By JUDITH VANDEWATER
Catholic Health Initiatives and PeaceHealth have signed a nonbinding letter of intent to combine their respective operations in the Northwest and create a new regional health care system serving Washington, Oregon and Alaska. The Catholic systems said they would be equal partners in the new venture. Due diligence is underway, and the partners hope to form the new system before June 30.
It will integrate seven CHI hospitals and nine PeaceHealth hospitals, outpatient care clinics, long-term care facilities, laboratories and home health services to create one of the largest systems in the Northwest. The large multi-specialty group PeaceHealth operates in the three states, as well as physicians and physician groups employed by CHI's Mercy Medical Center and St. Anthony Hospital in Oregon, and Franciscan Health System in Washington, will become part of the as yet unnamed new system. At present, there are no plans to change the names of any facilities that will be part of the new venture.
CHI and PeaceHealth said the reforming of U.S. health care underway now requires a more coordinated, integrated approach to the way health and wellness services are delivered to individuals and communities. In the emerging health care finance system, government payers, private insurers and large employers are looking to providers to accept more financial risk in caring for defined populations of patients, and for them to be accountable for the health status of patient groups.
Kevin E. Lofton, president and chief executive of Englewood, Colo.-based CHI, said the partnership is a "perfect way to share economies of scale, improve health services and reinforce our common mission to create and nurture healthier communities." He said the new system will strengthen both PeaceHealth and CHI in the Northwest and better position both for the future.
Alan Yordy, president and chief mission officer of Vancouver, Wash.-based PeaceHealth, said that both CHI and PeaceHealth "have been on a journey for some time trying to create specific geographic networks that provide seamless care, have standardized processes and protocols and can assume some level of financial risk."
For example, CHI has created or is active in evolving statewide structures and partnerships in Colorado, Nebraska, Iowa and Kentucky, all aimed at providing enough scale to drive cost efficiencies and care coordination to improve care quality. "We are trying in each of these partnerships to evolve enough scale so that our systems will be attractive as a clinically integrated network or accountable care organization that payers, patients, physicians all want to be a part of," Lofton said.
The new system in the Northwest would have combined annual revenues approaching $4 billion out of the gate, providing what Lofton called "a strong platform for growth." It is a "true partnership," he said, one in which both parties will have equal ownership interest in all assets. It will employ nearly 26,000 people. It will house all of PeaceHealth's operations which currently generate annual net operating revenues of $2.4 billion, and all of CHI's facilities in Washington and Oregon. Those CHI facilities have annual net operating revenues of $1.5 billion and represent about 14 percent of CHI's total annual revenue of more than $10.5 billion generated from facilities in 19 states.
As envisioned, the integration of PeaceHealth with CHI's Northwest operations will occur over time. Although the organization will start with a three-state operation, it could add ministries or business links in Idaho, where neither CHI nor PeaceHealth currently operates.
The leadership team of the new organization is expected to be announced in coming weeks. Yordy said that in preliminary discussions, the partners anticipate blending the leadership of both organizations and retaining the combined workforce of 26,000, although that number could shift over time. There is no expectation of large layoffs as a result of the partnership, Yordy said.
The Catholic entities will continue to be Catholic and continue to be sponsored by their respective juridic persons. The new company will have CHI and PeaceHealth as civil parents. It will be non-Catholic and operate under a statement of common values. Yordy said it will have the ability to partner with other-than-Catholic entities, provided they share the common values. One-third of its board will be women religious. CHI and PeaceHealth will both approve all lay board members.
Yordy said that in the Northwest, reductions in Medicaid reimbursement have increased pressure on providers, driving providers to grow more efficient and achieve economies of scale. Anticipated reductions in Medicare reimbursement also are propelling smaller providers to seek partnerships — a situation that provides growth opportunities for the new system. In their joint release, the partners said that the "size and scale of the new organization will allow it to form additional collaborations and networks of care that will include physicians, hospitals, insurers, and other caregivers, increasing access to high-quality care while reducing costs."
System Health Services
Catholic Health Initiatives Northwest Operations
Oregon
Mercy Medical Center, Roseburg Linus Oakes
St. Anthony Hospital, Pendleton
Washington
Franciscan Health System:
St. Joseph Medical Center, Tacoma
St. Francis Hospital, Federal Way
St. Clare Hospital, Lakewood
St. Anthony Hospital, Gig Harbor
St. Elizabeth Hospital, Enumclaw
Franciscan Medical Group
Franciscan Hospice and Palliative Care
PeaceHealth
Oregon
PeaceHealth Cottage Grove Community Hospital – Cottage Grove
PeaceHealth Peace Harbor Hospital – Florence
PeaceHealth Sacred Heart Medical Center at RiverBend – Springfield
PeaceHealth Sacred Heart Medical Center, University District – Eugene
Washington
PeaceHealth St. Joseph Medical Center – Bellingham
PeaceHealth St. John Medical Center – Longview
PeaceHealth Southwest Medical Center – Vancouver
PeaceHealth Peace Island Medical Center – Friday Harbor (scheduled to open in November)
Alaska
PeaceHealth Ketchikan Medical Center – Ketchikan
PeaceHealth Medical Group
PeaceHealth Laboratories
Columbia United Providers
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