PITTSBURGH — Two hospitals in Western Pennsylvania's second-largest health care system will consolidate to save money and prepare for federal changes in a move that could cost 1,500 jobs.

Allegheny General Hospital will become the primary hospital of the West Penn Allegheny Health System, while West Penn Hospital, which is also in Pittsburgh, will close its emergency room and move most of its medical and surgical programs to AGH. West Penn will maintain its burn center, a women's and infants' center, and inpatient rehabilitation programs.

The moves are expected to occur early next year. President and chief executive officer Christopher Olivia said the decision to consolidate and cut up to 1,500 jobs was driven partly by changes in the nation's health care system, pushed by President Barack Obama's administration.

"There is no more painful decision an organization can make than one that involves a loss of valued colleagues, many of whom have worked within the organization for a long time," Olivia said. Eligible workers will get severance packages, and help finding other jobs.

Olivia noted that the city has continued to lose population, and more people are seeking care in outlying areas. The health system in May announced that inpatient and emergency room services were closing at the Suburban Campus of Allegheny General in Bellevue, just west of the city.

West Penn has continued to lose patients, with an average daily census of 240, or 47 percent capacity. Its health insurance reimbursements have dropped as a result.

The network lost $63 million in the fiscal year that ended June 30, 2008, because of a $73 million accounting error that overstated its net accounts receivable. The health system continued to lose money into last year, despite cutting more than 300 of 13,000 workers in late 2008, and has lost $11.6 million in the last nine months through March 31.

The network had six hospitals, but will now have only four with the consolidation of Allegheny General and West Penn in Pittsburgh, and the conversion of the suburban campus to outpatient service.