The large and dynamic San Francisco market features a mostly unconsolidated health system sector, with eight systems claiming at least 5 percent of inpatient market share. This somewhat masks the power of Kaiser Permanente and Sutter Health, however, which are the only two systems with market-wide footprints. Kaiser Permanente is the nation’s largest nonprofit health system and the prototypical integrated delivery network. It includes the market’s largest health plan and a staff-model physician group. Sutter Health recently launched its own insurance operations and is working to consolidate affiliated physicians into foundations with shared governance and exclusive contracting, but its growth has been hampered by lawsuits and government investigations into its contracting and pricing practices. In a big win for health insurers, Sutter Health recently agreed in a legal settlement to cease contracting practices that required insurers to put all of Sutter’s hospitals in-network, or else none of them, and that prohibited insurers from rewarding members when they select higher-quality or less expensive providers. The case should have market-wide ripple effects and accelerate the development of value-based contracts. Many of the market’s smaller health systems have banded together in the Canopy Health clinically integrated network to counter the scale of Kaiser Permanente and Sutter. Canopy has a restricted Knox-Keene license allowing it to develop health insurance products in partnership with insurers. Stanford has started directly contracting with Silicon Valley employers, and in 2021 launched a joint cancer program with Sutter focused on outpatient expansions in the East Bay. Despite health systems integration strategies, physicians remain powerful in the San Francisco market, especially in serving HMO members. National players are most influential in the health plan sector, with for-profits Anthem and UnitedHealth Group joining Kaiser Permanente as the market’s leaders in total enrollment.


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