Three California healthcare systems were expected to formally announce late last week an agreement to create a provider network that would become a regional giant and possibly eclipse Kaiser Permanente in California.
Sources at San Francisco-based Catholic Healthcare West, Mercy Healthcare San Diego and La Jolla, Calif.-based Scripps Health confirmed that the not-for-profit groups will join in "an exclusive alignment primarily to pursue state and regional managed-care contracts."
Although details of the agreement weren't available by deadline, sources said the three-system alliance is poised for continued regional expansion, allowing it to become California's largest managed-care provider network, surpassing Kaiser.
The new network would consist of 22 hospitals with a total of 5,740 beds and 5,595 physicians in three states. Currently, Oakland, Calif.-based Kaiser operates 30 hospitals with a total of 6,351 beds and 7,676 physicians in three Western states and Ohio. Figures for the new network and Kaiser don't include medical clinics or other affiliations.
It's expected that, under the alliance, Scripps would join the Catholic Healthcare West system, which reported revenues in 1993 of $1.6 billion, through some form of affiliation arrangement.
Although the two organizations aren't expected to enter a full merger, it's likely the two organizations will be run jointly by a governing board and top executive.
Mercy Healthcare, which is part of the CHW's 16-hospital system, also would be linked to the five-hospital Scripps organization, which would gain ties to CHW's system in Arizona, California and Nevada. Mercy and Scripps now serve the San Diego County area.
Sources said the Mercy-Scripps relationship also is expected to be expanded to allow managed-care enrollees covered under the San Diego-based HealthFirst Network, a four-hospital provider group, to receive care at both Mercy and Scripps.
The region's largest private hospital, 520-bed Mercy, has an operating budget of about $200 million. Scripps has an annual operating budget of $730 million.
In addition, sources in the medical group management business confirmed that physicians associated with the Scripps and Mercy hospitals are involved in the early phases of forming a physician group practice organization that would serve the alliance.