Sutter buys Radiological Associates

11/19/2013 10:49 AM

11/19/2013 3:31 PM

Sutter Health is buying Radiological Associates of Sacramento in a union of two regional health-care giants that went through a nasty breakup three years ago.

Under an agreement that takes effect Feb. 1, Sutter Medical Foundation said Tuesday it will take control of RAS’ radiation oncology and diagnostic imaging services. Nearly 800 RAS employees, including the 60 doctors who own the radiology business, will go to work for the Sutter affiliate, Sutter Medical Group. The RAS name will give way to the Sutter brand.

Financial terms weren’t disclosed.

Experts said the deal is part of a trend toward consolidation in the industry, as medical providers try to economize in response to the Affordable Care Act and other pressures from government to reduce costs.

All 47 of Sutter’s and RAS’ imaging-related facilities will remain open for the time being, but Sutter will scrutinize the two operations for duplication of infrastructure. “There might be reallocating, closing, consolidating,” said Tom Blinn, Sutter Health’s regional chief executive for ambulatory care.

But officials stressed that the deal will improve the caliber of care, too. Having RAS’ 60 doctors join Sutter Medical Group’s staff of 650 doctors will create a forum “to collaborate clinically, learn from each other,” said Dr. Christine Griger, president of Sutter Medical Group.

There is some overlap in personnel between the two organizations. Sutter already has radiologists. But it doesn’t have radiation oncologists, Griger said, “so that will be new to us.”

The agreement comes three years after a highly public split between the two organizations. Embarking on an expansion of its own imaging business, Sutter ousted RAS from its Sacramento-area hospitals, severing a nearly 90-year relationship in which RAS doctors performed X-rays, CT scans and other diagnostic imaging services in Sutter’s facilities. A managed-care contract remained in force, although that agreement lapsed eight months ago.

The split triggered a lawsuit by six RAS physicians, who complained that they were being kept out of Sutter hospitals in Sacramento and Roseville.

On Tuesday, however, officials from both organizations sidestepped questions about the 2010 split.

“RAS and Sutter worked side by side for almost 100 years. That’s the context,” said Dr. Jonathan Breslau, president of RAS. “Right now, the best foot forward is working with Sutter.”

Blinn added: “We have ... an opportunity to do things better together.”

The deal is an example of “classic vertical integration – control more parts of the supply chain,” said Joanne Spetz, a health care economist at the University of California, San Francisco.

The rollout of the Affordable Care Act probably made RAS all the more desirable for Sutter, she added. Because more patients are getting insurance for the first time, their primary-care physicians will be referring them for a lot of CT scans and other tests. The law means “you wind up with a bunch of testing,” she said.

Even without the new law, providers are under increasing pressure to merge in order to save money. “That’s not easy to do when you’re operating on a small scale,” said Aileen Wetzel, CEO of the Sierra Sacramento Valley Medical Society. “Many of the physicians who are in small to medium groups are looking for alternatives. There’s a growing trend ... towards physicians who are combining their practices, consolidating.”

RAS is laying off 24 employees next month, according to filings with the state Employment Development Department. The layoffs aren’t connected to the Sutter deal, said RAS spokeswoman Kelly Balaam.

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