Just 18 months after completing a controversial merger designed to bolster the finances of its two hospitals, Alta Bates Summit Medical Center in Northern California is laying off hundreds of employees in a desperate effort to stem as much as $38 million in losses this year. The situation raises the possibility that the Sutter Health-owned system may ultimately join the growing ranks of hospital system divorces.
In late December 1999, Sutter bought struggling 420-bed Summit Medical Center in Oakland and merged it with 468-bed Alta Bates Medical Center in Berkeley, which Sutter had purchased two years before. The Sacramento-based hospital chain pumped $450 million into the operation and assumed $100 million of Summit's debt, arguing to regulators that a merger was the only way to keep the ailing hospitals from closing.
The Alta Bates-Summit merger was expected to reduce operating costs and eliminate duplicate spending at the hospitals, which posted a combined operating loss of $13.7 million in fiscal 2000. But so far this year, the system has lost more than $19 million and stands to lose twice that much by year-end if immediate measures aren't taken, said Irwin Hansen, Alta Bates Summit's president and chief executive officer.
Beginning in August, the system will lay off 300 full-time employees, or about 6% of its workforce, and streamline its materials purchasing process.
Alta Bates Summit spokeswoman Carolyn Kemp vigorously denied that a breakup may be in the cards for the system. "We're in very critical shape," she said. "But we're facing our challenges head-on and taking aggressive action to ensure our long-term success."