Hospitals See Mergers as a Cure for Fiscal Woes : Medicine: Impending health-care reforms prompt Bay Harbor Hospital to study an affiliation plan with nearby Little Company of Mary facility. Torrance Memorial Medical Center is also weighing a similar proposal.

In another sign of the sweeping changes enveloping the South Bay medical world, Bay Harbor Hospital in Harbor City is studying whether to join forces with a nearby hospital.

The board that oversees Bay Harbor Hospital voted last week to explore affiliating with Little Company of Mary Health Services, which operates hospitals in Torrance and San Pedro. Bay Harbor officials had already been talking with Little Company’s chief competitor, Torrance Memorial Medical Center.

No decision on any affiliation is expected before January, said Jack Weiblen, chief executive officer of Bay Harbor, a 362-bed nonprofit facility.

Weiblen and other executives call such affiliations a sign of the times. They point out that impending health-care reform, with its emphasis on managed care, is expected to depend heavily on networks of hospitals and physicians, rather than independent community hospitals.

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Hospital networks not only have a stronger bargaining stance with health maintenance organizations, but they can also help keep costs down by sharing equipment and services, some experts say.

“We think that’s the way health care is going to be packaged and delivered,” said Weiblen.

At the Hospital Council of Southern California, spokesman David Langness said: “It’s imperative for hospitals to join forces with other facilities. If they don’t, they won’t survive.”

While Bay Harbor says its operating in the black and has no plans to close, it maintains that this is the time to talk to other hospitals because as, Weiblen put it, “we think we have a good deal to offer.”

Bay Harbor Hospital, which opened in 1960, contains 126 medical-surgical beds and 212 beds in its rehabilitation center. State records show it had an overall 1992 bed occupancy rate of 67%, compared to 70% at the 374-bed Little Company of Mary Hospital in Torrance and 59% at Torrance Memorial Medical Center, which has 340 beds.

The last major South Bay hospital affiliation occurred in October, 1992, when Little Company of Mary Hospital joined forces with San Pedro Peninsula Hospital. The linkup was described as an “affiliation” rather than an outright merger, since the hospitals maintain separate licenses.

In the first year, the two hospitals together were able to save more than $2 million by taking such steps as combining some services, said Blair Contratto, vice president of corporate development for Little Company of Mary Health Services.

Any linkup between Bay Harbor and Little Company would not necessarily follow that model, Contratto added.

Torrance Memorial Medical Center has discussed a different kind of arrangement with Bay Harbor Hospital, one described as a three-year “management agreement.”

Under that system, Torrance Memorial could provide to Bay Harbor, among other things, administrative services, joint managed-care contracting and access to data processing systems, said Sally Eberhard, Torrance Memorial vice president of planning and marketing.

Weiblen said that Bay Harbor officials concluded after talking to Torrance Memorial that “we shouldn’t proceed any further without talking to Little Company to see whether or not there was a significant alternative option or set of options that could be developed.”

While competition was the watchword of the 1980s, cooperation has emerged as key to the 1990s, said Langness. “The medical arms race has gotten so expensive that very few single institutions can afford it. We’ve got to start sharing that equipment,” Langness said.

But another health expert, RAND consultant Glenn Melnick, is more skeptical about the benefits of such affiliations, saying they can limit competition by reducing the number of hospitals vying for insurers’ contracts.

“You need a sufficient number of players in the marketplace to create . . . a competitive pressure to keep costs down,” said Melnick, who is also an associate professor at the UCLA School of Public Health.