sacramento County 4.2% 4.1% 4.4% Sacramento County was noted for its robust continuum of ▶ Placer-Sierra Counties 3.7% 3.5% 3.6% care - from prevention and early intervention, to outpatient ▶ El Dorado County 3.7% 3.4% 3.7% services, crisis intervention and stabilization, and inpatient ▶ Yolo County 3.4% 3.3% 3.3% psychiatric services - as well as the county's coordina- Statewide 4.5% 4.5% 4.7% tion with law enforcement. The El Dorado and Placer-Sierra Source: Fiscal Year 2019–20 Reports, Behavioral Health Concepts, California External Quality Review Organization for Medi-Cal Specialty Mental Health services, accessed January 21, 2021. MHPs work closely with, or are colocated with, other county California Health Care Foundation www.chcf.org 17 agencies, community partners, or both. In addition, the with 16 or fewer beds. A consortium of providers, the city Placer-Sierra MHP coordinates care transitions with the Medi- of Sacramento mayor's office, and the governor's office have Cal managed care plans in this MHP's counties. been working to address inpatient bed capacity. In Placer County, respondents note that the mental Behavioral Health Workforce Shortages health continuum of care has gaps, as there are no inpa- While the region has slightly more psychiatrists per 100,000 tient crisis stabilization beds. Universal Health Services, an people (12.3) than the statewide average (11.8), many investor-owned company that specializes in psychiatric care, respondents noted that the region has severe shortages of attempted to build an inpatient psychiatric facility in Rocklin, behavioral health professionals, particularly psychiatrists, to but community resistance scuttled the project. Respondents serve the Medi-Cal population. One respondent remarked 50 in El Dorado County also noted the lack of inpatient crisis that recruiting a psychiatrist to El Dorado County can take stabilization capacity, adding that this shortage sometimes up to 18 months. Other professionals in short supply, as "strands patients in the ED for days or weeks." Counties use reported by respondents, include LCSWs, marriage and Full Service Partnership resources from the Mental Health family therapists, and SUD counselors. One respondent said, Services Act to deliver supplemental wraparound care and "Mental health need is so desperate; if we had the oppor- fill in gaps (i.e., those created by IMD exclusion) for patients tunity to hire one LCSW for each physician, we could keep with the most complex needs. These services can include them busy." Another respondent highlighted not just the intensive day treatment and rehabilitation. overall shortage of behavioral health professionals but also the dearth of such professionals who are able to provide cul- Integrating Levels of Care in the GMC Model Maze turally competent care. As noted earlier, the GMC Model presents a challenging labyrinth of providers and services for Medi-Cal enrollees to Concerns over Access to Inpatient Psychiatric Care navigate in Sacramento County. The integration and coordi- As is the case statewide, inpatient psychiatric care beds, nation of behavioral health services is particularly challenging which in the Sacramento region are in short supply, are one with five Medi-Cal managed care plans having to coordi- component in a complex, interconnected system for behav- nate with the Sacramento County MHP and SUD services. ioral health care. When access at one or more of these 51 Moreover, Medi-Cal managed care plans that delegate points is constrained, the effects may be felt throughout the to private behavioral health plans, such as Beacon Health system. According to respondents in the regional market Options, add another layer of complexity. study, access to inpatient psychiatric care is constrained in Sacramento County and Medi-Cal managed care plans, part by Medicaid's exclusion of payment for "institutions for however, have developed a tool to coordinate care and mental diseases" (IMD), which means that no federal funds navigate provider networks and to clarify steps for filling are available for services in settings with 16 or more beds. 52 prescriptions for medications. While the collaboration has Of the eight inpatient psychiatric facilities in the region, four worked administratively for the plans and county, consumers are large enough to fall into the IMD exclusion. The lack of still find the system confusing, according to several respon- federal funding constrains the counties' ability to find appro- dents. An advocate observed that despite these efforts, there priate care settings and drains resources that could be used is "no fluidity" in the system, and Medi-Cal enrollees do not for more outpatient services and prevention. A respondent know where and when to get services. Moreover, there is observed the need for more inpatient psychiatric facilities sometimes a disconnect between the time that someone is California Health Care Foundation www.chcf.org 18 willing to enter treatment and the availability of SUD treat- Drug Medi-Cal Organized Delivery System (DMC-ODS) ment appointments. Finally, a respondent commented that Aims to Transform Care Delivery neither DHCS nor the Department of Managed Health Care All four counties in the region participate in the DMC-ODS oversees the system well, and Medi-Cal enrollees' needs may pilot program with Yolo and Placer Counties launching in go unaddressed as a result. 2018 and Sacramento and El Dorado Counties launching in 2019. In contrast to the FFS DMC program, the DMC-ODS Tiptoeing to Risk-Based Payments in Medi-Cal Specialty brings a more focused clinical approach with more individu- Mental Health alized treatment. Providers are better able to place individuals For Medi-Cal specialty mental health services, payment at appropriate levels of care. The DMC-ODS pilot allows the innovation is difficult. However, Sacramento County, which use of providers designated as licensed practitioners of the contracts out 90% of its behavioral health services, has been healing arts to provide SUD services.53 One behavioral health slowly moving to a "per-member per-month" model that leader observed that the transformation in the approach may lay the foundation for value-based payments in the to care "will take time for the county and providers to really future. The county is contracting with community-based understand the implications of the changes." private providers and making monthly payments for spe- The Placer County DMC-ODS program provides case cialty mental health services for a minimum volume in each management for high-need clients with individualized case "modality" (e.g., case management, medication support) plans. The county has contracts with providers in adjacent based on historical utilization. This model is not the same counties to increase capacity for patients. Placer County has as capitation, because the providers do not incur downside a network of 23 sober living recovery residences with a total financial risk. A year-end cost reconciliation squares up total of 125 beds. Despite capacity and staff improvements, an expenditures with the minimum payments made initially; independent review found that Placer County still struggles if a provider's volumes and costs were higher, the provider to meet standards for timely access to care, particularly for will receive additional reimbursement. If expenditures were urgent and post-discharge appointments.54 lower, however, the county can recover some of the original Sacramento County implemented the DMC-ODS pilot minimum payments. in July 2019 and has seen a 90% increase in patients served, Providers paid in this manner have some flexibility with according to a behavioral health leader. The county increased how to staff and meet service objectives. The model also payment rates for providers, resulting in less provider turn- promotes the use of financial, administrative, and clinical over and more retention of high-quality staff. There has also management tools necessary to accept traditional risk-based been an increase in available treatment beds. payments in the future. Providers have requested techni- cal assistance to adapt to this new payment approach. Addressing the Needs of a Growing Homeless Population County MHP leaders expressed their interest in the California Hospital and other respondents reported that managing Advancing and Innovating Medi-Cal (CalAIM) behavioral the health and well-being of people without permanent health payment reform proposals, particularly the reduc- housing presents a significant and growing challenge in tion of documentation requirements that would accompany the Sacramento region. A 2019 point-in-time study found these reforms. These leaders cautioned, however, that value- that more than 5,500 people experience homelessness in based payments are "tricky" with a patient population in Sacramento County on any given night, an increase of 19 which a few high-cost enrollees can drain available resources. percent since 2017.55 This number represents 36 residents per California Health Care Foundation www.chcf.org 19 10,000 residents in the county - lower than San Francisco's Fragmented Exchange of Health Information 91 per 10,000 but higher than San Diego's 24 per 10,000. The Health information exchange (HIE) in the Sacramento region same study also found that 26% of those experiencing home- largely relies on providers using the same EHR system or EHR lessness have a debilitating cognitive or physical impairment, systems that are interoperable. Three of the four major health and 21% have a severe psychiatric condition, such as depres- systems in Sacramento County use the Epic EHR system - sion or schizophrenia. Sutter Health, Kaiser, and UC Davis. Providers using Epic can The city of Sacramento has established several initiatives access a patient's health records at organizations sharing the to resolve the array of challenges facing people without per- system. For example, UC Davis uses Epic across inpatient and manent shelter. The city is building new rehousing shelters outpatient clinic settings, along with Healthy Planet, an Epic that will offer hundreds of additional temporary beds, as well module designed for population health management to connections to health care and social services.56 In addition, track quality metrics and assess system performance. Sacramento County has expanded behavioral health spend- There is also limited data sharing between FQHCs and ing and capacity with the addition of more crisis residential hospitals. The major exception is the Sacramento County beds, increasing capacity from 12 to 72 beds. The county FQHC, which uses a version of Epic that enables UC Davis, also opened a mental health urgent care clinic in November Sutter Health, and Kaiser providers to pull FQHC clinical data 2017.57 into the hospital EHR. Respondents observed that sharing The city of Sacramento is also the only city in California data improves care management and makes it much easier running its own Medi-Cal Whole Person Care (WPC) pilot, for shared patients. Several other FQHCs have limited access Pathways, which targets more than 3,000 high-need people to hospital inpatient data. FQHCs using Care Everywhere, for the coordinated delivery of physical and behavioral health an Epic module, automatically receive notifications of their care, housing support, and food assistance.58 Pathways repre- patients' inpatient admissions or ED visits and can then sents a joint effort of various government agencies, health retrieve related patient care summaries. plans, and medical and social service providers. The pilot By contrast, Dignity Health uses the Cerner EHR system, enrolled its first members in November 2017 and had 1,900 so other hospital systems and providers have limited access members by early 2020. Placer County's WPC pilot had served to Dignity Health patient medical record information. One more than 444 enrollees by March 2020. health plan respondent anticipates that data exchange will The state has also invested in the region's homelessness improve as providers comply with the forthcoming federal response through its No Place Like Home program, which Interoperability and Patient Access regulations for 2021.60 awards grants to local governments to support construction These regulations introduce standards-based data-exchange of permanent supportive housing. Thus far, across the region, and information-blocking rules intended to reduce data- the state has awarded more than $39 million, including more exchange barriers and improve patient access to clinical than $24 million in Sacramento County, nearly $10 million in data and provider directories, improve the care experiences Yolo County, $1.9 million in Placer County, and $3.4 million in of people dually eligible for Medicare and Medicaid, and El Dorado County.59 improve information sharing among health plans for care coordination. Data exchange will likely remain fragmented given the various EHR systems used in the region. One FQHC leader observed that Carequality, an EHR interoperability vendor California Health Care Foundation www.chcf.org 20 used by some FQHCs and hospitals, had "created an explo- Limited Participation in SacValley MedShare sion of interaction between health records" and showed Participation in SacValley MedShare, a regional health some promise. Nevertheless, one FQHC executive remarked information organization (RHIO), has been slow among met- that HIE with hospitals or other FQHCs is "not the rallying cry ropolitan Sacramento providers. The RHIO serves a 19-county like other priorities." area mostly north and east of Sacramento. Several Yolo County providers participate. Using Data and Analytics to Improve Quality of Care Experts interviewed observed that health systems and FQHC respondents reported that capabilities to collect, providers using Epic and Cerner EHR systems participate manage, and send encounter data for Healthcare Effectiveness in national health information exchange platforms such as Data and Information Set (HEDIS) performance measures eHealth Exchange or Carequality but are less likely to par- varies but is continuously developing. Some FQHCs have ticipate in RHIOs. Furthermore, RHIO participation has to established information technology (IT) positions to manage compete with many other health system IT and organiza- requirements for reporting encounter data to health plans. tional priorities. The GMC Model, with five plans and several IPAs requiring Despite the reluctance of systems to make large invest- encounter data reports, increases the IT burden for FQHCs. ments in RHIOs, SacValley MedShare recently added member FQHCs not only submit encounter data to plans but also cal- access to continuity of care data that Sutter Health shares culate the FQHCs' own HEDIS quality performance measures via eHealth Exchange. Using California Health Information to validate what plans report to the FQHCs for care improve- Exchange Onboarding Program grant funding from DHCS, ment and incentive payments. Other FQHCs have invested SacValley MedShare will add Medi-Cal providers in Placer, significantly in IT departments and use analytics platforms to Nevada, and Sierra Counties to the RHIO, as well as expand- target quality improvement efforts for specific populations. ing current member data contributions. These investments may include a chief quality officer or pop- ulation health coordinator. Aspirational Behavioral Health Information Exchange FQHC leaders, however, identified several challenges Several respondents commented on the difficulties of access- to using data to drive performance improvement initia- ing and exchanging behavioral health data. For example, tives. First, data provided by health plans to FQHCs about clinicians at UCDMC can access patient information from care gaps and target populations are often out of date the UC Davis psychiatric clinic but nothing from the county and inaccurate. For example, health plans may hold FQHCs MHP, human services, or the county jail. According to those responsible for patients who are not assigned to an FQHC's interviewed, numerous impediments exist, but two are most patient panel, or the reverse may occur, with plans unaware prominent. First, the county MHP EHR and billing system, of patients who are on an FQHC's panel. Second, payments Avatar, has only limited connectivity capability. Second, received for meeting quality performance targets may come federal regulations regarding the privacy of SUD treatment months after the goal has been met. Finally, one FQHC leader restrict what data can be shared without explicit patient observed that the HEDIS performance measures selected consent. Another respondent said that behavioral health by DHCS are "not an accurate reflection of what's happen- data exchange, at this point, is aspirational but slowly emerg- ing on the ground" and do not include a population-health ing with several promising undertakings. perspective. California Health Care Foundation www.chcf.org 21 UCDMC is working to design and implement an HIE on hand and the personnel needed, such as frontline nurses. protocol with other providers, including county MHPs and For behavioral health providers, COVID-19 created challenges social services providers. This protocol would employ HIE for the crisis care continuum, with psychiatric hospitals, crisis when UCDMC providers prescribe medications to assess stabilization centers, skilled nursing facilities, and mental comorbidities and facilitate the transfer of patients from health urgent care sometimes failing to meet staffing ratio mild-to-moderate to specialty mental health services. requirements. Among the county MHPs, their contracted providers, The COVID-19 pandemic has put tremendous pressure and other providers in their counties, electronic HIE is only on and demand for clinical laboratory scientists. A hospital recently beginning to emerge. In El Dorado County, the MHP leader reported that many workers in the field are in their implemented the CareConnect Inbox in the Avatar system, 60s with retirements looming. In addition, the state does not which will facilitate HIE with contracted community-based have enough training programs to respond to coming retire- providers. And Placer County launched an emergency ments and increased demand. department (ED) information exchange that alerts county Providers suffered significant revenue shortfalls, with many behavioral health clinicians when one of their patients uses clinic sites closing as a result of the sharp decline of in-person a hospital ED and provides information about the nature of visits and hospitals temporarily pausing elective surgeries. the visit. While loans offered to physician practices through the CARES Act's Paycheck Protection Program helped sustain operations, COVID-19 Impact in the Sacramento Region providers reported that assistance was inadequate. Providers Similar to other California regions, the COVID-19 pandemic that rely on capitation were better positioned to weather has led to both significant health impacts and a significant reduced service utilization because of closures. For special- economic downturn in the Sacramento area, with particu- ist practices and hospitals, which rely predominantly on FFS larly large impacts on the health care industry. Likely because payment, the financial impact was more dire. state government accounts for a high share of regional employment, however, the pandemic's broader economic TABLE 13. COVID-19 Impacts Sacramento Area vs. California, October 2020 impact in the region was less severe than elsewhere in the Sacramento Area California state. While the unemployment rate increased 7.1 percent- UNEMPLOYMENT RATE age points statewide between February and August 2020, ▶ Pre-pandemic (FEBRUARY 2020) 3.8% 4.3% the increase in the Sacramento region was just 5.6 percent- ▶ Mid-pandemic (OC TOBER 2020) 7.3% 11.4% age points over the same period (see Table 13). MEDI-CAL ENROLLMENT Within health care, the virus's spread strained provid- ▶ Percentage change (FEBRUARY TO OC TOBER 2020) 4.3% 1.0% CARES ACT, PER CAPITA (AUGUST 2020) ers' balance sheets, medical supply inventories, and staff ▶ Provider Relief Funds $227 $148 capacity. Especially in the pandemic's early months, hospi- ▶ High Impact Funds $0 $16 tals lacked sufficient personal protective equipment (PPE), Sources: "Employment by Industry Data," State of California Employment Development Department; testing kits, and respirators, leading to concerns over staff "Month of Eligibility, Dual Status, by County, Medi-Cal Certified Eligibility," California Health and Human Services, Open Data; and "HHS Provider Relief Fund," Centers for Disease Control and Prevention. CARES Act data accessed August 31, 2020; all other data accessed January 15, 2021. safety and patient health. Moreover, effective responses to the virus were hampered by a mismatch between the staff California Health Care Foundation www.chcf.org 22 Mitigation Efforts Growth of Telehealth Sacramento County received $181 million from the federal One silver lining of the pandemic has been the rapid adop- government under the CARES Act's state and local govern- tion of telehealth to connect providers and patients, with ment assistance provisions, while the city of Sacramento changes in federal requirements for conducting and billing received an additional $90 million. Since El Dorado, Placer, for telehealth easing the transition. As in other regions, the and Yolo Counties are home to fewer than 500,000 resi- move to telehealth generally proceeded more smoothly dents, the city and county of Sacramento were the only than providers had expected, with many patients able local governments in the region to receive funding directly.61 to access videoconferencing services such as Zoom and Controversially, rather than using the emergency funds to Google Hangouts and providers reporting lower no-show address the pandemic directly, the county used its allocation rates. UC Davis, for instance, converted 50% of visits to tele- primarily to offset general fund expenses by covering payroll health within just one week. For smaller practices, however, for the sheriff's office and other county employees working the transition was more protracted; for some, several weeks in public health and social services. According to officials, were required to establish systems with telehealth vendors. this approach was necessary given the loss of tax revenue For some patient populations, access to the internet expected to result from the pandemic.62, 63 The remaining and proficiency with technology also proved challenging. funding was later approved to fund public health initiatives, Particularly in the behavioral health context - where tele- such as expanding COVID-19 testing and employing contact health would, in theory, be most promising - providers tracers. The city of Sacramento, however, dedicated its CARES worried that patients (especially youth) are not as forthcom- relief to a range of economic and public health efforts, includ- ing with pertinent information in telehealth visits. Moreover, ing assistance to small businesses, youth workforce training, one administrator noted that the pandemic's onset was fol- and rehousing the city's homeless residents.64 lowed by a reduction in youth referrals to behavioral health Also available to hospitals and other providers through services, perhaps because of parents' lack of awareness of the the CARES Act was the Provider Relief Fund, which allocated availability of telehealth. $175 billion to providers nationwide to help cover increased costs and lost revenues from the pandemic. The Sacramento region's hospitals and clinics received nearly $180 million in aid. Even while the pandemic's impact was greater in other regions, on a per capita basis, Sacramento providers received roughly $227 per resident - an amount significantly above the statewide per capita payment of $128. This disparity is likely a result of the Provider Relief Fund's allocation formula, which set each provider's award roughly proportional to its share of Medicare and Medicaid revenues. California Health Care Foundation www.chcf.org 23 Issues to Track ▶ Will Sacramento County's GMC Model evolve in ways that ease provider reporting burdens and simplify and improve access to quality services for Medi-Cal enrollees? Will the upcoming recontracting result in fewer partici- pating plans? Will the new Sacramento Health Authority Commission successfully move to a Two-Plan Model of managed care? ▶ Will the remaining independent physicians and two smaller independent hospitals join the region's large health systems? What countervailing forces will remain to keep health system payment rate increases in check? ▶ How will value-based payment and care delivery arrange- ments evolve? Will employers use their negotiating leverage to get better value at lower costs? ▶ Will medical groups and IPAs affiliated with health systems continue dropping contracts for Medi-Cal primary care and fuel a further migration of enrollees to FQHCs? ▶ What are the next organizational developments for FQHCs as they assume more responsibility for Medi-Cal enrollees? Will FQHCs increase collaboration? Can they retain their community-based roots and close con- nections with patients as they grow and develop more sophisticated capabilities? ▶ What imperatives will drive improved health information exchange and participation in a regional health informa- tion organization? ▶ How will pilots and other innovations in behavioral health improve access to care for Medi-Cal enrollees? Can any improvements be institutionalized through CalAIM? California Health Care Foundation www.chcf.org 24 ENDNOTES 1. California Employment Development Department, "Employment by 10. County of Sacramento, Sacramento County Code Title 2, Section 1, Industry Data," accessed November 15, 2020. Chapter 2.136, Sections 2.136.010 through 2.136.170 (PDF), Sacramento County Health Authority, December 15, 2020. 2.Tony Bizjak, "How COVID-19 Is Fueling a New Wave of Bay Area Transplants to the Sacramento Region," Sacramento Bee, 11. Felicia Alvarez, "Sutter Health Planning $5.6 Billion in Construction, September 10, 2020. Investments over Next Four Years," Sacramento Business Journal, March 6, 2020. 3. Benjy Egel, "Sacramento's Poverty Growth Ranks Among Highest in the U.S., Study Finds," Sacramento Bee, April 24, 2018. 12. Sam Boykin, "2020 Best Real Estate Projects: Sutter Roseville Medical Center Expansion," Sacramento Business Journal, March 6, 2020. 4. Analysis of "2019 Point in Time Estimates of Homelessness in the U.S," US Department of Housing and Urban Development, accessed 13. Felicia Alvarez, "Kaiser South Sacramento Expansion Would Double October 1, 2020. ER Capacity," Sacramento Business Journal, December 11, 2018. 5.Estimates of the uninsured rate for each region are based on 14.Staff, "Kaiser Permanente's New Roseville Facility," Roseville Today, the Census Bureau's 2019 estimate of the uninsured rate in each September 27, 2019. county. The estimated share of the population enrolled in Medi- 15. Felicia Alvarez, "Kaiser Completes Purchase of Railyards Site for $33 Cal is calculated as total Medi-Cal enrollment from the California Million," Sacramento Business Journal, January 22, 2019. Department of Health Care Services (DHCS) data as of June 2019 (excluding those dually eligible for both Medi-Cal and Medicare) 16.Alia Paavola, "Dignity Health to Replace South Sacramento divided by the US Census Bureau's 2019 population estimates, Hospital," Becker's Hospital Review, December 11, 2019. aggregated for each region. Similarly, the estimated share of the 17.Cathie Anderson, "Carmichael's Mercy San Juan Hospital Will population enrolled in Medicare is based on Medicare enrollment Open $38M Neonatal Intensive Care Unit," Sacramento Bee, figures for 2019 published by the Centers for Medicare & Medicaid September 24, 2020. Services and US Census Bureau population estimates. The category of private insurance and all other insurance types was calculated as 18. "California Northstate University Hospital," City of Elk Grove, Current the residual after accounting for those who were uninsured, enrolled Projects, accessed January 22, 2021. in Medi-Cal, or enrolled in Medicare. See US Census, "American 19.Robert King, "CommonSpirit Health Posts $550M Operating Community Survey 1-Year Estimates," Table DP03, accessed June Revenue Loss in Fiscal Year Due to COVID-19," Fierce Healthcare, 2020 (for Census Bureau estimates of total county populations and October 5, 2020, accessed November 24, 2020. uninsured rates); Department of Health Care Services, "Month of Eligibility, Medicare Status, and Age Group, by County, Medi-Cal 20. Richard Scheffler, Daniel Arnold, and Brent Fulton, The Sky's the Limit: Certified Eligibility," accessed June 2020 (for monthly Medi-Cal Health Care Prices and Market Consolidation in California, California enrollment totals); and Centers for Medicare & Medicaid Services, Health Care Foundation, October 2019. "Medicare Enrollment Dashboard," accessed June 2020 (for 21. The Herfindahl-Hirschman Index is a commonly accepted measure Medicare enrollment data). of market concentration. See US Department of Justice, "Herfindahl- 6.California Department of Managed Health Care (DMHC), "Health Hirschman Index," accessed January 6, 2021. Plan Dashboard, Sutter Health Plus," accessed November 11, 2020. 22Andrew Bindman, An Environmental Analysis of Health Care 7.Len Finocchio, Matthew Newman, and Shawn Blosser, A Close Delivery, Coverage, and Financing in California, Healthy California for Look at Medi-Cal Managed Care: Quality, Access, and the Provider's All, August 2020. Experience Under Geographic Managed Care, California Health Care 23. "Physician Integration," Dignity Health Medical Foundation, Foundation, October 2019. accessed October 31, 2020. 8."Medi-Cal Managed Care Request for Proposal Schedule by Model 24. Felicia Alvarez, "Dignity Health Medical Foundation CEO Departs," Type" (PDF), DHCS, February 27, 2020. Sacramento Business Journal, July 13, 2020. 9.California Senate Bill 1029, accessed November 10, 2020. 25. "About Sutter Medical Foundation," Sutter Health, accessed November 3, 2020. California Health Care Foundation www.chcf.org 25 26. "About RCMG," River City Medical Group, accessed October 31, 2020. 42. "2020 Behavioral Health Services Survey," California Primary Care Association, accessed December 16, 2020. 27. "IPA Enrollment Data by GMC Plan" (PDF), Sacramento County Department of Health Services, March 1, 2019, accessed October 31, 43. "FY 2019–20 Medi-Cal Specialty Mental Health External Quality 2020. Review: Yolo MHP Final Report" (PDF), Behavioral Health Concepts, accessed January 21, 2021. 28. Enforcement Matter Number: 17-1321, Letter of Agreement (PDF), DMHC, April 19, 2019, accessed February 4, 2021. 44. "Frequent Mental Distress," County Health Rankings & Roadmaps, 2020 (based on 2017 data). 29. Rodd Hill, "Physicians Taking On up to 2,500 Patients Following Nivano Health Plan Terminations," Sacramento Business Journal, 45. "California Opioid Overdose Surveillance Dashboard," California August 15, 2017, and Rodd Hill, "Blue Cross to Terminate Contracts Department of Public Health, updated January 27, 2021, accessed with Nivano, Affecting Over 45,000 Patients," Sacramento Business November 10, 2020. Journal, October 12, 2017. 46. "FY 2019–20 Medi-Cal Specialty Mental Health External Quality 30. "About Hill Physicians," Hill Physicians, accessed October 31, 2020. Review: Sacramento MHP Final Report" (PDF), Behavioral Health Concepts, accessed January 21, 2021. 31. "Shared Savings Program Participation Options for Performance Year 2021" (PDF), Centers for Medicare & Medicaid Services, accessed 47. "FY 2019–20 Medi-Cal Specialty Mental Health External Quality October 23, 2020. Review: El Dorado MHP Final Report" (PDF), Behavioral Health Concepts, accessed January 21, 2021. 32. Rob Waters, "California's Sutter Health Settlement: What States Can Learn About Protecting Residents from the Effects of Health Care 48."FY 2019–20 Sacramento MHP Final Report", Behavioral Health Provider Consolidation," Milbank Quarterly, September 23, 2020. Concepts, accessed January 21, 2021. 33. Glenn Melnik, "Congress Should Restore Health Care Competition, 49. "Medi-Cal Specialty Mental Health External Quality Review: Yolo MHP Not Let Providers Exploit COVID-19 to Raise Prices," Health Affairs, Final Report." October 1, 2020. 50. Healthforce Center at University of California, San Francisco, Analysis 34. UFCW & Employers Benefit Trust v. Sutter Health, "Notice of Motion and of Survey of Licensees (private tabulation), Medical Board of Motion for Preliminary Approval of Settlement: Memorandum of California, January 2020. Points and Authorities" (PDF), February 25, 2020. 51. California's Acute Psychiatric Bed Loss (PDF), California Hospital 35. Report to the Congress: Medicare Payment Policy, Medicare Payment Association, March 28, 2018, accessed November 10, 2020. Advisory Commission, March 2020, accessed November 20, 2020. 52. "State Options for Medicaid Coverage of Inpatient Behavioral 36. Nationwide Evaluation of Health Care Prices Paid by Private Health Health Services," Kaiser Family Foundation, November 6, 2019. Plans, RAND Corporation, 2020. 53. According to the Department of Health Care Services, nonphysician 37. For the number of patients served, patients may be double counted licensed practitioners of the healing arts (LPHAs) include nurse if the same person visits more than one health center. practitioners, physician assistants, registered nurses, registered pharmacists, licensed clinical psychologists, licensed clinical social 38. Scott Rodd, "Medi-Cal Patient Transfer Seen as a Boon for Native workers, licensed professional clinical counselors, and licensed American Health Clinic," Sacramento Business Journal, August 22, marriage and family therapists, as well as license-eligible practitioners 2017. working under the supervision of licensed clinicians. 39. Rob Waters, "'Getting Slapped in the Face-Twice': Low-Income 54. "2019–20 Drug Medi-Cal Organized Delivery System External Patients Losing UC Davis Coverage Again," Sacramento Bee, Quality Review: Placer DMC-ODS Report" (PDF), Behavioral Health September 27, 2018. Concepts, accessed January 21, 2021. 40. Felicia Alvarez, "Update: Anthem Blue Cross Cuts Ties with Sutter 55. "Homelessness in Sacramento County" (PDF), California State Health on HMO, Medi-Cal Plans," Sacramento Business Journal, University, Sacramento, June 2019, accessed November 29, 2020. February 1, 2019. 56. "What Is the City Doing to Get People off the Streets?," Mayor's 41.Felicia Alvarez, "WellSpace Health Continues Growth with New Office of Civic Engagement, City of Sacramento, accessed Lease in Oak Park," Sacramento Business Journal, December 2, 2019. November 24, 2020. California Health Care Foundation www.chcf.org 26 57. Molly Sullivan, "Mental Health Urgent Care Clinic to Open Nov. 29," Sacramento Bee, November 28, 2017. 58. "Whole Person Care" (PDF), City of Sacramento, accessed November 24, 2020. 59. "No Place Like Home Program," California Department of Housing and Community Development, accessed November 24, 2020. 60. "Interoperability and Patient Access Fact Sheet," Centers for Medicare & Medicaid Services, March 9, 2020. 61. "State Budget Effects of Recent Federal Actions to Address COVID- 19," Legislative Analyst's Office, April 5, 2020. 62. Lena Howland, "Majority of $181 Million CARES Act Funds Spent on Sacramento County Sheriff's Office," KXTV ABC10, August 11, 2020. 63. "SacCounty and CARES Act Funding," SacCounty News, Sacramento County, August 12, 2020. 64. "CARES Act Coronavirus Relief Fund," City of Sacramento, October 7, 2020. California Health Care Foundation www.chcf.org 27 Background on Regional Markets Study: Sacramento Area Between March and October 2020, researchers from Blue Sky Del Norte Consulting Group conducted interviews with health care leaders in El Dorado, Placer, Sacramento, and Yolo Counties in the Sacramento Humboldt area of California to study the market's local health care system. The market encompasses the Metropolitan Statistical Area of Sacramento- Roseville-Folsom. Sacramento Area The Sacramento area is one of seven markets included in the Regional Bay Markets Study funded by the California Health Care Foundation. The purpose Area of the study is to gain key insights into the organization, financing, and delivery San Joaquin Valley of care in communities across California and over time. This is the fourth round of the study; the first set of regional reports was released in 2009. The seven markets included in the project - Humboldt/Del Norte, Inland Empire, Los Angeles, Los Inland Empire Sacramento Area, San Diego, San Francisco Bay Area, and San Joaquin Valley - reflect a Angeles range of economic, demographic, care delivery, and financing conditions in California. Orange San Diego Blue Sky Consulting Group interviewed nearly 200 respondents for this study, with 24 specific to the Sacramento area. Respondents included executives from hospitals, physician organizations, community health centers, Medi-Cal managed care plans, and other local health care leaders. Interviews with commercial health plan executives and other respondents at the state level also informed this report. The onset of the COVID-19 pandemic occurred as the research and data collection for the regional market study reports were already underway. While the authors sought to incorporate information about the early stages of the pandemic into the findings, the focus of the reports remains the structure and characteristics of the health care landscape in each of the studied regions. ▶ V ISIT OUR WEBSITE FOR THE ENTIRE ALMANAC REGIONAL MARKETS SERIES. ABOUT THE AUTHORS ABOUT THE FOUNDATION Len Finocchio, DrPH, is principal consultant, and James Paci, JD, MPP, The California Health Care Foundation is dedicated to advancing is a policy analyst with the Blue Sky Consulting Group, which helps meaningful, measurable improvements in the way the health care government agencies, nonprofit organizations, foundations, and private- delivery system provides care to the people of California, particularly sector clients tackle complex policy issues with nonpartisan analytical those with low incomes and those whose needs are not well served by tools and methods. the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford. CHCF informs ACKNOWLEDGMENTS policymakers and industry leaders, invests in ideas and innovations, The authors thank all of the respondents who graciously shared their and connects with changemakers to create a more responsive, patient- time and expertise to help us understand key aspects of the health care centered health care system. market in the Sacramento area. We also thank Alwyn Cassil of Policy California Health Care Almanac is an online clearinghouse for key data Translation, LLC, for her editing expertise, and members of the Blue Sky and analysis examining the state's health care system. Consulting Group project team.