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Two of O.C.’s largest health providers collaborate on new initiative

Hoag Hospital and St. Joseph Health will partner to create a new company

By Steve Churm
Executive Editor/Publisher,
Published: August 15, 2012 02:35 PM

Hoag Hospital President & CEO
Richard Afable (top); St. Joseph Health
President & CEO Deborah Proctor (above)
Two of Orange County’s oldest and most respected hospital systems today announced a groundbreaking partnership that could ultimately form one of the largest healthcare networks in the region.

If approved sometime later this year by the state Attorney General’s Office, St. Joseph Health and Hoag Memorial Hospital Presbyterian will immediately begin work on a new company to deliver healthcare services, wellness programs and medical information and resources to consumers across Orange County. This new “affiliation,” as it was labeled by the top two executives from St. Joseph Health and Hoag, could result in the venture delivering up to one-third of the total healthcare services in the county, a reality that officials say should provide more and higher-quality medical and wellness options at lower costs for consumers.

"This is a historic day for medical care in Orange County," said Dr. Richard Afable," Hoag president and CEO. "Together, we share over a century of collective experience. Our goal in forming this affiliation is transformational."

In addressing the structure of this new partnership, Deborah Proctor, president and CEO of St. Joseph Health, said this is not a “merger, sale or transfer of assets.”

St. Joseph Health will continue to operate its four Orange County hospitals (Orange, Fullerton, Mission Viejo and Laguna Beach) with its own physicians, nursing and administrative staff, while Hoag will do the same with its two hospitals (Newport Beach and Irvine), seven health centers and five urgent care centers. St. Joseph Health has a fifth hospital in the high desert community of Apple Valley that will also be part of this new venture.

Officials do not anticipate any initial changes in staffing levels at the hospitals or the requirement of capital to fund the new company. There are no plans for any new buildings or significant infrastructure to support this integrated regional health system.

Instead, the two entities will leverage the considerable assets and labor forces already employed within the two organizations, according to Afable. In time, some non-medical functions and services such as administration and clerical duties could be consolidated and result in positions being eliminated, he said.

What Afable hopes will be different from the outset is the level of integration of treatment services and programs between the two institutions. Rather than St. Joseph and Hoag both developing similar patient care programs or both offering resources and advice on the same issues, the two groups will work together through this new company to offer the services at lower prices.

The two health systems entered into a letter of intent to form an affiliation in June. Because both groups are non-profits, they must apply for a status change with the Attorney General, which is planned for October and could take more than 100 days for final approval. Afable said he does not see any hurdles in securing approval. If successful, the two entities will begin flushing out details of the new relationship. The name of the new company, the exact organization structure, staffing and day-to-day operations have not been agreed upon. It may take up to a year for the new health system to be fully functional.

Under the affliation, Hoag and St. Joseph Health will retain their individual identities and faith affiliations—Presbyterian and Catholic.

Proctor said she and Afable began talking three years ago about the lack of a coordinated healthcare network for Orange County residents, particularly those in lower socioeconomic groups or the uninsured. However, efforts to rally others to their concern fell short and the two begin talking about joining forces. Those discussions intensified earlier this year, Proctor said, and ended with the agreement to form an affiliation.

“It was not a hard sell to my board and leadership,” Proctor said following the midday press conference. “St. Joseph and Hoag have much in common. We share the same values and a similar history of caring for the vulnerable. We have deep roots, with the two hospitals having served this community for more than 140 years [combined].”

Afable described the new partnership like a “strong marriage” but emphasized the two entities are not merging legally. However, when asked, he acknowledged this is a “stepping stone” for future initiatives with each other and other health-related service providers and companies.

Afable believes the St. Joseph Health-Hoag partnership can become a model for others in the region if not nationally.

Healthcare, he says, is going through a major transformation with the traditional hospital model increasingly out of step with consumer demands today. Technology is driving a flood of health and wellness information into the hands of consumers who are demanding more programs aimed at prevention and longevity.

“The future of healthcare is about better outcomes at a lower cost,” Afable said. “We believe we are embarking on a journey to provide that here in Orange County. Hospitals will remain vital and important. But we need to reach out and meet consumers with information, programs and treatment solutions in new and different ways."

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