Two large nonprofit health-care systems, LHS Corp. and HealthWest Foundation, announced Friday that they have merged, creating an organization with $1.3 billion in annual revenue. The new group, called UniHealth America, will operate 10 hospitals--including Santa Monica Hospital and California Medical Center in downtown Los Angeles--and several other facilities, mostly in Southern California.
UniHealth will be more competitive and operate at a lower cost than Los Angeles-based LHS and Woodland Hills-based HealthWest could operate separately, UniHealth Chairman Samuel J. Tibbitts said in an interview. Much of the savings will come by cutting corporate staff.
In anticipation of the merger, LHS and HealthWest have laid off a total of 30 senior executives and 90 other managers in the past two months, for a projected saving of $11 million over the next 18 months, Tibbitts said. An undetermined number of further layoffs are expected, he said. "There'll be some more as we get further into such areas as finance and data processing."
Staffing at hospitals will not be affected in any way, nor will the quality of care change, Tibbitts added. But growing competition and deregulation in the hospital business is forcing even nonprofit chains to combine or sink, he said, comparing hospitals today to the airline and banking industry three or four years ago.
Part of a Trend
"The individual hospital, the free-standing hospital, is going to have trouble making it in the next two or three years," he said.
The formation of UniHealth is part of a trend of hospitals banding together, said Tom Goodwin, director of public affairs for the Washington-based Federation of American Health Systems, a trade association of for-profit hospitals. "We're definitely seeing a regional trend of smaller hospitals doing business with each other."
UniHealth's cost cutting and merger is intended to ensure the hospitals' future, not to staunch any losses, Tibbitts said. LHS and HealthWest together earned $10.3 million last year. But because of increasing competition, he admitted, "we're all experiencing sharply dropping bottom lines."
UniHealth facilities include LaPalma Intercommunity Hospital, Long Beach Community Hospital, Northridge Hospital, Valley Hospital in Van Nuys, Martin Luther Hospital in Anaheim, and psychiatric care centers in Pasadena, North Hollywood and Panorama City. The company also operates the CareAmerica and PacifiCare health maintenance organizations and other health-related businesses.