South Coast Opts to Affiliate With Hospital Chain

One of Orange County’s few remaining independent hospitals chose Friday to merge with a regional network of hospitals run by the Seventh-day Adventist Church.

In a departure from a trend among nonprofit hospitals to go commercial, South Coast Medical Center--a 210-bed institution that has served Laguna Beach and nearby communities since 1959--decided to remain a charity hospital.

Trustees voted unanimously Friday to affiliate with Roseville-based Adventist Health, a nonprofit organization that operates 18 hospitals, 17 home care agencies and six hospices, mostly in California.

“Adventist Health affords our hospital the best opportunity to remain a community-based hospital with the least amount of changes for management, employees, physicians . . . and the community we serve,” said Arthur Peever, chairman of South Coast’s board.

Officials said the deal gives South Coast the best of both the nonprofit and commercial worlds of health care. As part of an extensive hospital network, South Coast should enjoy greater negotiating clout with managed care plans.

“We become one of what will now be 13 hospitals in California that will be negotiating with the various health care plans as a group,” said T. Michael Murray, the hospital’s chief executive.

Still, hospital officials expect “minimal changes” in its management or its work force of more than 600. Adventist also pledged to keep the hospital open for at least 12 years, hospital officials said.

The hospital, the sole institution serving South County residents until the 1970s, is known for operating with a distinctly small-town flair, supported by community volunteers. It offers emergency care, maternity and neonatal care and other general services.

The institution decided to look for a partner because of troubles competing in the rapidly changing medical world, as government and private health insurers cut reimbursements and larger health care organizations struck better deals with health plans.

Sources said other suitors for South Coast included two commercial health care giants, Tenet Healthcare Corp. of Santa Barbara and Columbia/HCA Healthcare Corp. of Nashville, as well as nonprofit St. Joseph Health System of Orange.

As an affiliate of Adventist Health, South Coast will retain control of hospital operations, officials said. The makeup of its 15-member board will change somewhat. Hospital physicians and local residents will continue to hold a majority of the positions, but Adventist representatives will be named to a number of seats yet to be determined.

Dr. Gabor Kovacs, a trustee and former chief of the medical staff, described the Adventist group as “community oriented” and said nearly all of the hospital’s physicians favored that option.

“We feel this was the best marriage you could get,” he said.

The agreement, which must be approved by regulators, is expected to be completed by June 30.