For Sutter North Medical Group, the math of rural healthcare in California is challenging. Travel north or west from Yuba City, and commercial insurance coverage drops precipitously — from roughly 40% of patients to 20% or below. The populations that remain are disproportionately on Medicaid and Medicare, precisely the payers facing the sharpest reimbursement pressure under HR-1 legislation that has reshaped the federal funding landscape for rural providers.
Steven Blair, MD, president and CEO of Yuba City, Calif.-based Sutter North Medical Group, does not describe value-based care as a payment reform trend his group is watching from a distance; it’s the financial mechanism that makes everything else possible.
“We’ve grown into a value-based care network and that’s something that Sutter Health is moving forward with. It’s nice to be able to, even in the rural population, still be a participant in value-based care. That is really the future for us,” said Dr. Blair in an interview with the “Becker’s Healthcare Podcast.” “I think the only way that we can continue to grow and deliver what we want to deliver to the patients is really through value-based care approaches.”
Sutter North is one of eight physician groups within Sacramento-based Sutter Health, with 130 clinicians across a multispecialty practice serving a population that has roughly doubled over the past 20 years. The group has grown approximately 25% in clinicians in recent years, expanding primary and specialty care into a semi-rural — more remote than much of Sutter Health’s footprint, but with access to the broader system’s resources.
The cost of delivering care in California is high across every input — physician compensation, staffing, facilities — and does not compress proportionally when the payer mix shifts toward government coverage.
“You’re going to start to run into populations where the amount of commercial insurance drops dramatically,” Dr. Blair said. “And with that comes some difficulty in how you deliver that care while still maintaining the ability to deliver it in a relatively good fashion while being able to afford the staffing and everything else that goes into that care.”
Other rural providers in California have already felt that pressure acutely. Mad River Community Hospital in Arcata, Calif., turned to outside partnerships to stabilize operations amid Medicaid cuts, while rural leaders speaking at Becker’s 16th Annual Meeting in April raised questions about whether the $50 billion rural health fund will reach providers most in need. Those concerns have a legislative dimension: the same legislation that created the rural health fund carries projected Medicaid cuts of $155 billion over the next decade.
For Sutter North, value-based care is the counterweight, incentivizing quality over volume.
“We do well in hypertension. We do well in diabetes. We do well in other population health,” he said.
A remote monitoring platform deployed through Sutter Health supports the group’s heart failure and hypertension programs, with pharmacist involvement designed to reduce the clinical burden on primary care physicians. Dr. Blair said the group is roughly one-third primary care, a mix he views as foundational for population health performance.
The argument for value-based care extends beyond the financial. Sutter North is the only OB-GYN provider in its area and delivers approximately 90% of the babies in the region — a service line that does not carry strong commercial margins but that Dr. Blair sees as central to the group’s community mission.
“There’s a mission to do it, and we just have to figure out ways to do it,” he said. “But I think using value-based care and some of the other mechanisms to manage population health will allow us to do more and more of those things that we all feel good about.”
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