Almost four years in the making, the new East End Health Alliance became a reality Friday as representatives of Peconic Bay Medical Center, Eastern Long Island Hospital and Southampton Hospital signed an agreement they believe will help them stem the tide of red ink and improve patient services.

The new entity will allow the three hospitals to pool resources and buying power, negotiate collectively with health insurance companies and work together on regional strategic planning for health care services.  The resulting economies of scale and management efficiencies will save the hospitals money, hospital officials said. A 21-person central governance board, comprised of representatives of each of the three hospitals, will oversee the new alliance. The central board will be responsible for decisions about adding or terminating patient services or expanding the physical plants of the three hospitals. But day-to-day operations of each hospital will remain under the management of each hospital’s own board of directors.

Collectively, the three hospitals lost $8 million last year, said Southampton Hospital board chairman Stephen Shapoff, who will serve as the first chairman of the new central board.

Cost savings initiatives contained in the new agreement should stem that bleeding through centralized purchasing, managed care negotiations and streamlining of services, Mr. Shapoff said.

There will be no need for staff reductions at any of the member hospitals, he said.

He pointed to recently negotiated contracts with Blue Cross-Blue Shield and Oxford/UnitedHealthcare Group, saying that by  negotiating together the hospitals’ reimbursements will be increased.

By being able to offer more and improved hospital services, the three hope they will increase patient loads, PBMC board chairman Bobby Goodale, who will serve as second vice chairman of the new central board.

“If we could stop the migration [of patients to other hospitals], we could fill another hospital, he said.

Mr. Shapoff predicted that both ELIH and Southampton Hospital would be operating in the black within a year or two while Mr. Goodale said he thought PBMC might be operating in the black by the end of this year.

All three hospitals have financial reports showing themselves as operating in the black now, but that’s only because they count contributions. In the past, such donations paid for “brick and mortar,” Mr. Shapoff said. Today they pay basics like electrical and heating costs, he said.

Mr. Goodale acknowledged that in practice, any two of the partners could prevent the third from an activity it wanted to pursue, but he expressed optimism that “there will never be such a vote” because issues would be hashed out and compromises reached to satisfy all three partners. His optimism today grows out of the spirit of cooperation he has experienced in hammering out the new agreement during the last four years, he said.

The three hospitals plan to enable doctors to be certified to work at any of their facilities and they hope to negotiate together in the future with unions representing hospital workers.

 They also want to adopt similar protocols to serve various ailments, Mr. Goodale said.

“Best practices is something we’d like to be the practice at all,” he said.

The central board has nine committees studying various methods of cooperating, Mr. Shapoff said. They are outlining short-term goals they expect can be reached within the next 18 months; medium-term goals that may take five years; and long-term goals that could take 10 or more years. But they want to begin taking steps toward those medium- and long-term goals soon, he said.

Overall alliance goals are to enhance the ability of the hospitals to continue to develop high quality, comprehensive and accessible services; enhance patient satisfaction, safety and quality; and improve the financial health of all three hospitals.

“This alliance is going to be the envy” of others around the state, said Kevin Dahill, president and CEO of the Nassau-Suffolk Hospital Council.

Although the state’s Commission on Health Care Facilities in the 21st Century, known as the Berger Commission, mandated the creation of a central board for the three East End Hospitals hospitals in its January 2007 report, the three had been working on plans for an alliance at least two years prior to the report’s issuance, according to Mr. Sapoff.

In fact, the mandate from the Berger Commission was based on efforts already under way, he said.

“We’re the poster child for the Berger Commission,” Mr. Shapoff said.

When Mr. Goodale first heard that the state Legislature was looking at streamlining hospital services and talking about alliances among hospitals, he admitted he was skeptical. A veteran of the failed Peconic Health Corp. that was once hailed as the vehicle for cooperation among the three East End hospitals, his reaction was “not again.”

Peconic Health Corp. ceased operations at the end of 2005.

What’s different this time is that a simple majority instead of a super- majority is needed to pass resolutions by the central board and the state has put $14 million so far into the funding programs to help the alliance. PHC had no money, he said.

As stand-alone facilities, the hospitals “struggled,” Mr. Shapoff said.

“Together we are a regional resource.” Together the three provide services to residents over a 300-square-mile area, have 360 beds, serve 16,000 patients per year and another 60,000 through emergency services, Mr. Shapoff said.

They employ 2,000 people and generate $1 billion for the economy of Suffolk County, he said.

He credited Sen. Kenneth LaValle (R-Port Jefferson) with being the guiding light to help achieve the alliance.

“His vision of a strong health system for eastern Suffolk has stimulated us all,: Thomas Murray, a central board member and ELIH board chairman, said about Mr. LaValle. “The whole is better than the sum of its parts,” Mr. Murray said.

Mr. LaValle credited a medical student back in the mid 1980s with making him aware that the East End was under-served by health care facilities. Through the new alliance, they’ve “willing to venture into uncharted waters,” he said. “They did it because they understood a certain vision — they understood that you need to collaborate,” he said.

“Today we are bearing the fruits of some very tough decisions, some very forthright conversations and compromise,” he said.