Vancouver’s Southwest Washington Health System, which operates Clark County’s largest hospital with 3,500 employees, on Friday announced it is entering merger negotiations with PeaceHealth, a Bellevue-based hospital chain.
The agreement would create a health-care company with about $2 billion in revenues, 464 physicians and hospitals from Ketchikan, Alaska, to Cottage Grove, Ore., allowing Southwest to benefit by sharing its costs with a larger chain. That could reduce expenses for everything from supplies to services such as information technology and make the organization more efficient, said Joseph Kortum, president and chief executive officer of Southwest Washington Health System.
Kortum said Southwest’s independent hospital model is rare in today’s competitive health care industry and has some disadvantages such as making it more difficult to get access to capital. Realizing this, the medical center’s 15-member board of directors searched for other hospital systems with which it could merge.
“We felt that it was in our community’s best interest to be part of a larger organization for the sharing of information on how to provide the best care,” Kortum said.
In Clark County, Southwest operates the Southwest Washington Medical Center hospital campus at 400 N.E. Mother Joseph Place, off Mill Plain Boulevard in Vancouver, as well as the Memorial Hospital campus in downtown Vancouver, clinics in the Salmon Creek and Fisher’s Landing areas, a physicians group, a residency program, a charitable foundation, a health plan for Medicaid patients and an outpatient surgery center.
While combining operations with PeaceHealth will offer Southwest operational efficiencies, it is not expected to result in changes in operations here.
Kortum does not expect the hospital’s name to change. He also doesn’t anticipate any workforce reductions. At most, he said, the agreement could mean a new logo and a change of letterhead.
“This will not be something that’s very visible to the patients,” Kortum said.
PeaceHealth employs more than 11,000 people and operates five hospitals, including the St. John Medical Center in Longview. Other PeaceHealth facilities are: St. Joseph Hospital in Bellingham; the Sacred Heart Medical Center in Cottege Grove, Ore., which opened in 2008; the Peace Harbor Hospital in Florence, Ore., and Ketchikan General Hospital in Ketchikan, Alaska.
For its part, aligning with Southwest allows for market expansion, said Alan Yordy, PeaceHealth’s president and chief executive officer.
It could also help PeaceHealth retain and grow less profitable services, such as mental health care. In 2009, the two systems, Southwest and PeaceHealth, had total revenues of about $1.8 billion.
“If you can bring a variety of services together that are financially strong and sustainable, then you can provide services that don’t always pay their way but are very important to the community,” Yordy said.
Together, the two would employ more than 460 physicians.
Kortum said that before entering negotiations with PeaceHealth, Southwest also explored other options. It considered merging with Portland-based Legacy Health System, which operates a Salmon Creek hospital. It also discussed a possible merger with Providence Health & Services, which has one clinic in Vancouver and plans to open a second clinic near Camas.
Kortum said his organization and PeaceHealth have cultures that are closely aligned, with similar values for serving the region.
PeaceHealth’s most recent expansions include its $97 million Sacred Heart Medical Center in Cottage Grove, Ore. This year, the organization expects to open a new hospital on San Juan Island near Seattle.
Southwest Washington Health has also expanded, completing the top floors of its $43.7 million Firstenburg Tower in 2009. It also has announced the possibility of building a $26 million clinic near the northwest corner of Southeast First Street and Southeast 192nd Avenue.
In 2007, it spent $17.8 million for 75 acres in Ridgefield near Interstate 5 with plans for a “super clinic” of medical offices and an inpatient hospital facility that could eventually employ 3,000.
In the past two years, the medical center also has divested itself of most of its real estate and now leases its properties. That move generated some $100 million in cash reserves.
Editor’s note: An earlier version of this story had an incorrect number for the list of PeaceHealth hospitals.