The cost of delivering a baby runs higher in the Sacramento region than in any other of the country’s 30 biggest metropolitan areas, with cesarean sections priced at more than twice the national average, according to a new study from a California-based research firm.
Examining claims data from millions of people with employer-provided insurance, the San Francisco-based firm Castlight Health found that Sacramento was the most expensive place to have both a C-section and a vaginal delivery, with the Bay Area ranking second.
In Sacramento, a C-section costs on average $27,067, and a vaginal birth costs an average of $15,420 – far higher than the national averages of $11,525 for a C-section and $8,775 for a vaginal birth.
The results, looking at the cost to patients, reflect the high price of health care in the Golden State, and particularly in Northern California, where hospital consolidations have left consumers with fewer choices, said Maribeth Shannon, who studies market forces and their impact on health care pricing for the California Health Care Foundation, an Oakland nonprofit group that tracks health care trends across the state.
State agencies have already reported a significant difference in health care costs between Northern and Southern California for many routine procedures.
“With bigger hospitals, the health plan doesn’t have very many options,” Shannon said. “That gives the hospital a lot of power in those negotiations. ... Sacramento has been a historically high priced market. We’ve had high prices for the last 20 years.”
The study used data from Medicare, providers and insurers as well as patient claims, said Christopher Whaley, a UC Berkeley health economist and Castlight’s data scientist. Castlight is a San Francisco startup that provides access to information on health care spending.
Unlike in Southern California where more small hospitals and physician groups operate, a few major health systems serve so much of the Sacramento area’s patient population that they wield great leverage in negotiating service costs with insurance companies, Whaley said.
During the 1990s, Sacramento’s 15 hospitals consolidated into the four major systems that dominate the market today. Dignity Health leads the region with five hospitals and 31 percent of the market, while Sutter Health has four hospitals and 27 percent of the market, according to a January report from the California Health Care Foundation. Kaiser Permanente runs three hospitals in the area with 21 percent market share, while the UC Davis Health System serves 17 percent of the market with one academic hospital.
“High prices are largely a function of market power,” Whaley said. “We know that the Northern California area is among the most concentrated hospital markets in the U.S.”
Even within the Sacramento-Yolo area, the cost of a vaginal delivery can run anywhere from $4,560 to $24,549, and the cost of a C-section ranges from $18,525 to $33,632, the Castlight study found. That’s because each health system negotiates the pricing for a baby delivery differently depending on how many patients it serves for that procedure and what that procedure costs the system, Shannon said.
According to the Office of Statewide Health Planning and Development’s Health Care Atlas, a vaginal delivery in Sacramento County is cheapest at Mercy Hospital Folsom, costing $22,835, and most expensive at the now-closed Sutter Memorial Hospital at $26,875. Prices were not listed for the Kaiser hospitals in the county. C-sections are most affordable at Mercy Folsom for $32,225, and most expensive at Mercy San Juan Hospital at $36,298.
The Castlight study found that delivering a baby in the San Francisco Bay Area costs $21,799 by C-section and $15,204 for vaginal births. The UC San Francisco medical system provides slightly more diversity to that market, which gives hospitals an incentive to keep prices low, Shannon said. The UC Davis Medical Center, with only one facility in Sacramento, is more of a niche market, she said.
That state database lists how much each hospital bills for a procedure and not how much it actually receives from patients or insurance plans, which routinely pay less than hospitals ask. The Castlight study measures how much is paid by both the patient and the patient’s employer.
Despite the higher cost of C-sections, more Californians have been opting for the procedure in recent years, according to the California Health Care Foundation. The state’s C-section rate has grown from one-fifth of all births in 1997 to a third in 2014. From 2010 to 2013, the total average payment for C-sections in California was nearly 50 percent higher than the total average payment for vaginal births.
Stephanie Teleki, the foundation’s senior program officer, said California hospitals have been pushing women to deliver by C-section to increase obstetrician efficiency and get better payouts from insurance companies.
“Hospital culture is a really fundamental concept in this rise in C-section,” she said. “If you have a really risk-averse legal team at a hospital, and then compounding that you have the economics on it that the hospital won’t earn as much by doing a natural birth, and you compound on that the time involved, it’s a huge driver.”
Sutter’s Davis hospital has the lowest C-section rate in California at 12 percent, according to the foundation. Los Angeles Community Hospital has the highest C-section rate at 70 percent.
The issue with Northern California’s health care pricing will likely continue to plague the market unless new health systems enter the arena – an unlikely scenario, Shannon said.
“It isn’t easy for competition to just crop up, for another hospital to pop into the market,” she said. “It’s a problem that’s very difficult to solve.”