The two chief executives of two of the biggest health-care providers in Santa Barbara County formally announced this Monday what the South Coast medical community has been whispering for the past six months: Cottage Health System is officially exploring merger talks with the Sansum Clinic. Speaking to a packed house of doctors at Cottage Hospital’s Burtness Auditorium, Cottage CEO Ron Werft explained he had signed a letter of intent to incorporate Sansum — with its 23 clinics, 180 doctors, and 1,200 employees—into the Cottage Health System with its three hospitals and rehab institute. Taking the stage with Werft was Sansum CEO Kurt Ransohoff.
By combining forces, the two CEOs said in an interview afterward, Cottage and Sansum can “do a better job” controlling costs while providing better integrated health care at a time when the number of insured patients throughout Santa Barbara County is expected to jump by 25,000 come January 1, 2014, when the Affordable Care Act goes into effect. At that time, the basic economics by which health care is financed in the United States will undergo a drastic sea change. Medical providers will find themselves reimbursed less on the traditional fee-for-service basis, but more by a set dollar amount per patient, otherwise known as “capitation.”
The strategy behind this shift is to give medical providers a powerful financial incentive to focus on the total health of the patients and not so much on procedures provided. To meet this new demand, existing medical institutions must better coordinate the delivery of services, and to that end, Werft and Ransohoff said they signed the letter of intent to come together.
Although Sansum will become part of Cottage, it will retain its name. “Most people won’t even know there’s a difference,” said Ransohoff. Those most likely to feel it, he added, are patients with complicated health challenges requiring numerous hospitalizations coupled with extensive follow-up treatment upon release. By fusing the two institutions, the objective is to offer better “continuity of care” under one roof, economies of scale, better coordination, and better bargaining power with suppliers.
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Date: June 19, 2013