Hoag Hospital Planning Link With St. Joseph Organization

Hoag Memorial Hospital Presbyterian, one of Orange County’s few remaining independent health-care institutions, announced plans Wednesday to forge a business relationship with Orange-based St. Joseph Health System.

The linkup with the larger organization, while intended to help Hoag better compete for business with large health plans, would stop far short of a full-blown merger.

“This is not a merger of our assets. We will remain separate,” Hoag President Michael D. Stephens said Wednesday.

Stephens characterized the hoped-for affiliation as an arrangement that would enable St. Joseph and Hoag to provide a network of hospitals to health plans serving members throughout the county. He noted that such an arrangement would allow the two to contract cooperatively without running afoul of antitrust laws.

If the plan goes through, Stephens said, patient services will not be affected.

Hoag expects to begin negotiating with St. Joseph soon in hope of reaching a contract agreement sometime this year, Stephens said.

A spokeswoman for St. Joseph Hospital said the organization is “absolutely delighted” with Hoag’s decision. “We have an awful lot of respect for the quality of clinical service Hoag provides and are grateful we have an opportunity to work more closely.”

Hoag also considered linking up with Long Beach-based Memorial Health Services, but decided in favor of St. Joseph because of its larger size, Stephens said.

Just how terms of any final arrangement will shape up remains uncertain--and negotiators must satisfy many parties before anything is signed. Though Hoag’s board voted Tuesday evening to begin negotiations, Stephens said the decision wasn’t unanimous.

In addition, he said, the majority of Hoag’s medical staff of nearly 800 physicians prefers that the hospital remain strictly independent.

What’s more, St. Joseph officials have previously expressed an interest in an outright merger--though the organization’s spokeswoman suggested Wednesday that St. Joseph is open to striking a partnership that’s “mutually beneficial.”

Other issues expected to come up include the fact that Hoag--some of whose physicians perform abortions--will be dealing with a Catholic organization.

In addition, it must work out terms for decision making that both satisfy its determination to remain a separate entity and give the much larger St. Joseph organization its voice.

The Catholic organization owns the 457-bed St. Joseph Hospital in Orange, 345-bed St. Jude Medical Center in Fullerton and 271-bed Mission Hospital Regional Medical Center in Mission Viejo.

Unlike many hospitals, Hoag hasn’t been forced to consider a business combination out of financial desperation. The 416-bed hospital, founded in 1952 by local Presbyterian churches and known for serving the health-care needs of Newport Beach’s wealthy, has continually operated on a surplus, officials say.

However, the combination of intensifying competition, cost pressures and the rise of hospital chains prompted its board last year to start weighing options that would enable the hospital to continue to thrive.

“You deal with uncertainty in the best way you can,” Stephens noted.