Yale-New Haven Hospital and Catholic Saint Raphael’s Hospital signed a letter of intent Friday announcing their plans to merge.

Saint Raphael’s has been facing serious financial challenges in recent years and officials hope the merger will ensure that Saint Raphael’s remains open. Under the plan, Yale-New Haven would buy Saint Raphael’s, but Saint Raphael’s would retain some of its Catholic character, specifically by offering healthcare to the impoverished and prohibiting certain procedures, such as abortion. Vin Petrini, Senior Vice President of Yale-New Haven, said that the hospitals’ next step will be to examine the financial records and negotiate a definitive agreement on the specifics of the integration.

“Saint Raphael’s is struggling to survive financially,” said Ropert Alpern, Dean of the School of Medicine. “It would be very bad for the community if Saint Raphael’s were to close.”

The Connecticut Post reported Friday that Saint Raphael’s Hospital lost $35.6 million in 2008 and $17.4 million in 2009, and made a small profit in 2010.

“Even though we have worked to acquire a positive bottom line [in profit] for this year, 2010, it is impossible for us to think about moving forward in the future as an independent healthcare provider,” Saint Raphael’s spokeswoman Geri Johnson-Reis said, adding that this was the driving factor behind deciding to merge.

The press release accompanying the Letter of Intent indicated that the “majority” of Saint Raphael’s employees would keep their jobs, and that Yale-New Haven would honor the pensions of Saint Raphael’s employees.

Petrini also said that a merger with Saint Raphael’s could resolve an overcrowding at Yale-New Haven.

Yale-New Haven has 966 beds, Saint Raphael’s has 511. The combined hospital would have 1,477 beds.

One key part of the negotiations is the degree to which Saint Raphael’s will remain a Catholic institution. Currently, the hospital follows the Religious and Ethical Directives of the Catholic Church, which are a set of guidelines for medical providers.

“If we become one integrated hospital, Saint Raphael’s would not be a Catholic hospital any longer,” Johnson-Reis said. “We would not be able to call ourselves a Catholic hospital. However, one of the non-negotiable points is adherence to the Religious and Ethical Directives of the Catholic Church.”

Petrini confirmed that medical care provided on Saint Raphael’s will continue to be consistent with the Religious and Ethical Directives, even if Yale-New Haven — which does offer abortions — acquires Saint Raphael’s.

Johnson-Reis said that, during the search for a new “health care partner”, Saint Raphael’s looked at different types of hospitals: secular or catholic, national or more local. They ultimately chose Yale-New Haven because it was the best way for Saint Raphael’s to ensure that decisions about New Haven healthcare remain in the city.

Ward 23 Alderman Yusuf Shah, whose district includes Saint Raphael’s Hospital, approved of the merger.

“Yale is always evenhanded in their business,” Shah said. “I think that this will be a good move given the fiscal challenges that Saint Raphael’s has had.”

Assuming that the two institutions do agree on a definitive agreement, the merger would be evaluated at the local, state and possibly national level, Petrini said, adding that the approval process could last a year. The hospitals will need to prove that the merger will not affect the health care services market, Garcia said. He said that he did not think the merger will create a monopoly.

Representatives from both hospitals were optimistic about the chance for growth provided by the merger.

“This is a unique opportunity to drive efficiencies,” Petrini said. “[It will allow us to] reduce unnecessary duplication of services and equipment between the two campuses.”

Johnson-Reis echoed Petrini’s sentiments that sometimes competition between hospitals could lead to waste, giving the example of competing to acquire new technology.

Another way that this will improve efficiency is by uniting the two hospital’s medical records, Johnson-Reis said. Yale-New Haven is going to buy the million dollar “EPIC” electronic records system, and install it at Saint Raphael’s as well, she said.

“You wouldn’t have to repeat tests,” Johnson-Reis said. “It’s going to provide for more efficient care and, I would say, better care.”

Garcia said that although it is too early to know for sure how the merger might affect the quality of New Haven health care, efficiency gains are possible if the combination of the two institutions creates “cost-effective results”.

Saint Raphael’s was founded in 1907 by the Sisters of Charity of Saint Elizabeth.