Talks still tentative; venture could bring cost, service benefits

MARIN AND SONOMA – A partnership between Sonoma Valley Hospital and the Marin Healthcare District is being explored by both parties as each seeks to maintain  competitive advantage amid anticipated changes at the once-struggling hospitals.

Marin General Hospital, which is operated by the Marin Healthcare District, is set to transition away from its previous operator, Sutter Health, and a partnership with Sonoma Valley Hospital could help strengthen the district’s position, according to Jon Friedenberg, the district’s chief fund and business development officer.

For Sonoma Valley Hospital, which in 2009 posted an $850,000 loss,  a partnership with Marin Healthcare District would likely strengthen its bottom line and help maintain a level of autonomy that both hospitals see as an ideal, said Sonoma Valley Hospital Chief Financial Officer Tim Noakes.

“Hospitals that are more efficient tend to be affiliated, and they tend to save more money,” he said, adding that Sonoma Valley is expecting to net $150,000 next fiscal year.

Talks between the two hospitals have been ongoing for some time, but the conversation has become more serious in the past 60 days.  And although no time table is set for any agreement, both Mr. Noakes and Mr. Friedenberg said some form of collaboration was likely given that both sides thus far see a benefit from  the mutual relationship.

“I think we’re months away, but not years,” Mr. Friedenburg said.

The two sides made clear that any deal would not be an outright merger, as both intend on remaining community hospitals.

The two are already supporters of the Prima Medical Group, which has offices in Sausalito, Mill Valley, Greenbrae, Larkspur, Terra Linda and Sonoma.

“It would really be a natural continuation of that relationship,” Mr. Noakes said.

Both hospitals would benefit from aspects of a collaboration, Mr. Noakes said, pointing to  a possible increased buying power, more shared physicians, better reimbursements from insurance providers, split costs for IT, billing and marketing services, and the sharing of specialized services. For example, Mr. Noakes said, the 83-bed Sonoma hospital could better serve patients in matters of interventional cardiology and cancer.

“Occasionally situations come up where the scope of services go beyond what we can offer,” he said. “We don’t have a cancer program in Sonoma and they have one in Marin.”

While “myriad” of potential services could improve for both hospitals, both Mr. Friedenberg and Mr. Noakes said more study is needed before any final agreement.

“What we’re exploring is the possibility of  collaborating for a mutual benefit,” Mr. Friedenberg said. “We think there is a potential for mutual benefit, in terms of clinical support and other kinds, whether it’s contracting, purchasing, administrative functions.”

That both hospitals operate as health care districts independent of other, larger providers is another aspect that could strengthen their positions in a competitive health care market, Mr. Friedenberg said.

“Because of our similarity in being a district, in serving adjacent geographies, there could be some nice synergies,” he said.

For Sonoma Valley, Mr. Noakes said a partnership could ease the burdens that smaller community hospitals face.

“I think it’s fair to say that Sonoma recognizes it’s difficult to survive as a stand alone hospital,” he said, adding that Sonoma could “gain some economy of scale by  being part of a larger organization.”

Both hospitals face a multitude of issues before any collaboration could be formalized, Mr. Noakes and Mr. Friedenberg said.

The Marin district is on pace to take control of the hospital on June 29. Upon the transferring of ownership, Marin General will be seeking bonds to foot the bill of an approximately $200 million seismic retrofitting of the hospital. Sonoma Valley, too, is seeking a bill process for seismic upgrades, which the board will discuss within the next 30  days, according to Mr. Noakes.

“Both organizations are juggling some high priority items,” Mr. Noakes said.

Added Mr. Friedenberg, “The way I would say it is that there are some gigantic players out there, and there is definitely a disadvantage if you’re very small,” Mr. Friedenberg said. “If you can identify partners with similar ideas you can really help yourself.”