Last hurdle for PeaceHealth deal awaits

State insurance chief expected to OK merger

By Aaron Corvin, Columbian port & economy reporter

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Although Southwest Washington Medical Center and PeaceHealth formally agreed to team up earlier this month, both nonprofits have one final hurdle to clear before they merge.

They must win Insurance Commissioner Mike Kreidler’s blessing.

At issue is Columbia United Providers, a Southwest subsidiary that serves Medicaid patients and that would be acquired by Bellevue-based PeaceHealth as part of the larger deal.

It’s up to Kreidler to decide whether to grant PeaceHealth’s proposed acquisition of the licensed health insurance contractor, which provides coverage to about 45,000 people in Clark County. A public hearing to decide the matter will occur at 1 p.m. Monday in the insurance commissioner’s office, 5000 Capitol Blvd., Tumwater.

Officials reviewing the proposed acquisition said it’s a routine examination and that they expect Kreidler to approve the deal. They also said the management of Columbia United Providers and the services it provides to people will see no changes under the acquisition proposed by PeaceHealth.

“We are not objecting at all,” said Marcia Stickler, staff attorney for the insurance commissioner’s office. “We’re supportive of it.”

Under state law, Kreidler, who regulates insurance carriers, must approve an acquisition unless he finds it would lessen competition or tend to create a monopoly in the business of providing health care.

If Kreidler approves the deal, as expected, the merger between PeaceHealth and Southwest will be fully complete and set to officially take effect in early 2011 as the two nonprofits have hoped. It will create a nonprofit health system with roughly 15,000 employees, eight hospitals and nearly $2 billion in revenues.

It will also mark the end of government analyses of the proposed merger by state and federal authorities. The merger received its most recent clearance on Dec. 13, when the U.S. Federal Trade Commission granted its approval.

Mitch Katz, a spokesman for the FTC, said the agency let the merger go through because “it doesn’t raise significant anti-competitive issues,” though the FTC could review the merger again if allegations of anti-competitive behavior crop up later on.

The state Attorney General’s office also has reviewed the issue of Columbia United Providers and doesn’t think its acquisition poses a problem, Stickler said.

No changes expected

PeaceHealth “definitely wants us to continue doing what we’re doing now,” said Ann Wheelock, president and CEO of Columbia United Providers.

Columbia United Providers employs 80 people, including claims processors. The insurer’s revenue, which Wheelock pegged at $100 million for this year, comes from the state in the form of Medicaid premiums.

Wheelock said the company exists “to ensure there is good access for Medicaid patients.” Medicaid is a shared state-federal health insurance program that serves low-income parents, children, seniors and people with disabilities. Columbia United Providers is 89 percent owned by Southwest and 11 percent owned by various physician groups in the Vancouver area.

For now, PeaceHealth plans no changes to Columbia United Providers, according to a letter submitted to the Insurance Commissioner’s Office. But it values what it would get from acquiring it. PeaceHealth doesn’t currently operate “a health plan or insurance vehicle,” which makes Columbia United Providers “a welcome addition to PeaceHealth’s services,” wrote Meredith Vaughan, system director of planning and strategy for PeaceHealth.

Other subsidiaries

Columbia United Providers is just one of several subsidiaries that PeaceHealth would acquire under its merger with Southwest. The Catholic-sponsored PeaceHealth would become the parent of Southwest Washington Health System, which runs Southwest Washington Medical Center.

Southwest’s parent system also encompasses other organizations, including:

• Southwest Medical Group, which includes both family practice physicians and several specialist groups such as plastic surgery.

• Family Medicine of Southwest Washington, a three-year family practice residency program.

• Southwest Washington Medical Center Foundation, which works with donors to raise money for patients, hospital programs and departments.

• Southwest Imaging Center — Fisher’s Landing, a diagnostic imaging service.

• Southwest Washington Regional Surgery Center LLC, an outpatient surgery center.

• Property and Building Company LLC, which manages Southwest’s rental properties and property acquisitions.

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 after the merger closes: PeaceHealth Southwest Medical Center.

Southwest and PeaceHealth kicked off merger negotiations in March. Earlier this month, the two nonprofits announced that they had reached a final agreement.