Catholic Healthcare West may sell two Southern California hospitals it acquired less than six months ago to Vanguard Health Systems.
Talks to divest 205-bed Martin Luther Hospital Anaheim and 139-bed La Palma Intercommunity Hospital began in early May, said CHW, a not-for-profit system based in San Francisco, and Vanguard, a for-profit system based in Nashville. CHW spokeswoman Joyce Hawthorne confirmed the negotiations.
CHW acquired Martin Luther and La Palma last December as part of an eight-hospital, $165-million deal with Burbank-based UniHealth.
But observers say the hospitals are too far away from CHW's Los Angeles-area properties to make strategic sense, and that they cannot compete with the area's predominant Catholic operator, Orange, Calif.-based St. Joseph Health System, which owns three hospitals in Orange County.
"Even nonprofit religious operators have to have a business focus these days, and it doesn't make sense for CHW to keep those hospitals," said Steve Valentine, president of the Camden Group, an El Segundo-based consulting firm.
Martin Luther lost $5.7 million on revenues of $44.3 million in 1998, while La Palma lost $4.2 million on revenues of $34.5 million, according to the Office of Statewide Health Planning and Development.
Vanguard, founded by former OrNda HealthCorp President Charles Martin Jr., has struggled to buy properties, acquiring just one hospital since it began operations in July 1997.