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Los Angeles: Fragmented Health Care Market Shows Signs of Coalescing

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Los Angeles: Fragmented Health Care Market Shows Signs of Coalescing california Health Care Almanac regional markets issue brief January 2013 Los Angeles: Fragmented Health Care Market Shows Signs of Coalescing Summary of Findings or even merging with each other, in part to help adjust Illustrating the fragmented nature of the Los Angeles capacity, expand referral bases, organize service-line (LA) health care market, scores of hospitals and numerous strategies, and improve care coordination. The more physician practices are scattered across a vast and congested prestigious and financially healthier hospitals (including area that is home to 10 million people. With the exception UCLA) have been at the forefront of these activities. of Kaiser Permanente, hospital systems and physician ▶▶ Physician organizations leading integration efforts. organizations tend to operate in isolated silos without an Given their experience in accepting financial risk for extensive footprint across the county. Emerging market patient care, LA physician organizations are spearheading trends and expected changes under national health reform are efforts to develop accountable care organizations (ACOs). prompting many providers to pursue new strategies to ensure For example, HealthCare Partners and Heritage Provider their viability. Network are participating in Medicare ACOs, while Key developments since the last study was conducted in HealthCare Partners is also working with Anthem Blue 2008 include: Cross in a commercial ACO. ▶▶ Intense competition for physicians. Physician ▶▶ Fresh leadership for the county’s safety net. New organizations, hospitals, and others are seeking new, health department leadership is redesigning the extensive tighter affiliations with physicians to gain patients, county-operated delivery system, which includes compete with Kaiser Permanente, and prepare for hospitals, outpatient centers, and primary care clinics, health reform. The two largest physician organizations, and collaborating with private hospitals and community HealthCare Partners and Heritage Provider Network, health centers. These changes are intended to help both are growing both their medical groups and independent public and private safety-net providers remain financially practice associations (IPAs). In November 2012, national viable, use existing capacity efficiently to serve more dialysis provider DaVita purchased HealthCare Partners, patients, and improve patient care, especially as the which also operates in other states. county prepares to enroll many uninsured residents into Medi-Cal under reform. ▶▶ Growing interest in affiliations among hospitals. Although the market is generally considered to have ▶▶ Safety-net interest in ACOs. Unlike other markets excess inpatient beds, some hospitals face capacity studied, there has been substantial ACO activity for constraints. Hospitals are starting to consider affiliating the Medi-Cal population, with two such entities under development that include safety-net Table 1. Demographic and Health System Characteristics: Los Angeles vs. California Los Angeles California hospitals, community health centers, and POPULATION STATISTICS, 2010 Medi-Cal health plans. Total population 9,818,605 37,253,956 Population growth, 10-year 3.1% 10.0% Population growth, 5-year 0.1% 4.1% Market Background AGE OF POPULATION, 2009 Persons under 5 years old 7.2% 7.3% Los Angeles County’s diverse economy helped Persons under 18 years old 26.7% 26.3% insulate the community from significant job Persons 18 to 64 years old 62.7% 62.8% losses and declining rates of private health Persons 65 years and older 10.6% 10.9% RACE/ETHNICITY, 2009 insurance that afflicted many other California White non-Latino 27.9% 42.3% communities during the economic recession. Black non-Latino 8.4% 5.6% Latino 48.3% 36.8% With approximately 10 million residents, Asian non-Latino 13.1% 12.1% Los Angeles County is the most populous Other race non-Latino 2.4% 3.1% Foreign-born 33.0% 26.3% county in the United States and home to more EDUCATION, 2009 than a quarter of California’s residents. After High school diploma or higher, adults 25 and older 77.6% 82.6% College degree or higher, adults 25 and older 35.2% 37.7% rapid growth between 2000 and 2005, the HEALTH STATUS, 2009 county’s population has stabilized in recent Fair/poor health status 18.0% 15.3% Diabetes 10.9% 8.5% years. Still, the greater LA region is the most Asthma 12.5% 13.7% densely populated urban area in the country, Heart disease, adults 5.8% 5.9% and significant traffic congestion leads many to ECONOMIC INDICATORS Below 100% federal poverty level (2009) 22.7% 17.8% seek medical care close to home, contributing Below 200% federal poverty level (2009) 42.9% 36.4% to the fragmented nature of the health care Household income above $50,000 (2009) 43.7% 50.4% Unemployment rate (2011) 13.3% 12.4% 1 market. Foreclosure rate* (2011) 4.7% n/a Los Angeles also is known for its racial and HEALTH INSURANCE, All AGES, 2009 Private insurance 50.8% 55.3% ethnic diversity. Compared to California overall, Medicare 7.7% 8.8% the county has a lower percentage of White Medi-Cal and other public programs 24.6% 21.4% Uninsured 17.0% 14.5% residents and higher proportions of Black, SUPPLY OF HEALTH PROFESSIONALS, PER 100,000 populatION, 2008 Latino, and Asian residents. The county attracts Physicians 176 174 Primary care physicians 58 59 many foreign-born residents and people with Dentists 64 69 limited to no English language skills, creating HOSPITALS, 2010 Community, acute care hospital beds per 100,000 population 204.6 178.4 serious challenges for providers to serve them Operating margin with net disproportionate share hospitals (Kaiser excluded) –1.2% 2.4% effectively. Notably, the rest of California is Occupancy rate for licensed acute care beds (Kaiser included) 60.3% 57.8% catching up with LA in population diversity, Average length of stay (in days) (Kaiser included) 4.8 4.5 Paid full-time equivalents per 1,000 adjusted patient days (Kaiser excluded) 15.8 15.8 as immigrant populations grew faster in other Total operating expense per adjusted patient day (Kaiser excluded) $2,677 $2,856 parts of the state between 2007 and 2009. *Foreclosure rates in 367 metropolitan statistical areas nationally ranged from 18.2% (Miami, FL) to 1% (College Station, TX). Sources: US Census Bureau, 2010; California Health Interview Survey, 2009; State of California Employment Development Department, Labor The socioeconomic status of LA residents Market Information Division, “Monthly Labor Force Data for California Counties and Metropolitan Statistical Areas, July 2011” (preliminary data not seasonally adjusted); California HealthCare Foundation, “Fewer and More Specialized: A New Assessment of Physician Supply in California,” June 2009; UCLA Center for Health Policy Research, “Distribution and Characteristics of Dentists Licensed to Practice in California, 2008,” is somewhat lower than in the rest of the state. May 2009; California Office of Statewide Health Planning and Development, Healthcare Information Division, Annual Financial Data, 2010; www.foreclosureresponse.org, 2011. In 2009, the percentage of LA residents living in poverty was higher than the state average ©2013 California HealthCare Foundation 2 (22.7% vs. 17.8%), and the proportions of uninsured that negotiate health maintenance organization (HMO) residents (17.0%) and those with Medi-Cal or other public contracts. Independent primary care physicians (PCPs) tend coverage for low-income people (24.6%) were higher than to belong to one or two IPAs; specialists tend to participate the state averages of 14.5% and 21.4%, respectively. The in multiple IPAs to gain sufficient patient volume. Physicians proportion of LA residents with commercial insurance — primarily PCPs — increasingly are moving to exclusive fell slightly between 2007 and 2009, from 52.8% to relationships with IPAs as physicians become comfortable 50.8%, slightly less than the statewide decline. The county with a given IPA’s payment rates, information technology, unemployment rate has tracked the state’s, peaking at about and volume of patient referrals. To provide nearby options 13% in July 2010 and declining to 11.8% in March 2012 for patients needing hospital care, physician organizations (the month of the site study). typically contract with multiple hospitals across geographic Socioeconomic status varies significantly across the areas rather than aligning with particular hospitals. county, however. The more affluent areas include the San The largest physician organizations in the market Fernando Valley, West LA, San Gabriel, and South Bay, while focusing on Medicare and commercially insured patients — South LA and the Metro areas have the lowest incomes. West HealthCare Partners and Heritage Provider Network — are LA and South LA display some of the starkest differences in both primarily IPAs but also own medical groups and have socioeconomic status. For example, in 2009, the percentage a presence beyond Los Angeles. In LA, HealthCare Partners of uninsured residents in West LA was significantly lower contracts with about 3,900 physicians through an IPA and than in South LA (11.6% vs. 26.4%), and 8.1% of residents employs 700 physicians in a medical group. Heritage has in West LA lacked a usual source of health care, compared to approximately 1,800 physicians in an IPA and employs 22.3% of South LA residents.2 another 700 physicians in a medical group. Since 2008, both physician organizations have expanded their physician Efforts to Align Physicians networks significantly.
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