Providence Health System is hoping to sell six of its 17 Seattle-area outpatient clinics or form a joint venture to operate them. It also will close one other Seattle-area clinic. If the system doesn't take such action, it may lose as much as $16 million this year.
It will be the second time this year that the Seattle-based Roman Catholic system has reorganized its physician operations because of financial woes.
In February, Providence pulled all 30 of its clinics out of a 4-year-old joint venture with Tacoma, Wash.-based Franciscan Health System (Feb. 8, p. 62).
It grouped 13 of the clinics into a network based in Everett, Wash., anchored by 262-bed Providence General Medical Center in Everett. The rest were grouped into a network based in Seattle, anchored by 310-bed Providence Seattle Medical Center.
Providence operates 17 other hospitals in Alaska, California, Oregon and Washington.
"The market tells us what to do, and it doesn't seem to make sense to continue to underwrite the losses of the clinics in the current fashion," said Derick Pasternak, M.D., chief executive officer of Providence's Puget Sound service area.
Pasternak said the sale and closing of the seven clinics in the Seattle network will reduce that group's losses to about $8 million next year.
He attributed their poor financial performance to insufficient Medicare payment rates and flat managed-care penetration. The clinics' revenues depended on capitated payments from health plans.
Pasternak also noted that Providence Seattle Medical Center could not afford to continue subsidizing the physician network.
According to Baltimore-based data tracking firm HCIA, the hospital lost $2.4 million on net patient revenues of $166.1 million in 1997, the most recent year available. The hospital had previously enjoyed years of profitability.
Fewer than 10 of the 140 physicians in the network are expected to lose their positions at the clinics that are being sold or closed, according to Providence system officials.
The 13-clinic network based in Everett is unaffected by the changes.