Plans to build an Elk Grove hospital, announced nearly 4 years ago, are on hold. Here’s why

Dignity Health’s plans for a first-ever hospital in Elk Grove are on hold, with no set timeline to start back up again.

A sign just off a busy stretch of Elk Grove Boulevard marks the spot where a new six-story, 200,000 square-foot, 100-bed facility would be built: the first full-service hospital for a city projected to top 200,000 people by the end of the decade.

Originally set to begin construction this year with a projected 2026 opening, the future for the facility is now uncertain.

“For the past three years, we have been focused on meeting the needs of our community in response to the pandemic and as a result, the timeline for this project has been impacted,” said Phyllis Baltz, president of Dignity’s Methodist Hospital, the south Sacramento hospital that a new Elk Grove campus is intended to eventually replace.

Baltz said Dignity Health and other health networks still grapple with the effects of the COVID-19 pandemic.

“Similar to health systems across the country, we are in the process of reviewing and reprioritizing all of our major capital projects,” Baltz said.

Dignity Health unveiled its plans in December 2019, and there was excitement on an overcast January day weeks later on Wymark Road. Baltz spoke of the rare chance to build a new hospital from scratch.

“It’s not often in a health care career that you have the opportunity to build a hospital from the ground up,” Baltz said at the 2020 ceremony.

Weeks later came the global pandemic that so dramatically upended the health care landscape. Elk Grove has not received an official update from the medical group since, a city spokeswoman said last week.

“COVID’s impact on providers has been significant and wide-ranging,” health care analyst Len Finocchio stated in a 2021 report by the non-profit California Health Care Foundation, just as the global contagion was deepening.

Opening a hospital in Elk Grove has been in Dignity’s plans for more than a decade. The network purchased the land in 2007. Elk Grove leaders went on to approve the project seven years later in 2013.

Another factor for the hospital delay, perhaps, was Dignity Health’s 2019 merger with Colorado’s Catholic Health Initiatives to form CommonSpirit Health. The mega-network is now the nation’s second-largest nonprofit hospital chain, operating more than 700 care sites and 142 hospitals with 25,000 physicians across 21 states.

Analysts surmise that decisions on Dignity capital projects like Elk Grove’s that were once made in California are now being considered 2,000 miles away, at CommonSpirit’s Chicago headquarters. Dignity Health is headquartered in San Francisco.

As recently as May, officials in a CommonSpirit quarterly report said the pandemic’s ongoing impacts continue to linger across the organization’s markets; and that operational concerns including revenue losses, labor shortages and inflation “continue to impact financial results.”

But local Dignity Health leaders insist that an Elk Grove hospital remains a priority for the network, both to serve a growing city and as an eventual replacement for Methodist Hospital.

Dignity Health says it is adding on to services it already has ahead of an eventual Elk Grove hospital, setting aside third-floor space in its existing medical office building in the city for more physicians’ offices and opening an emergency obstetrics department at Methodist.

Dignity Health served more than 15,000 emergency visits and more than 4,000 hospital admissions to Elk Grove-area residents in this past year, according to the health system. Thousands more enrolled in health insurance plans with provider benefits are served by Dignity in Elk Grove and immediate surrounding areas.

Even before the pandemic, the Sacramento-area market delivered its own challenges for health care providers, even as its big four networks — Kaiser Permanente, Sutter Health, UC Davis Health and Dignity Health — continued to expand territory, build hospitals and open office space. That same 2021 California Health Care Foundation report laid out the local landscape, describing a “pricey and tumultuous market.”

Each of Sacramento’s three other major health care player have footholds in Elk Grove. Sutter at one point had its own designs for a hospital in the city. Its plans for a phased development of 393,000 square feet of facilities — including a surgery center, medical offices and a 68-bed hospital with a heliport expandable to 99 beds — went as far as CEQA environmental review in 2008.

And Elk Grove-based California Northstate University scuttled its plans for a 400-bed, 13-story hospital tower and helipad on the city’s west side in 2021 after an aggressive-but-ultimately-unsuccessful campaign. The proposed site near Interstate 5 and its Stonelake community campus was rejected by Elk Grove city planners after vehement opposition from neighbors and environmental groups.

The private medical school now has sights set on a $1 billion hospital and medical campus in North Natomas.

Meantime, Elk Grove remains on the short list of California cities of 100,000 population or larger without a hospital, according to the California Hospital Association. At nearly 178,000 people, Elk Grove is second in size on the list only to Santa Clarita in Southern California’s San Fernando Valley, at more than 221,000.

But association officials note that some cities on their list are close to hospitals in neighboring cities. Such is the case in Elk Grove, near Kaiser Permanente South Sacramento Medical Center, Methodist, Sutter General Hospital and UC Davis Medical Center in Sacramento.

Other health systems expand into fast-growing Elk Grove

Even as Sacramento’s big four health systems and the communities they serve continue to emerge from the pandemic, they do so in a still-strong health care market, say analysts.

The Sacramento health care market remains relatively robust with its high rates of residents covered by insurance. Dignity Health provides a ready example — 12,000 people enrolled in health insurance plans with provider benefits are served by Dignity in Elk Grove and surrounding areas alone, say Dignity officials.

Operating margins — profit after wages and other production costs — remain healthy. It’s but one of several indicators of a system’s overall health, along with wealth in the form of cash reserves.

Sutter Health, for instance, posted an operating profit of $278 million in 2022, up 40% from the prior year, while patient volume returned to levels last seen before the pandemic, Sutter officials said earlier this year.

Health systems are able to grow to meet demand, confident that the market will bear out, say local industry watchers.

Dignity’s competitors are testing that maxim. Neither UC Davis nor Sutter Health are planning new hospitals in Elk Grove, but springtime moves by both systems point to what the future holds for health care in the city.

In March, UC Davis Health paid just below $19.5 million for 20 acres at Elk Grove Boulevard and Laguna Springs Drive in Elk Grove, east of Dignity Health’s Wymark Road plot. The aim: to add more primary and specialty care services to its existing Laguna Boulevard clinics while solidifying its regional footprint, officials said at the time. All, officials said, in response to anticipated growth in one of the state’s fastest growing communities.

That same month, Sutter Health leaders said the health system will spend millions of dollars to build more than 24 ambulatory care centers across Northern California, including Elk Grove, expanding access to Sutter Health’s medical teams while responding to growth-fueled demand.

Sutter owns approximately 29 undeveloped acres south of its existing complex at the southeast corner of Big Horn and Laguna boulevards.

Officials in March said the aim of the centers will vary: better access to primary care physicians and medical services at some; outpatient surgery or cancer care at others. Still other centers may have specialists practicing in concert with primary care providers.