It is a time of enormous upheaval in the health care industry.

The emphasis increasingly is on running the system as cost-effectively as possible.

However, at Jan. 26's annual meeting of the Western Connecticut Health Care Network, the umbrella organization that runs Danbury and New Milford hospitals, Dr. John Murphy, the network's president and chief executive officer, insisted these hospitals will not lose sight of their "true north" -- caring for human beings.

"Health care is not a commodity," Dr. Murphy said. "It's one of the most important elements of our life. When people come to a hospital, their quality of life -- sometimes life itself -- is at risk.

"When people come to us, they are frightened, overwhelmed," Dr. Murphy said. "They are looking for a human, caring response to their brokenness. We cannot just provide them with a commodity."

The annual meeting gave Dr. Murphy and the outgoing chairman of the board, John Martocci, the chance to speak about the achievements of 2011.

On their list?

• Opening the state-of-the-art Spratt Family Neonatal Intensive Care Unit at Danbury Hospital;

the health network's Biomedical Research Institution on West Street;

renovations at New Milford Hospital's Cancer Center;

the ongoing work on the $150 million tower addition at Danbury Hospital, scheduled to open in 2014;

the two hospitals also spent $110 million in community outreach programs in 2011.

Last year was the first full year the two hospitals -- which formally affiliated in July 2010 -- operated in partnership.

"The two hospitals have come together at a rate far faster than ever thought possible," Dr. Murphy said.

The two also had good financial years.

Danbury Hospital had more than $517 million in net revenues and more than $498 million in total expenses. With an additional $4 million in non-operating income, it had a surplus of $23.6 million.

After a $5.5 million deficit in 2009, New Milford Hospital had net revenues of $93.4 million and total expenses of $93.8 million. With an additional $1.2 million in non-operating income, it had a surplus of $837,226.

"That's quite a turnaround," said Steven Rosenberg, the network's senior vice president, chief financial officer and treasurer.

Dr. Murphy said the next five to 10 years would bring a huge change to the nation's health care system.

That change would come regardless of the U.S. Supreme Court's expected June decision on the constitutionality of President Barack Obama's health care reforms and his bid for re-election in November.

It will happen, Dr. Murphy said, because the U.S. is spending 17 percent of its gross domestic product on health care, far more than any other country in the world.

That could increase to 20 percent by 2020, unless the system changes, Dr. Murphy said.

At the same time, U.S. health care is not excelling.

"Our outcomes are average at best," Dr. Murphy said.

What will have to happen, he said, is a complete change in the structure and financing of health care. Instead of paying doctors and hospitals for every procedure, insurers -- including Medicare -- will reward them for good outcomes and penalize them for poor outcomes.

That means increasing emphasis on primary care and preventive care.

"We do a very good job on sick care," Dr. Murphy said. "Now we want to collaborate and do a better job on keeping people well."