St. Joseph to Acquire Holy Cross : Hospitals: Deal is attributed to financial crunch, but both facilities pledge to keep their commitment to the poor.

In yet another sign of the financial crunch faced by hospitals in the managed-care era, the order of Catholic nuns that owns St. Joseph Medical Center is acquiring Holy Cross Medical Center, another Catholic hospital in Mission Hills.

Hospital executives said Tuesday that both institutions and their emergency rooms will remain open, and they pledged to keep providing millions of dollars in free care to the poor--a major mission of both nonprofit facilities.

Administrators of both hospitals declined to disclose the terms, which are still being negotiated. Holy Cross, owned by the Holy Cross nuns of Notre Dame, Ind., is being acquired by the Seattle-based Sisters of Providence Health System, which owns St. Joseph in Burbank and 13 other hospitals in Washington, Oregon and Alaska.

The deal was announced at a time when hospitals across the nation are merging to gain more negotiating clout against health maintenance organizations and other managed care groups, which insure millions of people and have used that leverage to sharply drive down hospital and doctors’ fees in recent years.

From 1989 to 1993, there has been a wave of 87 mergers and consolidations involving 178 hospitals across the United States, according to the American Hospital Assn., an industry trade group. The association does not keep figures on how many hospitals have closed or declared bankruptcy as managed care has revolutionized the health care business.

Deep price-cutting has affected even the most prestigious hospitals, such as St. Joseph. The hospital has lost more than $20 million since 1990, said a hospital spokeswoman.

“We were slow to react to the market conditions,” said Michael Madden, chief executive officer of St. Joseph. “Managed care came in and we didn’t have some contracts [with HMOs] that we do now.”

By combining, he said, the two hospitals will “bring strength to the market that individually we couldn’t.”

Holy Cross has operated either slightly in the red or slightly in the black over the past several years, said the hospital’s president and chief executive officer, Carl Fitch. He added that the $34 million in damages the hospital suffered in last year’s earthquake was not a factor in the acquisition, although the hospital had to pay $2.4 million to meet its quake damage policy’s deductible.

Both institutions said they will continue to provide a high level of “uncompensated care.” That refers both to free care for the uninsured and to making up payment shortfalls for patients covered by Medicare and Medicaid, the government medical programs that often don’t pay the full cost of care.

Last year, for instance, St. Joseph spent $14.4 million on uncompensated care. Holy Cross paid $9.9 million, including $2.3 million in charity care.

“Whatever comes in, we’ll take care of,” Fitch said.

With 309 beds, Holy Cross is about half the size of St. Joseph. But the Mission Hills hospital operates one of two trauma centers in the San Fernando Valley, a service that Fitch said will continue after the takeover. Trauma centers are staffed by surgical specialists available around the clock to treat victims of car crashes, gunshots and other severe injuries.

Madden said he expects clinical services at both hospitals to remain unchanged despite the acquisition, although cuts are likely among managers and support services. Both Madden and Fitch are expected to retain their jobs, Fitch said.

David Langness, spokesman for the Southern California Healthcare Assn., a group of mostly private hospitals, said St. Joseph had been searching for a suitable partner for some time before striking the preliminary deal with Holy Cross.

“Holy Cross is seen as a particularly good fit because they are not competing hospitals,” he said. “They don’t have the same kinds of programs, and they don’t compete in the same area geographically.

“St. Joseph was one of the last, big, free-standing, non-network hospitals in Los Angeles County,” Langness added. “What this means is that we have really moved completely into the era of hospital networks. It’s very difficult to make it as a free-standing, unaffiliated hospital in the ‘90s.”