St. Joseph Seeks Alliance With Mission Hospital : Health: The chain and South County medical center say they are studying ‘the most effective way to affiliate.’

Seeking to enter the South County market, the St. Joseph Health System, which already operates two major hospitals in Orange County, said Wednesday it is exploring a merger or close alliance with Mission Hospital Regional Medical Center in Mission Viejo.

Thomas Porath, vice president of corporate services for St. Joseph Health System in Orange, said the hospital chain has signed an agreement with Mission to study “the most effective way to affiliate.”

Porath said the discussions have “grown out of health reform efforts going on not only in the state but at a national level, which will mean hospitals will want to be part of larger health service networks.”

St. Joseph Health System, a nonprofit health-care organization owned by the Roman Catholic Sisters of St. Joseph of Orange, operates seven hospitals in California and one in Texas.

In Orange County, St. Joseph Health System operates St. Joseph Hospital, with 519 licensed beds, in Orange and St. Jude Medical Center, with 347 licensed beds, in Fullerton. It also has a home health-care service in the county.

Mission Hospital Regional Medical Center, which has 241 licensed beds, is a community hospital owned by investors, most of whom are physicians.

Porath said the proposed alliance would give St. Joseph Health System a countywide presence that would make it more attractive to large employer groups, insurance companies and others who purchase health care.

“Over the long haul we may also be able to eliminate duplication of services and thus keep costs down,” he said.

Porath said affiliation agreements typically take three to six months to negotiate.

Officials with Mission Viejo Medical Development Co., the holding company for Mission Hospital, were unavailable for comment Wednesday. However, Becky Barney-Villano, director of marketing and physician services at Mission, confirmed that they had “entered a letter of intent to affiliate” with the St. Joseph Health System.

Barney-Villano noted that this year, Mission Hospital Regional Medical Center affiliated with Children’s Hospital of Orange County, which took over Mission’s pediatric services and opened a 54-bed, free-standing children’s hospital on the fifth floor of a new patient tower at Mission. The affiliation was designed to give CHOC, which operates its main facility in Orange, a South County extension.

David Langness, spokesman for the Hospital Council of Southern California, said the new alliances show a dramatic cooling of the competition that existed among local hospitals as recently as five years ago. New market pressures are prompting hospitals across California to shut down or form alliances to capture more business, he said.

“It is the long-predicted health-care shakeout,” he said, noting that many areas like Orange County have a surplus of hospital beds.

Langness said he wouldn’t be surprised if more affiliations are in the offing in Orange County. Chief executives of hospitals, he said, “are telling me everybody is having lunch with everybody else.”

“Everybody realizes they have to get into a larger network,” he said. “That is a far cry from the competitive days when hospitals didn’t talk to each other.”

Langness predicted that hospital mergers are “really going to help everyone, especially patients. Ultimately they will have lower costs and better treatment.”