Cottage Health is a not-for-profit regional health system based on California’s Central Coast, serving communities across Santa Barbara, Ventura, and San Luis Obispo counties. The organization operates acute care hospitals, urgent care centers, outpatient services, primary and specialty care clinics and virtual care programs, with a focus on innovation and research, population health, and community-based healthcare delivery.
Cottage Health recently created a dedicated Chief Innovation Officer role and launched its Innovation Center. What are the key areas of focus, and what kinds of ideas are emerging?
We spent much of 2025 building the foundational elements of the Innovation Center, starting by soliciting ideas internally and then broadening that externally — what we call “inside out” and “outside in.” We also partnered with the University of California, Santa Barbara on a capstone relationship with its engineering and computer science departments. Now, with Chief Innovation Officer Ryan Kelly joining us from a large innovation center in Southern California, we’re fully on board. It’s been wonderful to see the level of excitement within our 5,000 employees thinking differently about how to improve things clinically, operationally, and from an efficiency standpoint.
We had 65 ideas generated across the organization last summer, many of which are already being implemented. Three of those ideas are now being developed further. One focuses on reducing falls within the hospital through changes related to clothing, items, and flooring. Another is an operative-space solution designed to improve safety and wellbeing for surgeons and nurses by reducing splash and mess in the OR. The third is a technology solution focused on improving communication between acute and post-acute care environments. We also partnered with UCSB on a sophisticated algorithm related to medical recalls, and our team won third place in the capstone competition. That project is now transitioning to a major organization that may implement it within a healthcare software solution.
What would you say are the most significant operational and financial pressures facing a regional health system like Cottage Health right now?
The biggest thing is inflationary pressures are outpacing our revenue by a large margin. I’ve been doing this work for over three decades, and this is the largest spread between inflationary cost and revenue cost that I’ve seen.
With the legislation that happened in the United States on July 1 last year, it really changes the dynamics of how we’re reimbursed, predominantly around Medicaid — what we call Medi-Cal in California. About 25% of our activity is Medi-Cal. We’re also seeing the aging of commercial to Medicare, with Medicare becoming a larger percentage year after year. For our organization, those pressures may total over $60 million a year, and we have to find ways to be more efficient and effective while maintaining a very small operating margin of between 0% and 4%. A lot of that comes from constantly improving efficiencies — from revenue cycle operations to patient throughput and supply costs.
How is Cottage Health approaching workforce stability and clinician retention at a time when many hospitals continue to face staffing shortages and labor cost pressures?
This is something that really drove me to working here at Cottage Health. We have a really strong culture and shared governance model, with a high level of collaboration across the organization.
In Santa Barbara, the biggest pressure point has been housing. To recruit and retain talented people, housing is a very large obstacle in our marketplace. We’ve created a model to help assist with housing for our workforce. Any member of the organization who has been here for a year, we will buy equity into an individual’s home for up to $500,000, which can be up to 40% of the value of the home. We also offer additional housing support, including reduced interest rates and access to housing at previous cost structures rather than current ones. Childcare has also been a major issue, so we’ve created what I think is one of the best childcare centers not only in California but in the United States, and we’re going to double its size to support almost 200 children every day.
How has patient care delivery changed as more care moves into outpatient, virtual, urgent care, and specialty settings?
We understand that access is critical, and we need to make sure the system works efficiently and effectively at every level of care. We have a very broad virtual care platform available to anybody residing in the state of California, so almost 40 million people have access to a sophisticated virtual care platform.
Across Ventura County, Santa Barbara County, and San Luis Obispo County, we also have an extensive urgent care network with more than 13 locations. They reduce the need for lower-level emergency room care and have been voted the best urgent cares in their communities. We also have an extensive population health arm focused on people’s long-term health, not just acute episodic issues. And if someone does need to be admitted to Cottage Health, we do it better than almost anybody else in the United States. Our satisfaction scores consistently place us in the top decile.
What are patients expecting from a health system today that they maybe weren’t expecting five or ten years ago?
The biggest thing is that people want more control over their time and how effectively they use it. If I want to schedule an appointment online, I want to be able to do it no differently than booking a restaurant reservation or a flight.
We understand that consumer interaction needs to be more seamless. We’re deploying more tools so people can interact more easily with caregivers, receive notifications, and become more proactive about the care they need.
How is Cottage Health evaluating and implementing technologies such as AI, automation, and digital health tools?
We’re very patient-centered, so any new tools or technology have to answer a fundamental question: how does it help the people we serve? That breaks into two buckets — the patients we care for and the people working at Cottage.
We’re seeing physicians use AI through voice recognition tools that integrate into the electronic health record, and there are some really good solutions already active across organizations. We’re also using AI tools in areas like revenue cycle to make back-office functions more efficient. But we always ask whether the technology will improve the work environment, daily tasks, and clinical care. I think communication and education are key as well. I’ve been amazed by how eager our teams are to understand how these applications can make them more effective.
