Health service firm buys stake in medical group

BURBANK — In an unprecedented move they say will widen its circle of care, Burbank-based Providence Health & Services California has purchased a minority stake in Lakeside Systems Inc., based in Glendale.

The multimillion-dollar investment, which was announced Tuesday, will allow Providence to expand the “integration and coordination of healthcare services” in response to ballooning medical costs and increased patient waiting time, said Dr. Keith Richman, a former chairman of Lakeside and one of the architects of the deal.

“This investment by Providence in Lakeside will address the problems of healthcare as families and individuals continue to have difficulty finding quality care,” he said.

Officials would not disclose what percentage of Lakeside was purchased or the exact dollar amount, but Richman said the deal did not exceed $100 million.

Privately held Lakeside Systems Inc. is the parent company of Lakeside Healthcare, one of Southern California’s largest for-profit integrated comprehensive healthcare organizations, officials said. Lakeside Healthcare provides a network of services, including more than 300 primary care physicians and 1,500 specialists. Its medical groups serve patients with different types of health insurance, who are able to choose a physician affiliated with Lakeside, according to Lakeside Healthcare’s website.

The deal could boost the number of doctors at Providence St. Joseph Medical Center in Burbank and Providence Holy Cross Medical Center in Mission Hills and will increase case management services for patients, disease management and patient education services in the coming years, said Providence spokesman Dan Boyle.

The deal could also result in new technology at both Providence hospitals, he said.

Tuesday’s agreement — the first of its kind for Providence’s two Southern California hospitals — has been in the works for at least a year, when Richman first broached the idea. But the two have had a working relationship for about 20 years.

“I first spoke with Providence about the possibility of a strategic relationship a year ago and have been working on developing one for the last six months,” he said.

Both sides said the primary motivation behind the purchase was to provide medical services to economically disadvantaged patients.

“One of our goals is to expand our service to the underinsured, who are a part of the health care crisis,” said Richman, a former state assemblyman whose district included a portion of the San Fernando Valley.

“L.A. County is ground zero. There are 2 million uninsured here. One in four are at least 65 [years-old]. If we can work together to provide high-quality health care, this is a good thing.”

Another benefit of the deal is that waiting room times could decrease as the amount of doctors increase, Boyle said.

Lakeside employs 110 primary care and specialty doctors, some of whom could provide services to patients at Providence, a boon for the hospital that has been affected by a drop in the number of doctors in California and the country.

The number of primary care physicians in the United States has dropped by nearly 35%, increasing the amount of time people may spend in a waiting room, according to the Center for Studying Health System Change, a nonpartisan policy research organization in Washington, D.C.

The drop in the country mirrors that in California, Boyle said.

“There are a low number of doctors in California because of the high cost of living and their salaries tend to be lower in comparison to the rest of the country,” he said. “The impact is on the people in California. One of our goals is to decrease patient waiting times.”

Providence and Lakeside will remain separate entities, Richman said, emphasizing that the deal was less a merger than a partnership between two medical firms where patients might not even notice the change right away.

“Our offices will remain Lakeside, and there will be no co-branding,” he said. “Nothing changes right now with patients. Lakeside and Providence are working together to develop high-quality affordable heath care.”

 JEREMY OBERSTEIN covers City Hall and public safety. He may be reached at (818) 637-3242 or by e-mail at jeremy.oberstein@ latimes.com.