SAN FRANCISCO—It doesn’t take much searching to encounter San Francisco’s glaring wealth divide. On a stroll through its ritzy Financial District, one passes executives in pristine business suits, gleaming buildings that house Fortune 500 companies and a store that sells $400 hair dryers. Then, just a few blocks over in the Tenderloin neighborhood, it’s a scene of poverty and homelessness—sidewalks are crowded with tents, blankets and discarded clothes.
The high cost of living here has pushed many aspects of its economy into extremes. The median cost of a home in the San Francisco metro area is almost quadruple that of the U.S.—$910,300 compared with $229,700, Census data show. Median household income in the Bay Area is almost double that of the U.S.: $108,000 versus $62,000.
The local healthcare industry is a similar story. The way healthcare is delivered, who is able to access care and the level of attention patients get from their providers all hinges on how much they can afford to pay.
“There certainly is a have and have not tale of two cities in California in general and the Bay Area specifically, and that extends to healthcare as well,” said Anthony Wright, executive director of the consumer advocacy group Health Access California, which has an office in Oakland.
San Francisco County has far and away the most doctors per capita in the state. Yet even doctors considering jobs at Permanente Medical Group worry they can’t afford to live there, said Dr. Sameer Awsare, the practice’s associate executive director. “The cost of living is getting quite crazy,” he said.
San Francisco’s largest employers include heavy hitters in the tech industry, like Apple, Facebook, Google and Intel, as well as some in healthcare, like McKesson Corp.
People who spend their days propelling humanity into the future expect innovation from other aspects of their life. In San Francisco, the dynamic has hastened the demand for healthcare that can be delivered whenever, wherever and using cutting-edge technology. It’s given rise to companies like Forward and One Medical and has challenged traditional providers to step up their game.
Bay Area residents tend to be early adopters of healthcare innovations because they understand the power of technology, said Dr. Nate Favini, medical lead at Forward, a primary-care practice that launched its first clinic in San Francisco’s Financial District three years ago.
“People use technology to have their food delivered or to get a ride somewhere and they’ve helped to build those technologies,” he said. “So they’re asking themselves, ‘Why do I still go sit in this decrepit old doctor’s office and wait forever and have a terrible experience, when technology has changed the way I use and interact with every other service in my life?’ ”
At Forward, patients enter the lobby and step onto a futuristic-looking body scanner that uses sensors to measure their body temperature, heart rate, blood oxygen level and weight. That information, along with data from their wearable device, then fills a giant screen in the exam room. That data, the results of genetic testing included with a membership and notes from doctor visits automatically appear in the Forward app on patients’ phones.
Forward, which now has clinics in other cities, is a membership-based practice that typically costs $149 a month. Patients can message their care team 24/7. Favini said the goal is to eventually bring that price down so that it’s accessible to more people.
San Francisco-based One Medical, which recently went public, is more affordable at $199 per year. The company touts same day-appointments and care provided in patients’ workplaces or using video.
Such practices “address failures in our current primary-care system,” said Dr. Coleen Kivlahan, UCSF Health’s executive director of primary-care services.
“Access is a major disrupter, and when these programs can create immediate, same-day access or after-hours access, that is a disrupter to a visit-based or building-focused practice,” Kivlahan said. “It makes it difficult for me to compete. I can’t offer same-day access.”
The demand has pushed traditional providers to change how they operate. Sutter Health in 2018 launched a practice in San Francisco called Tera that’s been able to move 90% of patient care into virtual space, including video and phone visits, said Dr. Yumi Taylor, Tera’s founder.
Permanente Medical Group, made up of physicians that treat Kaiser Permanente members, has responded aggressively. Its patients have 24/7 access, whether by secure message, phone, video or in-person visits, Awsare said. Last year, the medical group delivered almost 5 million telephone visits, more than 23 million secure messages and almost 100,000 video visits, he said, adding that 70% of the medical group’s dermatology is now done virtually, through emailed photos or video.
Another long-standing feature of San Francisco’s healthcare industry is the fact that it’s dominated by major healthcare players like Sutter Health, Kaiser Permanente and UCSF.
Sutter recently agreed to pay $575 million to settle a high-profile lawsuit that alleged the system used its market dominance to demand all-or-nothing contracts with insurers and denying patients access to cheaper health plans, which allegedly drove up healthcare prices in the region. A damages expert working on behalf of the plaintiffs estimated Sutter overcharged them by 15.5% on average.
“It’s possible this litigation will reduce some of Sutter’s power in the market,” said Dr. Janet Coffman, a professor at the UCSF Healthforce Center, which tracks healthcare workforce issues. “Sutter certainly has power in the outpatient market, but the bigger issue is on the hospital side.”
Research has found San Francisco, along with other California counties, has a consolidated hospital market. Market concentration is measured using a metric called the Herfindahl-Hirschman Index. Average prices for inpatient procedures are 79% higher in markets with HHI scores above 1,500 compared with markets below 1,500. A 2018 study by researchers at the University of California at Berkeley found San Francisco’s HHI hospital market score was about 2,200 in 2014, a number the U.S. Department of Justice considers to be “moderately concentrated.”
That study found that inpatient costs were 70% higher in Northern California than Southern California across the healthcare market, and also that the inpatient market was more concentrated.
John Pollock, CEO of the real estate development firm Meridian, said he thinks competition is still alive and well on the outpatient front. “We see opportunity,” he said, “particularly in outpatient care as they try to defend their flanks and really try to get those patients.”
The concept of paying a premium for concierge-level access to doctors has been around for years but has gained particular popularity in the Bay Area, where doctors who charge tens of thousands of dollars for annual memberships say they have no issues filling their panels.
“In the Bay Area where people have, I’d say, more refined needs and more financial resources and the cost of running a practice is much higher, I’d say more standard concierge practices have done better here,” said Dr. Paul Abramson, medical director of My Doctor Medical Group, a concierge practice in San Francisco’s Financial District.
Local concierge providers, most of whom do not accept health insurance and charge patients monthly or annual membership fees, said they cater to a patient population that wants close relationships with their doctors and 24/7 access. Sources said that membership fees can range from around $7,000 to around $40,000 per patient per year, depending on how small the practice is and how much attention each patient receives.
Peninsula Doctor, an exclusive concierge practice in Menlo Park an hour south of San Francisco, is on the high end of that scale because of the amount of time its doctors spend with their patients, and how few patients each doctor sees in a day, said Sabina Shnapek, the practice’s head of business operations. That includes a physician accompanying them to their specialist appointments. Peninsula doesn’t disclose the cost. “We know these people really, really well,” she said. “The level of care we can provide and quality of service, it’s a whole different ballgame when you know your patients.”
At the same time, quite a different trend is taking shape. The high cost of practicing in the Bay Area is making it increasingly difficult for providers that treat low-income patients. Land value and commercial rents are very high even in impoverished neighborhoods like Tenderloin or Mission, which makes it difficult for providers that serve low-income patients to locate there, according to a draft version of the city of San Francisco’s forthcoming Health Care Services Master Plan.
The report also found that the high cost of doing business in the area is making it difficult for federally qualified health centers and community clinics to attract physicians. It says geographic and socioeconomic health disparities are expected to continue in the future.
San Francisco’s 2019 Community Health Needs Assessment cited racial health inequities and poverty as two foundational issues contributing to local health needs.
“We know it’s a challenge,” said Claire Lindsay, senior health program planner with the city’s public health department. “Because of other forces, because of reimbursement rates that exist outside of city’s jurisdiction, we know that it’s challenging for them to keep providers and pay them a fair salary and afford to live here because of the high cost of living.”
Since the proportion of patients who see concierge doctors likely only represents 2% to 3% of the market, it’s probably not contributing to the recruitment challenges facing providers that treat low-income patients in the Bay Area, said UCSF’s Coffman.
San Francisco County has a robust supply of doctors compared with the rest of the state, a Modern Healthcare analysis found. The county had 827 physicians across all specialties per 100,000 people, the highest of any California county, and compared with an average of 215 physicians per 100,000 people across all California counties. San Francisco County also had the highest number of primary-care physicians per 100,000 people in 2017: 158 compared with 70 on average.
Concierge medicine is likely to happen anywhere there’s a high saturation of doctors, especially those who are younger, forward-thinking and fed up with insurance rules and regulations, said Donovan Miske, executive director of Kona Medical Consulting, a Detroit-based company that manages concierge practices, including several in the Bay Area. “We’re kind of the punk rockers of the medicine field,” he said.
Miske said he thinks the Bay Area is particularly well suited for concierge medicine. Expensive real estate drives providers to look for more creative ways to use office space, such as shared workspaces or even seeing patients in their homes or offices, which they mostly couldn’t do if they billed insurance.
“San Francisco is going to increasingly become more and more concierge,” he said. “The density and prices to operate and own a business just keep skyrocketing.”
It’s not just physicians who are eschewing health insurance. Many of the Bay Area’s mental health providers operate largely on a self-pay basis, making it almost impossible for people to get care if they can’t afford to pay out-of-pocket.
Some mental health providers in the area say closing their practices to health insurance has become necessary to their survival. They argue reimbursement rates from the area’s dominant health insurers haven’t kept up with their skyrocketing expenses. Rates for therapy typically start at about $200 per hour and can go as high as $500 per hour, according to several therapists interviewed.
It’s a trend happening across the country, but some say it’s intensified in San Francisco by the high cost of living. Almost half of California residents who tried to make mental health appointments using their health insurance found it very or somewhat difficult to find providers who took their insurance, according to a February survey by the California Health Care Foundation. Nine in 10 Californians who took the survey said making sure people with mental health problems can get treatment is their top healthcare priority above all other health issues.
UCSF’s Coffman said there isn’t great data available on the issue, but the trend seems to be more common in affluent areas in places like San Francisco, Beverly Hills and New York City. San Francisco’s public health department is currently studying the issue, said Jenna Lane, a behavioral health communications specialist in the city’s public health department.
Shelley Diamond, a licensed psychologist who runs a solo practice in San Francisco, said she works seven days a week in order to break even. The rent for her office near Golden Gate Park increases every year, and she also shoulders heavy expenses to live in the city. She said she’s only in one insurance network and the rest of her clients have to pay out-of-pocket so she can make ends meet.
Accepting insurance also means spending time dealing with the associated administrative hassles, she said. “You’re chasing a few dollars here, a few dollars there, just to get a pitiful amount that you can’t even pay your bills,” Diamond said. “Every month they make mistakes, don’t pay because of errors.”
Akiko Kaji, another licensed psychologist in San Francisco, is among the providers who do accept health insurance. She said she’s able to because her husband works in information technology and her income is supplemental for their family of three.
Kaji said health insurers typically pay less than half of the amount that a patient would pay out-of-pocket—something like $60 an hour, including the patient’s co-pay, for a master’s level therapy and $70 an hour for a doctorate level therapist, she said.
“It’s basically really difficult to live comfortably if you take insurance,” she said.