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In Santa Barbara, worries abound over planned health care merger

In Santa Barbara, worries abound over planned health care merger

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Cottage Health System and Sansum Clinic, the largest health care providers in south Santa Barbara County, plan to merge. The deal would create a health care giant largely unchecked by competitors.

The proposed merger of the two health care nonprofits caught the eye of California Attorney General Kamala Harris, who had already been investigating Cottage for a potential violation of federal antitrust laws. The changing Affordable Care Act landscape has incentivized health care providers to combine forces and create more efficient, cost-effective systems. But recent court decisions have blocked similar mergers due to the potential for price gouging.

The Federal Trade Commission filed a lawsuit in 2013 seeking to block St. Luke’s Health System, which has seven hospitals in Idaho, from buying Saltzer Medical Group. A federal judge ruled that the deal would likely improve care but also allow the combined health care provider to pressure insurers into paying higher rates that would eventually be footed by consumers.

A hospital merger boom in the 1990s, for example, increased patient costs by 5 to 40 percent in areas where only a few hospitals dominate, according to the Robert Wood Johnson Foundation.

Without health care competition in South County, its residents and some in the industry worry that patient costs will increase. A stay in Santa Barbara Cottage Hospital’s intensive care unit jumped from $4,050 a day in 2005 to $6,120 in 2013, nearly three times the cost of an ICU stay at the Lompoc Valley Medical Center ($2,173). An ICU stay in the Community Memorial Hospital in Ventura is $7,091 compared to $9,132 in Ventura County Medical Center, $9,955 in San Luis Obispo’s Sierra Vista Regional Medical Center, and $5,585 in the California Hospital Medical Center in Los Angeles.

The UCLA Health System expanded into the Conejo Valley to fill a need for more quality primary care physicians but some area doctors worry that UCLA would muscle out community physicians. A similar situation is happening in Santa Barbara and some medical professionals feel cornered into accepting lower reimbursement rates.

Cottage is attempting to assuage the FTC’s concerns by divesting its outpatient surgery center. Still, the California Nurses Association said it is worried that consolidations that often result from mergers means patients would have to drive longer distances for adequate care.

Cottage has been gradually acquiring health care providers since it bought Santa Ynez Hospital in 1995. It purchased Goleta Valley Hospital a year later. In 2003, Cottage acquired St. Francis hospital and turned it into subsidized employee housing. That resulted in one less psychiatric ward and local psych patients are now transported to facilities in Ventura.

My 2016 California Fellowship project will investigate how the proposed Cottage/Sansum merger would impact cost, quality and access to care. With fewer health care options, who would care for the low-income and indigent populations? How is the pricing bar set when there is minimal competition? Are mergers the new normal in health care, like we’ve seen with community banks?

[Photo by Damian Gadal via Flickr.]

This post has been updated as of March 18, 2016.


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