Merger of Holy Cross, Providence Made Sense but Still Caused Pain


As hospital deals go, the one in May 1996 that joined Holy Cross Medical Center in Mission Hills and Providence St. Joseph Medical Center in Burbank--two Catholic hospitals with shared values--was culturally a smooth fit. Still, bringing the two under common management wasn't painless.

"That first year was tough," said Linda Coale, the operations director of acute patient care services at Holy Cross, now called Providence Holy Cross Medical Center.

In the eyes of many at Holy Cross, she said, "It was Big Brother coming over. A lot of the Holy Cross staff was leery. We did lose a few who didn't like the way things were done."

Three years later, though, the stress of transition has eased and Holy Cross has a healthier bottom line.

"I think it helped both [hospitals]," said Michael Madden, the chief executive at St. Joseph since 1993 and now CEO of Holy Cross as well. He said Holy Cross, earlier owned by the Indiana-based Holy Cross nuns, was struggling financially at the time of the merger. Now it's in the black, as is St. Joseph.

And St. Joseph, part of the Seattle-based Sisters of Providence Health System, is earning national recognition for its own management skills.

Coale is the highest-ranking manager based at the Mission Hills hospital--her superiors, including Madden, are all based at St. Joseph. She herself came from St. Joseph, where she started as a nurse and rose through the ranks). Most of the former top managers at Holy Cross are long gone (having left voluntarily, she said, within a few months of the merger).

As in any type of business, it's hard to justify two separate management teams when one could do the same job just as well. And it's hard to realize economies of scale without shedding superfluous jobs. Coale said management styles had to change, too.

"One of the hardest things to do," she explained, "was to merge our philosophy with regard to human resource issues."

The new team had to bring some consistency to employee discipline, for instance.

"They had their guidelines and stuff, but if you happened to deviate from them, nobody did anything about it," Coale said. "It was very loose."

In making such judgments, St. Joseph had the benefit of being widely respected for both its management and medicine. The hospital made the most recent list of the 100 "benchmark" facilities selected by the health-care information firm HCIA as national standard-setters. But it's had hard times of its own: early in the '90s, it was caught off guard by the rush to managed-care contracts and was losing money. It learned from that experience, Madden said, and was able to use the knowledge in making the business side of Holy Cross more cost-efficient.

The two hospitals are more independent of each other on the clinical side. Madden says the medical staffs are free to merge if they wish but have chosen not to. Holy Cross continues to run a busy trauma center--one of two such facilities in the Valley staffed by surgical specialists to treat victims of car crashes, gunshot wounds and other serious injuries.

Some Holy Cross services, such as a tattoo removal program, have been expanded to St. Joseph. St. Joseph, in turn, has taken over management of the Holy Cross gift shop to beef up its sales. But Madden says hospitals can only go so far in merging services before they start getting out of sync with the populations they serve.

"It's generally not the best way to work in a market to bring someone from the outside into it," he said.

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