Los Angeles | California | 2021 | Market Overview Brief

Highly unconsolidated provider sectors and an unfavorable payer mix characterize the Los Angeles healthcare market. The latter will be exacerbated by the COVID-19 pandemic — which may also spur state and local policymakers to seek universal coverage initiatives to meet future challenges. The market’s per capita income exceeds the national average, but the figure masks a high degree of income inequality. The poverty rate in the city of Los Angeles exceeds 20 percent, and marketwide unemployment and uninsured rates are higher than state and national averages. Illustrating the prevalence of government programs, L.A. Care Health Plan is the market’s largest insurer despite offering only Medicaid and exchange coverage. The influence of management services organizations in the physician sector continues to grow in step with the increasing complexity of reimbursement contracts emphasizing outcomes and efficiency. While low, provider consolidation is on the rise in the Los Angeles market, as evidenced by a proposed affiliation between Cedars-Sinai and Huntington Hospital. Vertical integration also is a popular strategy among both payers and providers, with upstart insurer Bright Health acquiring telehealth platform Zipnosis in 2021 and Adventist Health West putting payer integration at the heart of its long-term strategy. Expect runner-up health systems and payers to continue aggressively pursuing such deals in a bid to challenge market leader Kaiser Permanente and improve leverage in reimbursement negotiations.