Utica, NY (WIBX) - Utica's two hospitals are joining forces to take the first step toward a potential full affiliation agreement.

Faxton St. Luke's Healthcare and St. Elizabeth Medical Center signed a Memorandum of Understanding, with the intent of establishing a common parent corporation overseeing both hospitals.

The parent board will consist of ten members from each hospital, with Chairperson appointed by SEMC. The President position will be held by the FSLH CEO, Scott Perra.

Norman Siegel, Saint Elizabeth's Board Chairman, says an affiliation was inevitable, and will place Utica in a better position.

"Medicine has changed and medical care is changing so significantly and rapidly that consolidation is going on nationally," Siegel said. "There are fewer and fewer standalone hospitals, and we're doing this for several reasons, the most important reason is quality of care."

Scott Perra, President and CEO of Faxton St. Luke's, agrees.

"It's really looking at what's happening on the landscape of healthcare from a federal perspective, as well as a state perspective," Perra said. "The reimbursement rates, quite frankly, keep reducing every year and at the same time the federal government and state government are requiring us to do a better job of taking care of patients, which is great. We want to do a better job of taking care of patients. Everybody does."

The two organizations have been meeting since December 2011, and aim to complete their affiliation by the end of 2013.

Together, the hospitals employ almost 4,500 people and operate on a more than $540 million budget.