ValleyCare seeking a partner

The key news in ValleyCare’s April 15 letter to corporate members was the ongoing discussions about an affiliation or partnership.
Chairman John Sensiba wrote, “We are currently exploring the potential for an affiliation with a number of these providers as we believe an affiliation will be in our community’s best interest. With the changes in health care, community hospitals will not survive alone.”
The ValleyCare board certainly is not alone in that decision. The giant Sutter Health system of non-profit hospitals was built when Sutter executives convinced local boards that joining the system made more sense for their communities than continuing as stand-alone entities.
ValleyCare nearly went that way many years ago when the board approved a merger with John Muir that the corporate membership rejected. ValleyCare has charted its own path since, but the health care industry changed dramatically with ObamaCare.
Just drive into Dublin on Tassajara Road and you can see one building with ValleyCare’s urgent care; Palo Alto Medical Foundation physicians’ offices; and Webster Orthopedics offices. Palo Alto is the doctors’ organization that is linked with Sutter, which operates Eden in Castro Valley as well as Alta Bates-Summit in Oakland.
John Muir has formed a joint venture with San Ramon Regional, which purchased a four-story office building down the street from ValleyCare in Pleasanton.
The huge challenge for the ValleyCare board and new CEO Scott Gregerson will be to structure the right type of affiliation/partnership. There’s no question that ValleyCare needs more capital to maintain and improve its services. The partnerships that former CEO Marcy Feit built with UC Davis’s medical school and then UCSF gave patients access to specialists and cutting edge treatments (to say nothing about the neonatal intensive care unit staffed by UCSF specialists at ValleyCare).
As Gregerson noted, whatever arrangement must allow ValleyCare to retain its ability to react nimbly to the market, a trait very difficult to find in large organizations.
The demographics of the Tri-Valley, with relatively few patients living in poverty, are highly desirable for potential partners. ValleyCare brings a lot to the table—it will be interesting to see what organization the board decides to move forward with.
Last week President Obama touted sign-ups for ObamaCare, saying 8 million people had signed up. Of course, the government still cannot tell anyone how many of those people actually paid for their policies.
In California, the total was 830,000 through the state insurance exchange with another 2 million added to the MediCal rolls. Remember that Gregerson said that when ValleyCare treats a MediCal patient, it recovers just 68 cents on the dollar it spends. Those numbers are typical across the industry and remember that hospitals are targeted for cost reductions under the health care law.
Those numbers point out why hospitals serving communities with lots of people living in poverty struggle to survive—there just are not enough insured patients to spread the costs across to balance the books.