UCSF, John Muir Health to Partner, Create Bay Area Health Network

UC San Francisco and John Muir Health, which primarily serves patients in Contra Costa and Alameda counties, announced Tuesday that they will form a new company and, in their first joint move, develop a regional health network.

Both companies will remain independent. The new network will be an accountable care organization (ACO), which will provide patients access to hospitals, doctors and other providers from the two organizations.

An ACO is a formal network of both doctors and hospitals. They share medical responsibility and financial responsibility for patients. The goal is to provide higher quality care at a lower price and limit unnecessary spending.

"We look forward to working not just with each other, "said Mark Laret, CEO of UCSF Medical Center in a joint release, "but with other health organizations throughout Northern California."

In the joint release, Cal Knight, president and CEO of John Muir Health, noted that his organization had considered other affiliations, but found the "right fit" with UCSF and "look(s) forward to the development, along with other partners, of a regional ACO that will benefit patients and the communities we serve."

The new ACO could shake up the Northern California market, dominated by the power of Sutter Health and Kaiser. People in the Bay Area pay more for health insurance because health costs are higher here than Southern California, largely due to market consolidation.

In an interview, George Sauter, chief strategy officer at John Muir Health, said, "We want to offer something that is Bay Area-wide, so you can offer basically a Kaiser-like or Sutter-like alternative in the marketplace."

At present, if a health system delivers care at a reduced cost, "we don't capture the savings," Sauter said. "If we reduce our costs, health plans don't necessarily reduce our costs to employers" when the employers purchase insurance.

Sauter believes the new affiliation will do just that: "We can manage the care, provide a consistent level of quality and service -- and ideally at lower cost," Sauter said.

A final agreement between John Muir and UCSF is expected by the end of this year.