Providence Health & Services and Swedish Health Services say their local solution to the national problem of improving care while lowering costs is to combine their western Washington operations in a new not-for-profit system.
Providence, Swedish forging new system in Wash.
“We don’t see a lot of bright light on the horizon,” Dr. John Koster, president and CEO of Renton-based Providence, said during a conference call. “This is a bold step. We aren’t waiting for others to give us guidance. ACOs and health reform, those are very exciting, but at some point, we have to step up and lead.”
The comprehensive delivery system that the tie-up will produce “puts us in a very, very strong position” to form an accountable care organization and go beyond that, Dr. Rod Hochman, Swedish’s president and CEO, said during the call. Seattle-based Swedish studied many possible partners, but Providence was the best fit in terms of mission and values, Hochman said. The organizations use or are implementing the same electronic health-record system as well, he noted.
Koster insisted the deal is not a merger of Providence and Swedish nor an acquisition by Providence but an affiliation. Hochman said, however, that five board members from Swedish will join the Providence board, and Swedish will become part of Providence’s debt obligation group. And Koster said they will not form a new corporation, such as a joint venture, to own and operate the combined operations, and the new system will be set up and managed as a region of Providence, which now has 26 hospitals in Alaska, California, Montana, Oregon and Washington. All of those aspects are often features of mergers.
Both executives emphasized that each system will retain its own governance and heritage. Providence’s facilities will continue to operate according to Catholic ethical and religious directives, and Swedish’s facilities will stay secular. Each will maintain its own foundation. No financial terms were disclosed.
Providence will contribute its operations in King, Snohomish, Thurston and Lewis counties to the system, including three hospitals. Swedish is essentially contributing all its operations, which serve King, Kittitas and Snohomish counties. The deal requires regulatory approvals at both state and federal levels, as well as approval from the Roman Catholic Church. Hochman said he hopes the deal can be completed by the beginning of next year.
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