Parent Companies to Merge : Martin Luther, La Palma Hospitals Plan Link-Ups

Martin Luther Hospital in Anaheim and La Palma Intercommunity Hospital in La Palma are planning to consolidate some of their programs in anticipation of the merger of their parent companies.

A final merger agreement between LHS Corp. of Los Angeles, owner of the 200-bed Martin Luther, and HealthWest Foundation of Chatsworth, owner of the 136-bed La Palma Intercommunity, is expected to be signed today, with the merger becoming effective later in the month. The combination of the two nonprofit corporations will be called UniHealth America. With 12 Southern California hospitals, two health maintenance organizations, two home health care agencies and two senior health care programs, UniHealth America will be the second largest health care system in the Los Angeles Basin. Only Kaiser Permanente has a larger local presence. On a combined basis, LHS and HealthWest earned $10.3 million on revenue of $1.3 billion in their latest fiscal years.

Hospital officials said UniHealth will cover more territory than either organization alone and thus will help member hospitals negotiate contracts with HMOs and other insurance providers.

“We need hospitals and doctors close to patients in order to be marketable to various insurance companies putting together more organized health delivery systems,” said John Cochran, president and chief executive officer of La Palma Intercommunity Hospital.

Although La Palma Intercommunity and Martin Luther are only eight miles from each other, Cochran said both will remain in operation, and no layoffs are planned. He said the two hospitals have not competed because they serve referring physicians from different communities.

But he said the hospitals will share some services and consolidate others. La Palma Intercommunity is in the process of transferring its inpatient alcohol and drug treatment program for adolescents to Martin Luther, which is adding 12 beds for adolescents to its inpatient alcohol and drug treatment program for adults.

In turn, Cochran said La Palma is expanding its adolescent outpatient drug-treatment program to include adults who formerly might have gone to Martin Luther.

Also, Cochran said La Palma and Martin Luther will share management and administrative personnel in specialized areas such as insurance contracting, physician recruitment and public relations.

And he said that La Palma Intercommunity expects to refer patients to the cardiac-catheterization laboratory that Martin Luther is building.

Ross Goldberg, vice president of communications for UniHealth America, said the companies’ two health maintenance organizations--Cypress-based PacifiCare, of which 70% is owned by LHS, and Chatsworth-based CareAmerica, which is owned by HealthWest--will not merge and will remain competitors.