Five ways Sutter merger shakes up Tri-County healthcare

Now that the Sansum Clinic-Sutter Health transaction is a done deal, it’s time for a look at what the transaction tells us about the region’s incredibly complex healthcare system — and what happens next.

Here are five things to consider:

• Don’t discount the fact that the stealth factor in this merger was the high cost of housing. Repeated policy failures on the housing front make it impossible for doctors, nurses and other skilled healthcare professionals to find housing that is competitive with other markets. That makes it hard to recruit and without top talent, Sansum was going to be at a competitive disadvantage. That wasn’t the case a generation ago when South Coast housing was expensive but not out of reach. Now, a new generation of medical professionals is looking for a place to live and coming up empty.  

• The not-so-stealth factor was the rising cost of technology. Sansum Clinic’s quick pivot to telemedicine gave it a competitive advantage during the pandemic. But in the post-pandemic world, things are different. Government help is drying up just as investments in new technologies, new information systems, new diagnostic and treatment equipment, and most of all artificial intelligence, are going to be increasingly expensive. Sutter can make those investments across a vastly bigger platform and adding Sansum Clinic’s network will quite likely help reduce per-capita costs for both organizations.

• Sutter Health would be wise to keep Sansum Clinic CEO Kurt Ransohoff and some board members on the team. Indications are that Ransohoff will stay in a senior role, and Sutter said it’s looking at adding one or two board members to its advisory board. Local market knowledge is crucial, especially in South Santa Barbara County. Having those insights can help take advantage of opportunities — and avoid missteps in personnel, facilities and logistics. That could be especially true when it comes to relationships with Cottage Health and other large organizations.

• This likely is not the last Sutter Health transaction we will see on the Central Coast. If I had to bet, I’d put my money on Sutter coming back and filling the Central Coast with physician practice acquisitions in the Santa Maria-San Luis Obispo corridor and perhaps discuss some sort of partnership with Tenet Health hospitals in San Luis and Templeton. Looking across the tri-county region, we have a dozen acute care hospitals operating under five or six different types of ownership, plus UCLA and Kaiser Permanente. It’s a market ripe for consolidation.

• There will be ripple effects. UCLA’s effort to build a specialist network as far north as San Luis Obispo now has a serious competitor with Sutter Health in the mix. Cottage Health’s Urgent Care network will become more important as a source of patients. Dignity Health’s hospitals in Santa Maria, Arroyo Grande and San Luis Obispo will be watching and taking notes.

The bottom line is that the cost efficiencies that Sutter Health will gain from operating the Sansum Clinic network are going to be substantial. That doesn’t just include purchasing, logistics and medical technology — it also includes financial management, billing and data platforms. Those efficiencies are large enough that the transaction offered Sansum a financial lifeline at a time when its margins were going to be thin to nonexistent.

Note to politicians and bureaucrats: Take this lesson of high housing costs to heart. When new, young doctors can’t afford to live in your town, the autonomy of your healthcare system is going to be at risk.

• Henry Dubroff is the founder, owner and editor of the Pacific Coast Business Times. He can be reached at