DISTRUST BUT VERIFY: Maybe it’s no big deal. Maybe I’m too fussy. But isn’t anyone else troubled that the federal oversight body most responsible for approving the Haggen-Vons-Albertsons supermarket meltdown is the very same government agency empowered to approve plans to merge Cottage Health with the Sansum Medical Clinic? Everyone gets a free pass, I suppose, because everyone screws up. And by everyone, I mean the Federal Trade Commission, better known as the FTC, whose job is to regulate business mergers and make sure consumers don’t get screwed. In this equation, Sansum and Cottage qualify as two 9,000-pound gorillas. The FTC is now reviewing plans — submitted in 2013 — to surgically reconfigure these two King Kongs into the health-care equivalent of Siamese twins. It could very well be the case that two heads are, in fact, much better than one, and that bigger is indeed more beautiful. Even so, there’s ample reason sane people get paranoid about big monopolies, even if the more delicate term now is “sole provider.” Prices have a habit of going up, range of services often go down, and access can be impeded. Given that the product under consideration is health care, the stakes involved could not be much higher.
With this in mind, I’m most struck by the screaming silence the Cottage-Sansum merger has generated. After all, we held no fewer than 30 public hearings on a new hedge-height ordinance. The problem is not merely that we are all trivial, superficial, silly people. It’s that there’s no forum for public discussion of the merger. That’s by design. It’s also, it turns out, a function of law. In hopes of jump-starting a public conversation, I called the FTC, seeking copies of the merger application. Seemed like a reasonable starting point. I was told the FTC doesn’t release this information. In response, I got bratty and threatened to file a Freedom of Information Act request. Go ahead, I was told. The federal law governing the FTC specifically exempts mergers from the Freedom of Information Act. That’s because merger applications often include highly sensitive financial information that no businesses would want to see made public. In response to that, I submitted a bucket-load of follow-up questions. What steps had the FTC taken to engage any of Santa Barbara’s many interest groups as to their thoughts, hopes, and concerns surrounding the proposed merger? What, I wondered, had such efforts turned up? I was told the FTC would not be responding to any of those questions and was referred instead to a generic mission statement: Ensure mergers don’t cause prices to go up.
If I were going to get really bratty, I would have brought up what a great job the FTC did with the merger between Albertsons and Safeway. That $9.2 billion supermarket mega merger was approved on the condition that Albertsons and Safeway sell off 168 of their outlets throughout the nation. This was to ensure competition among supermarkets survived and consumers didn’t get shanked in the checkout line. A relatively tiny chain from the Pacific Northwest named Haggen wound up buying 146 of these. Any fool could have predicted that Haggen would fail. No business with only 18 outlets could be expected to absorb 146 new ones overnight and survive. That’s a 900 percent increase. The FTC should have known better. Terminal logistics aside, if the point is to keep prices from going up, how does forcing the sale of supermarkets to an operator known to charge higher prices achieve that goal? But in actual practice, the picture was even worse. When Haggen took over the Carpinteria Vons, for example, customers found themselves charged even more at the cash register than what the shelf prices were. When a 38-year Vons employee there notified company executives about this chronic discrepancy, her continued employment became a matter of grave doubt. Or so she claimed in a lawsuit.
Some people have accused me of bagging on Cottage with or without provocation. I beg to differ. Were it not for Cottage’s Neonatal Intensive Care Unit, it’s doubtful my son would have survived his fourth day on planet Earth. For that I am eternally and abjectly grateful. But I also remember the last merger, when Cottage bought our St. Francis hospital. St. Francis had a geriatric psychiatric ward for older people in acute psychological distress. When St. Francis disappeared, so too did the psych ward. Given the silver tsunami we’re now experiencing, we could really use a psych ward for aging boomers. Instead, we ship them off to facilities in Ventura. Since then Cottage has gobbled up Goleta Valley Community Hospital, the Santa Ynez Hospital, and the rehab center. According to conventional wisdom, Cottage’s bargaining power with the insurance companies has grown exponentially with the disappearance of any credible competition. I don’t pretend to understand the complexities of health-care economics. But I was just told that the City of Santa Barbara spends $340 a month more to provide its employees with a family HMO plan than it costs the City of Ventura to do the same. Santa Barbara has one hospital. Ventura has four. Likewise, the insurance broker serving the County of Santa Barbara told county administrators insurance premiums in Ventura and Los Angeles are significantly lower than Santa Barbara’s. Why? No competition.
It turns out that the FTC called up high-ranking administrators with the City and County of Santa Barbara — who combined represent about 5,000 employees — months ago and got several earfuls about these very concerns. I know this because I asked around, not because the FTC deigned to divulge anything. Cottage Hospital and Sansum could still release the merger application documents on their own. I’ve asked. Here’s why they should. They could appear to be open and transparent. Since I won’t understand a word, their secrets will still be safe. Sadly, they declined. Silence is not golden, and, no, I’m not being fussy. It is a big deal.