Summit Health Agrees to Acquire St. Luke Hospital

St. Joseph Health System of Orange has agreed to sell its aging 167-bed St. Luke Hospital in Pasadena to Summit Health Ltd. for $13.5 million.

Terms of the sale, which is expected to be final by the end of January, call for Studio City-based Summit Health to spend an additional $4 million renovating the 52-year-old hospital, officials of both companies said Monday.

“Anyone who stepped into this operation would have to pour a lot of money into it to keep it competitive . . . with hospitals with newer physical plants than St. Luke,” said Alan Chamison, St. Joseph’s chief financial officer. “In the initial request for proposals that we sent to Summit and other companies, we asked for a commitment to upgrade the physical plant.”

Jackie Rheinhardt, Summit Health’s vice president of marketing, said the company is more interested in earnings potential than the expense of renovating facilities such as St Luke. “We rarely make a purchase that doesn’t require renovations,” she said.

Summit Health operates 78 hospitals, nursing homes and other health care facilities in Arizona, California, Colorado, Iowa, Oregon, Texas, Washington and Saudi Arabia. Its 19 hospitals, 52 nursing homes and 7 retirement hotels total more than 9,000 beds.

During the 12 months ended June 30, Summit Health had net income of $18.6 million, compared to net income of $13 million a year earlier. Revenue during fiscal 1985 totaled $364 million, compared to $273.8 million in 1984.

In addition to St. Luke Hospital, St. Joseph Health System, which is run by the Sisters of St. Joseph of Orange, owns eight other hospitals in California and Texas, as well as a prepaid medical plan and a liability insurance company.