HOSPITAL CONSIDERS MERGER; NEWHALL MEMORIAL HEAD SAYS STAFF BACKS PLAN.

Byline: Jason Takenouchi Daily News Staff Writer

The top official at Henry Mayo Newhall Memorial Hospital hopes to merge his medical center with San Francisco-based Catholic Healthcare West in the next two months.

``We have had discussions with CHW in the past and we anticipate having future discussions,'' hospital President Duffy Watson told the Daily News. ``We're not dealing with anybody else.''

Newhall Memorial, Santa Clarita's only full-service hospital, has struggled in recent years to meet growing demand in the rapidly expanding region. Earthquake repair costs and other expenses have drained about $12 million from its bottom line, making it impossible for the 217-bed hospital to add beds and expand services without merging with a larger organization.

Watson said the hospital's roughly 275-member medical staff supports the merger. He said he hopes soon to have the details on how the plan would affect wages, seniority and other issues for the hospital's 1,200 other full-time, part-time and contract workers.

``I would think that within 60 days the two parties will know whether or not they want to proceed to the final steps,'' Watson said.

Catholic Healthcare West, a nonprofit health care group founded in 1986, runs 46 hospitals in California, one in Arizona and one in Nevada. Its California facilities include Northridge Hospital Medical Center, Glendale Memorial Hospital and St. Vincent Medical Center in Los Angeles.

The group recently purchased eight hospitals in Southern California, placing it among the region's largest hospital organizations. A company spokeswoman said there are not any current talks with Newhall Memorial.

Watson said merger pressure is driven by a changing health industry and the need to expand services and facilities at Newhall Memorial.

A larger partner could help the hospital in a number of areas, he said. Among the priorities would be a neonatal intensive care unit, increased pediatric care and more beds.

From a strategic standpoint, Watson said, ``As you consolidate the insurance companies in California, there is some value in being able to negotiate from a stronger front on what we get paid.''

If Newhall Memorial does not merge with CHW, it likely will have to join another organization if it is going to survive, analysts say.

Increasing consolidation among health care purchasers - including Blue Cross, PacifiCare, Health Net and Kaiser Permanente - is putting enormous financial pressure on small, independent hospitals such as Newhall Memorial, said Jim Lott, executive vice president at the Healthcare Association of Southern California, a hospital trade group.

``The health provider consolidation you see going on is a direct response to the consolidation in the health purchaser community,'' he said.

``We've got four health plans in California that dominate 90 percent of the market,'' Lott said. ``It gives them huge purchasing power, and with that power they are able to pick off independent hospitals by threatening to take their customers elsewhere if those hospitals do not give them huge discounts.''

By 2020, Lott said, 12 to 18 hospital systems probably will control the California market, leaving little room for independents.

``Survival means strategic alliances if not merger with other organizations,'' Lott said. ``It's an inevitability in today's marketplace.''

But a merger with Catholic Healthcare West could bring problems as well as benefits, some women's groups say.

Since the organization is governed by Catholic principles, it usually limits the kinds of reproductive services its hospitals offer, said Susan Fogel, legal director of the California Women's Law Center, a nonprofit civil rights group. Those services include abortions, contraceptives and fertility treatments.

``Many CHW hospitals are extremely restrictive and don't allow any of these reproductive services,'' Fogel said. ``Especially where there is only one hospital, it's critically important that those services are available.''

Watson said that CHW is ``a little different'' from other religious organizations. ``Their values, as they've run their hospitals up and down the state, are compatible with ours,'' he said.

But Watson said it is unclear how a merger would affect the approximately six to seven therapeutic abortions that the hospital performs each year.

``We don't really know precisely in any given year whether or not all or some would have been allowed,'' he said.