Ornda Healthcorp. to Take Over Summit : Medicine: $375-million merger would create one of the nation’s largest publicly owned hospital companies.
Burbank-based Summit Health Ltd. agreed Thursday to be acquired by Ornda Healthcorp. in a $375-million deal that would create one of the nation’s largest publicly owned hospital companies and a major new force in the Southern California health care market.
The deal would create a $1.6-billion hospital company with 46 acute-care hospitals, four retirement centers and more than 20 other facilities providing psychiatric and nursing care and outpatient surgery. Moreover, the proposed merger would bring together under one company 13 hospitals in the Los Angeles area, some of which now compete with each other.
The proposal is another example of the wave of hospital mergers in response to President Clinton’s health care reform proposals, the growth of managed-care health insurance and a sharp decline in occupancy rates.
“Health care reform is really pushing providers into forming integrated delivery systems” or alliances between hospitals, physicians and other suppliers aimed at reducing costs and improving patient care, said Charles Martin, Ornda’s chairman and chief executive, who will retain those titles with the merged company.
“Now, with 13 hospitals (in Southern California) we have better economies of scale for securing managed-care contracts,” Martin said. “I think it will enhance our competitive position as allies rather than competitors.”
He said the company will be able to cut costs by eliminating duplicative services at the hospitals. Ronald D. Spoltore, director of health care for consultant Kenneth Leventhal & Co. in Los Angeles, said Ornda will likely close one or more of its Southland hospitals or convert them to specialty uses.
He said the merger gives Ornda a “critical mass” of facilities in the Southland and creates “tremendous pressure” on other hospitals to find partners to improve their competitive position. For example, Ornda would now operate Brotman Medical Center and Midway Hospital Medical Center, both of which compete with powerful Cedars-Sinai Medical Center for patients covered by managed-care contracts on the Westside.
