Health Care Group Expands Its Horizons

As in any business, once a health care company gets to a certain size, it has to start doing things differently.

Consider Friendly Hills Healthcare in La Habra, for example.

In January, the diversified medical group quadrupled the number of people it serves when it picked up 300,000 new health plan members across Southern California from Cigna Corp. The acquisition, engineered by Friendly Hills’ parent, Illinois-based Caremark International Inc., increased Friendly Hills membership rolls to 400,000. The company also added 250 doctors from Cigna, making a total of about 380 .

The change meant Friendly Hills could no longer serve all of its members, as it used to, from its own 270-bed hospital in La Habra. Its new members live across a much wider area, including Orange, Los Angeles, San Bernardino and Riverside counties, so it needed to contract with hospitals and other providers throughout the territory.

To do that, Friendly Hills decided to become the first medical group in the county to apply for a special state license that will allow it to behave much like a health maintenance organization. HMOs traditionally divide up members’ premiums among a range of providers, including medical groups, hospitals, home care agencies and others. Presently, Friendly Hills can receive premiums only for its original doctors group in Orange and Los Angeles counties and its own hospital in La Habra.

Unlike the typical HMO, however, Friendly Hills will not market itself directly to employers or consumers. It will still rely on HMOs to refer customers.

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Barbara Marsh covers health care for The Times. She can be reached at (714) 966-7762 and at barbara.marsh@latimes.com