Can PeaceHealth cure its ills?

• PeaceHealth is a nonprofit health care system with hospitals, medical clinics and laboratories located in Alaska, Washington and Oregon.

• PeaceHealth operates 10 medical centers: five in Washington, four in Oregon and one in Alaska.

• In 2011, PeaceHealth began relocating its headquarters from Bellevue to Vancouver.

• PeaceHealth employs 16,010 people systemwide.

• PeaceHealth is the largest Clark County employer, with 4,288 employees (3,254 full time and 1,034 part time) and $295 million in local payroll.

• December 2010: Southwest Washington Medical Center and PeaceHealth finalize merger and announce the new hospital name, PeaceHealth Southwest Medical Center.

• May 2011: PeaceHealth confirms moving its headquarters from Bellevue to Columbia Center at Columbia Tech Center in east Vancouver.

• August 2012: Leaders from PeaceHealth and Englewood, Colo.-based Catholic Health Initiatives announced a nonbinding letter of intent to create a regional health care system with operations based in Vancouver.

• January 2013: Kaiser Permanente Northwest announces new contract with Legacy Salmon Creek Medical Center, effective Oct. 1, ending a 15-year relationship with Southwest Medical Center.

• April 2013: PeaceHealth and Catholic Health Initiatives say they are “unable to develop an integrated model that would provide the desired benefits and serve the best interests of both organizations.”

• August 2013: PeaceHealth says it will cut 500 positions systemwide, mostly at its Vancouver and Longview hospitals, as part of a $130 million budget cut. PeaceHealth Southwest lays off 124 people.

• September 2013: Rainy Atkins, who served 10 years as chief administrative officer for PeaceHealth Southwest, retires.

• January 2014: Joe Kortum, who led Southwest Washington Medical Center for eight years and was chief executive officer of PeaceHealth’s Columbia Network for two years, retires.

• December 2014: Alan Yordy, PeaceHealth’s president and chief mission officer, announces his retirement, effective June 30.

• March 2014: PeaceHealth Southwest nurses present petitions with more than 3,000 signatures calling for sufficient staffing levels to hospital administrators.

• October 2014: Thirty-seven Sacred Heart Medical Center hospitalists in Lane County, Ore., form a union.

• April 2015: PeaceHealth announces departures of four top administrators, including the top two leaders at PeaceHealth Southwest Medical Center.

• May 2015: PeaceHealth announces the creation and appointment of two new systemwide positions: chief nursing officer and chief medical officer. PeaceHealth also announces the elimination of the PeaceHealth Medical Group CEO position.

• May 2015: Frontline workers at PeaceHealth St. Joseph Medical Center in Bellingham stage a one-day walkout after 18 months of negotiations failed to result in a new contract with the 900 members of SEIU Healthcare 1199NW.

• May 2015: Frontline workers at PeaceHealth Sacred Heart hospitals at RiverBend in Springfield, Ore., and University District in Eugene, Ore., vote to join SEIU Local 49.

Three weeks ago, PeaceHealth set out a belated welcome mat for hundreds of Clark County business leaders and elected officials. The operator of PeaceHealth Southwest Medical Center and nine other medical centers in three states wanted to introduce itself to the community — something PeaceHealth leaders say they hadn’t done since moving corporate offices here from Bellevue four years ago.

For two hours, visitors filled the vast entryway of the Columbia Center at Columbia Tech Center. PeaceHealth leaders touted the health care system’s economic impact as Clark County’s largest employer, with nearly 4,300 employees and $295 million in local payroll. Guests snacking on sumptuous foods checked out displays of services and technology offered at PeaceHealth Southwest Medical Center, the county’s largest medical facility.

While PeaceHealth officials joked about their four-year delay in introducing themselves to the community, they made no mention of another point of awkwardness about the event timing, coming in the midst of major turmoil that is rumbling through the health care system.

In just the last few months, many of PeaceHealth’s top leaders have been replaced or their positions eliminated, raising questions about the direction of the nonprofit that is operated by the Sisters of St. Joseph of Peace. Meanwhile, some employee groups at two Oregon hospitals, in Eugene and Springfield, have voted to unionize over complaints about staffing levels and employee benefits; and workers in both Bellingham and Vancouver have gone public with complaints about staffing and employee benefits.

All the while, PeaceHealth is struggling internally to adapt its leadership and its sprawling health care system to meet the mandates of the Affordable Care Act. Its future is uncertain in an era of tight finances and industry consolidation. In 2012, it flirted with an affiliation with a Colorado-based health care system, Catholic Health Initiatives. Later, both organizations dropped the idea, saying they were unable to come to terms. At the time, however, a PeaceHealth spokeswoman said the organization remained open to forging partnerships with others, including Catholic Health Initiatives.

PeaceHealth’s current and past leaders say plenty of the health care giant’s current turmoil stems from broader forces bringing change to many health care organizations across the U.S.

“I think there is tension and there is uncertainty and unrest,” said Sister Andrea Nenzel, chairwoman of PeaceHealth’s Board of Directors and a board member since 1987. “I think a great majority of the tension comes from the fact that our society and our industry is demanding great change and uncertainty.”

Growing to survive

PeaceHealth was an unknown entity in Clark County just a half-decade ago, when venerable Southwest Washington Medical Center was a proudly independent health care provider that had gained the respect and loyalty of county residents. But behind the scenes late in the last decade, Southwest Washington’s leaders worried that the hospital could be losing ground competitively as small players were consolidating into regional giants in order to contain costs.

David Nierenberg, an investment manager and Camas resident, served on the board of Southwest Washington Medical Center during discussions that led to the medical center’s consolidation with PeaceHealth in December 2010. For 33 years, Nierenberg has invested in public and private companies in the health care sector and served on for-profit and nonprofit health care boards, making him something of an authority on industry trends and challenges. The bulk of his and his family’s philanthropy remains in support of PeaceHealth Southwest, a commitment he said “continues as strong as ever.”

For decades, Nierenberg said, health care providers in the U.S. have operated under an ever-looming pressure: reduce the cost of health care while meeting the needs of patients.

Part of the pressure arises from the power of payer organizations — insurance companies, health maintenance organizations, Medicare and Medicaid — to control reimbursement rates. The response by hospitals has been to increase their bargaining power by teaming up with merger partners. The idea is to achieve economies of scale. It’s a situation in which hospitals must get “bigger and bigger to have more and more market share, so they can push back against the payers,” Nierenberg said.

Suffice it to say, the pressure applied to Southwest Washington Medical Center.

By 2009, Nierenberg recalled, Southwest Washington was one of the last remaining independent hospitals in the Portland metro area.

The Providence, Legacy and Kaiser health care systems “were growing in their market power and in their pricing power,” Nierenberg said. Southwest’s board sized up the situation.

“We felt that while we were still in a position of strength it would be ideal to try and merge with a larger organization which shared our values so we could obtain the economic benefits of scale and be an even stronger and more durable competitor, still focused on serving the needs of this local market,” Nierenberg said.

The finalists to become Southwest’s corporate parent were Providence, Legacy and PeaceHealth, Nierenberg said. PeaceHealth won, and now it is roughly equal in size systemwide with Portland-based Legacy.

The Catholic-affiliated nonprofit’s mission of service, including to those most in need, reflected Southwest’s Catholic heritage, dating to the hospital’s founding in 1858 by Mother Joseph of the Sacred Heart.

“There was a very powerful mind-meld,” Nierenberg said.

Other factors led Southwest to PeaceHealth. Although Southwest would become part of a larger system, Nierenberg said, PeaceHealth’s tradition was to tailor its governance to the different needs of local communities. What’s more, PeaceHealth wouldn’t just bring Southwest under its umbrella. It would also make Southwest its flagship hospital and make Vancouver its new corporate headquarters, bringing hundreds of jobs with it.

A wave of departures

When the merger was consummated in late 2010, PeaceHealth and Southwest Washington launched a long process of integrating staff, work cultures and missions, and countless computer and administrative systems. But questions about the future were never far away.

In August 2012, leaders from PeaceHealth and Englewood, Colo.-based Catholic Health Initiatives announced they had signed a nonbinding letter of intent to create a regional health care system with operations based in Vancouver. The agreement would combine seven Catholic Health Initiatives hospitals in Washington and Oregon with nine PeaceHealth hospitals in Washington, Oregon and Alaska.

But in April 2013 — just two months before the two sides expected a completed agreement — PeaceHealth and Catholic Health Initiatives announced in a joint statement they “were unable to develop an integrated model that would provide the desired benefits and serve the best interests of both organizations.”

The organizations said they were exploring other opportunities to work together but nothing materialized.

While looking at the big picture, PeaceHealth suffered a significant financial setback at Southwest Medical Center. In early 2013, Kaiser Permanente Northwest chose not to renew its 15-year contract that allowed PeaceHealth to serve its Clark County patients, opting instead to contract with Legacy Salmon Creek Medical Center.

Legacy immediately expanded its facilities, while PeaceHealth absorbed a loss of revenue and patients.

A wave of administrative departures began soon after. In September 2013, Rainy Atkins, who served as PeaceHealth Southwest’s chief administrative officer for 10 years, retired. In January 2014, Joe Kortum, who led Southwest Washington Medical Center for eight years before serving two years as chief executive officer of PeaceHealth’s Columbia Network, retired.

Later that year, in December 2014, PeaceHealth’s president and chief mission officer, Alan Yordy, announced his own retirement. His last day is Tuesday.

This spring, PeaceHealth announced numerous leadership changes. During just one week in early April, PeaceHealth announced the departures of four members of its administrative team, including the top two members of the PeaceHealth Southwest Medical Center leadership team.

Those departures were followed with an announcement in May that PeaceHealth had eliminated the chief executive officer position for PeaceHealth Medical Group.

PeaceHealth also announced in May the creation and appointments of two new systemwide positions — chief nursing officer and chief medical officer — and in June, announced a new chief operating officer for PeaceHealth Medical Group.

This fall, PeaceHealth expects to announce a replacement for Yordy, said Tim Strickland, PeaceHealth director of communications.

The administrative changes were made to better position PeaceHealth for success in population health, as opposed to caring for ill individuals, Strickland said. Some of the positions were eliminated. In other cases, executives chose to leave, he said.

“The new leadership structure positions us to become much better at eliminating waste, eliminating variation, so we can maximize not only our affordability but also, most importantly, we can maximize our quality of care we provide to our patients,” Strickland said.

But they haven’t been easy on PeaceHealth’s staff, a point recognized by administrators.

In May, Nancy Steiger, the CEO and chief mission officer for PeaceHealth’s new Washington/Alaska region, sent a letter to local nurses acknowledging that “PeaceHealth Southwest hasn’t been an easy place to work the past few years.”

Labor tension

As PeaceHealth leaders grapple with changing direction and leadership at top management levels, employees in some parts of PeaceHealth’s sprawling network are feeling their own pain.

In May, frontline workers at PeaceHealth Sacred Heart hospitals at RiverBend in Springfield, Ore., and University District in Eugene, Ore., voted to join SEIU Local 49. The 1,100 caregivers include licensed practical nurses, nursing assistants, professional and technical workers, pharmacists and dietary aides.

The group started organizing about a year earlier because workers felt like they weren’t getting anywhere on their own talking to management, said Anna Blackman, a certified nursing assistant at Sacred Heart at RiverBend who was part of the organizing group.

Nurses in Bellingham have picketed PeaceHealth, drawing local media attention. And earlier this year, PeaceHealth workers in Vancouver circulated petitions outside Chuck’s Produce.

There are no visible signs of union organizing at Southwest Medical Center, and an SEIU representative said the union was focused on its efforts at the PeaceHealth hospitals in Eugene and Springfield. But top officials say they recognize that some employee groups are unhappy.

“There’s been a lot of labor unrest,” Nenzel said.

PeaceHealth prefers to deal with caregivers directly, Nenzel said, but if employees choose to form a union, PeaceHealth leaders respect that decision and will work in good faith with their representatives.

The frontline workers at PeaceHealth Southwest Medical Center are not unionized. Strickland, PeaceHealth’s communications director, said the health system has not received “any formal notice” of a vote to unionize among those workers.

Many PeaceHealth employees are already union members. PeaceHealth currently has 16,000 employees systemwide. Of those, nearly 5,400 — about 34 percent — belong to bargaining units, according to numbers provided by PeaceHealth.

Legacy Health — which operates Clark County’s other hospital, Legacy Salmon Creek Medical Center — also has about 16,000 employees systemwide. Union-represented workers account for about 9 percent of Legacy’s total employee population systemwide. None of Legacy Salmon Creek’s employees belong to unions, according to the health system.

In 2000, 8.4 percent of workers in health care and social assistance were represented by unions, according to federal data. The figure was the same in 2014: 8.4 percent.

Yet there’s anecdotal evidence of more hospital workers joining unions at hospitals in different parts of the U.S. And some industry observers say the health care sector is ripe for increased unionization.

As policy and market forces prod health care providers to reduce costs, workers “are feeling greater anxiety over wages and job security,” according to a January 2014 analysis by Modern Healthcare, a magazine devoted to health care business and policy news.

“I think there’s a lot of pent-up demand,” Jim Trivisonno, president of labor relations advisory firm IRI Consultants, told Modern Healthcare. “The Affordable Care Act means people will have to look at costs, and that sometimes leads to change and less job security. And that leads to more organizing activity.”

The strongest union push within PeaceHealth’s network has been in its Eugene and Springfield hospitals. At the Sacred Heart at RiverBend hospital in Springfield, staffing changes made about three years ago became the focal point for the employees, said Blackman, the certified nursing assistant who was part of the organizing group.

“When I started 9½ years ago, I would be responsible for six patients during a shift and, on some days, a little more,” she said. “Now, they are giving the CNAs on the day shift nine and sometimes up to 12 patients.”

In addition, benefits aren’t as good as they once were — employees are paying more out of pocket for plans that cover less — and wages haven’t been adjusted for longtime employees, even though entry-level wages have increased, Blackman said. PeaceHealth is even taking its employees to collections and garnishing wages for unpaid bills at their own facilities, she said.

“We don’t feel like they hear our cries for help,” Blackman said. “It just feels like we’re saying the same thing over and over and nothing is ever done.”

In October, a group of 37 hospitalists — the doctors who provide care at Sacred Heart hospitals — formed a union, which they believe to be the first of its kind in the country. The physicians say they unionized because the administration wasn’t listening to concerns about patient safety and workload demands.

But PeaceHealth faces unrest in other locations as well. In Bellingham, about 900 workers at PeaceHealth St. Joseph Medical Center voted in September 2013 to join SEIU Healthcare 1199NW. Last month, Bellingham nursing assistants, lab technicians, unit secretaries and housekeepers staged a one-day walkout after 18 months of contract negotiations failed to result in an agreement. After the walkout, PeaceHealth locked out the employees for two more days, citing a three-day contract with temporary workers.

Complaints by nurses about patient safety aren’t new to PeaceHealth administrators.

Last year, Sacred Heart nurses represented by the Oregon Nurses Association launched a campaign for safer staffing. And two years ago, 160 nurses from St. Joseph Medical Center in Bellingham and their supporters rallied in front of PeaceHealth’s headquarters in east Vancouver.

Earlier this year, nurses from PeaceHealth Southwest Medical Center gathered 3,200 signatures on petitions calling for sufficient staffing to deliver safe patient care at the local medical center. The signatures included local nurses, providers from other PeaceHealth facilities and residents who were approached outside of local grocery stores.

Without sufficient staffing, the petition argues, nurses and other providers can’t take legally mandated meal and rest breaks, providers are forced to cover too many patients and care can be compromised.

“Our community and the nurses are calling for administration to pay attention to this one issue that really affects our ability to give good patient care, the best care possible,” said Christine Himmelsbach, assistant executive director of labor relations at the Washington State Nurses Association.

The nurses presented the petitions to the hospital’s staffing committee meeting in March. PeaceHealth added some positions, but “there’s still a huge need for RN staffing,” Himmelsbach said.

PeaceHealth recently added 54 positions at PeaceHealth Southwest Medical Center, Strickland said. The bulk of those are what’s called “patient team support role,” a unit secretary with additional support roles, he said.

But there is an asterisk to that increase in staffing: In 2013, PeaceHealth eliminated most unit secretary positions at Southwest as part of its $130 million in budget cuts.

Grappling with costs

Ostensibly, expanding health insurance coverage nationwide under the Affordable Care Act will benefit hospitals by reducing the number of uninsured patients they must serve, particularly in emergency rooms. But it’s not that simple. Reimbursement rates for hospitals aren’t likely to rise. And most of the more than 20 million Americans who’ve received access to care under the law are reimbursed at Medicaid rates, said Nierenberg, who was a director emeritus for PeaceHealth’s board until last year. “Medicaid rates are inadequate to cover the costs of care,” he said.

The Affordable Care Act also changes the way in which hospitals are expected to care for patients. Rather than just treating the ill, hospitals are called to take better care of people and to prevent hospitalizations, Nenzel said.

Rather than a vision of healing, PeaceHealth needs to shift its focus to restoring health, Nenzel said.

“Moving from a hospital-centric reality to a community-health reality really requires massive innovation and change,” she said.

At the same time, PeaceHealth must try to keep up with the latest medical technology and also develop creative ways to prevent hospitalizations.

“If we get it right, we’ll provide less care in the acute hospital setting and more care in the outpatient setting,” said Strickland, the PeaceHealth communications manager. “That doesn’t change the fact that we’re going to need acute care hospitals. There’s still going to be a need for that care setting for the foreseeable future.”

That’s why PeaceHealth continues to invest in the latest acute care and surgical technology, Strickland said.

Nierenberg said there’s no single cause or person to blame for the turmoil at PeaceHealth. The merger of Southwest and PeaceHealth created a larger organization, which came with more challenges for managers and workers alike, he said. None of the pressures to cut costs are unique to PeaceHealth, he said.

“You’ll find this issue in any provider organization anywhere in the country,” said Nierenberg. “Everybody is grappling with it.”