Southwest, PeaceHealth finalize merger

Southwest Washington Medical Center and PeaceHealth made their marriage final Wednesday, signing papers to launch a nonprofit health system with roughly 15,000 employees, eight hospitals and nearly $2 billion in revenues.

The deal cements Bellevue-based PeaceHealth’s plan to move its corporate headquarters and some employees from its other locations to Vancouver, bringing some 340 new jobs with it. It also boosts Vancouver-based Southwest Washington Medical Center’s capacity to expand hospital services in the years ahead while enabling it to team up with another PeaceHealth affiliate — St. John Medical Center in Longview — to serve Southwest Washington residents.

“We can move on with the good work to make this relationship all that it can be in terms of helping expand the services we can offer to the community,” said Ken Cole, spokesman for Southwest.

Joe Kortum, president and CEO of Southwest, and Alan Yordy, president and chief mission officer for PeaceHealth, met at Southwest’s campus Wednesday for a ceremony during which they signed the final documents to seal the deal, Cole said.

Noting that Southwest already employs more than 3,000 people, Kortum said the added economic impact of PeaceHealth coming to town cannot be understated.

“How many times in Clark County do we have an organization like PeaceHealth say we are going to be moving hundreds of good-paying jobs with benefits into your community?” he said. “That’s really big. There’s no other way to slice that.”

Southwest and PeaceHealth are planning a community open house and other public events in January to celebrate the merger and to further reveal their plans for expansion of services in the region.

Southwest’s board approved its part in the merger, which leaders from both nonprofits call an affiliation agreement, Tuesday night. Before that, Vancouver Mayor Tim Leavitt and City Manager Eric Holmes flew to Seattle on Monday to meet with PeaceHealth executives and discuss their future in Vancouver.

PeaceHealth’s board signed off on the merger in November, according to Cole. The final approvals mark the end of a process that got under way in March, when leaders of both nonprofit medical systems kicked off negotiations.

Although the merger is final from PeaceHealth’s and Southwest’s perspectives, there are additional hurdles: The deal is being examined by the U.S. Federal Trade Commission, the state Attorney General’s Office and the state Insurance Commissioner’s Office.

Approvals from those agencies are expected to be granted by the end of this year, Cole said, and there’s no reason to doubt they will happen. The merger, which will see Southwest’s hospital, clinics, foundation, medical group and other programs join Catholic-sponsored PeaceHealth’s system, is slated to take effect Jan. 1, pending the regulatory approvals. The merger means that PeaceHealth becomes the parent of Southwest Washington Health System, which runs Southwest Washington Medical Center.

Under the merger agreement, funds raised by the Southwest Foundation will continue to be directed “exclusively” to services and programs benefiting Southwest, Vancouver and Clark County, according to a news release issued by the two nonprofits Wednesday. Southwest’s board will retain local control over day-to-day decisions.

A new name …

Southwest, founded in 1858 by Mother Joseph of the Sacred Heart — the first hospital established in the Pacific Northwest — also will get a name change: PeaceHealth Southwest Medical Center.

In approving the merger, Kortum said, Southwest’s board saw wisdom in being part of a larger organization in a vastly changing health care industry. Board members asked themselves “how could we expand the possibility that we’re going to be able to do better in the future,” Kortum said. Ultimately, the board decided that by creating a bigger organization, “you can do a better job, you can bring more capital investment into your community, you can expand your service lines,” Kortum said. “The other key feature is what this is going to mean to Southwest and its ability to continue to grow and serve the community. We clearly think it strengthens that mission.”

and new jobs

As part of the overall merger, PeaceHealth, which has hospitals in Washington, Oregon and Alaska, plans to set up what it calls a “shared services center” in Vancouver. That facility will harbor the nonprofit’s corporate offices and some of its back-office operations, bringing 340 new jobs to the area.

Additionally, another 160 employees who already work in back-office operations for Southwest will be moved to the new services center, bringing the total staff there to about 500 by 2014. The non-clinical back-office operations are positions in accounting, finance, information technology, health information management, patient financial services, human resources and payroll and materials management, according to the two nonprofits’ news release.

Most of the job transitions to the services center are expected to begin in mid-2012 and continue through 2014. A site has not been selected for the services center. Cole, the Southwest spokesman, said PeaceHealth continues to look for “a location that would work for them.”

By joining forces, PeaceHealth and Southwest are looking to establish and expand “a fully integrated regional network of care serving Clark and Cowlitz counties, and neighboring communities,” according to the news release. “This care network will feature a close working relationship between Southwest and PeaceHealth St. John Medical Center in Longview, as well as expanded access to primary, specialty and ancillary services.”

In an interview with the Columbian in November, Peter Adler, senior vice president and chief strategy officer for PeaceHealth, said there are other plans for joint initiatives, including:

o Investing in a single, efficient electronic records system for both hospital groups, spreading the cost across the entire combined organization.

o Expanding PeaceHealth’s “bridge assistance” program to include Clark County. The program is a charity care policy PeaceHealth uses to help low-income people pay their medical bills and to get financial counseling.

o Expanding Southwest’s family practice and residency training program in Vancouver and replicating that program in other communities PeaceHealth serves.

o Tapping the sophistication of both PeaceHealth’s and Southwest’s medical labs to transform them into the “premier laboratory system in the Northwestern U.S.”

None of the planned new services will come easy or quickly, however. Cole said the two nonprofits will launch “integration planning” next year, which will include building relationships with Southwest’s new sister hospitals, “especially St. John in Longview.”

Kortum described what will ensue, saying “what you have is a large, complex organization merging with another large, complex organization in a competitive marketplace in a complex system called health care.”

He said putting the two nonprofits together will take enormous work.

“We’ve got to integrate our human resources, our financial systems, our clinical systems,” he said. “It’s going to be exciting work. It’s going to be fun and challenging and probably a lot of headaches. All of the above. But it’s going to be a major, positive thing for our community.”