After pursing for nearly four years a merger that would have fused the inpatient care power of Cottage Health and the outpatient prowess of Sansum Clinic, executives of both health-care enterprises announced last week they were pulling the plug. Ron Werft, CEO of Cottage, and Kurt Ransohoff, CEO of Sansum, expressed frustration with the Federal Trade Commission (FTC), the agency charged with screening potential mergers for their monopolistic impacts.
“Over the years, we found we were waiting to hear, waiting to hear, waiting to hear,” said Ransohoff. “We just finally came to the conclusion that … we would not be able to clarify things and that going down the path we’ve been going down wasn’t going to have a good ending.” Werft experienced similar challenges trying to understand what the FTC actually wanted. “They don’t give you a recipe; they give you a list of concerns, and then you have to figure out how to respond,” he said. “But it just goes on and on and on. They have no deadlines.” This is the second time in almost nine years that Cottage and Sansum — the two 900-pound health-care gorillas on the South Coast — have submitted applications for a merger. Both times, they have had to withdraw them.
Throughout the recent attempt, Cottage and Sansum made a strategic decision not to speak in public about the merger except when necessary. Few details of the application — which involve reams of proprietary trade information — were shared with the public. About 18 months ago, however, Werft and Ransohoff explained that the FTC had expressed concerns that, because both entities own and operate outpatient surgical centers, the merger might result in a loss of competition. That could be a deal killer. Cottage, in response, found an independent buyer for its surgical centers. That sale, however, was conditional on the merger being approved. Werft explained, “They [the FTC] still are unconvinced that that transaction would result in sufficient competition ….”.