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Hoag, St. Joseph form hospital partnership in Orange County

August 15, 2012|By Chad Terhune
  • Richard Afable, chief executive of Hoag Memorial Hospital Presbyterian in Newport Beach, joined the nonprofit in 2005.
Richard Afable, chief executive of Hoag Memorial Hospital Presbyterian… (Arkasha Stevenson/Los…)

Two nonprofit hospital companies with a major presence in Orange County announced plans for a partnership as the federal healthcare law spurs more consolidation nationwide.

St. Joseph Health System and Hoag Memorial Hospital Presbyterian said Wednesday they have agreed on an affiliation among seven of their hospitals in Southern California.

They emphasized it was not a merger, but a new holding company will be formed to better integrate medical care and to eliminate duplicative services. The affiliation is subject to approval by the California attorney general's office.

The two companies have gone down this path before. In 1997, they pursued a potential affiliation in hopes it would strengthen their bargaining power with health insurers, among other factors.

St. Joseph Health, a Catholic organization based in Orange, runs 14 hospitals overall in California, Texas and New Mexico and reported $4.2 billion in revenue last year. Operating income grew 15% last year to $191.5 million, according to its annual report.

St. Joseph has five hospitals in Southern California: St. Joseph Hospital in Orange, St. Jude Medical Center in Fullerton, St. Mary Medical Center in Apple Valley and Mission Hospital in Mission Viejo and Laguna Beach.

Hoag Memorial, based in Newport Beach, has two hospitals, seven health centers and five urgent-care clinics with overall revenue of about $1 billion. Hoag was founded in 1952 by local Presbyterian churches.

The two organizations will retain their separate faith-based identities, executives said.

Richard Afable, chief executive of Hoag Memorial, said no immediate job cuts were planned under the affiliation, but the two organizations will look for efficiencies in back office and other nonclinical operations.

Afable said the combined entity should offer a more "compelling" network to insurers and employers that purchase medical care in Orange County.

Hospitals nationwide have faced belt tightening under the federal healthcare law. The California Hospital Assn. estimates that hospitals statewide face $17 billion in federal cuts over 10 years under the Affordable Care Act.

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