June 26, 2008 in City

Crowd urges hospitals’ sale

But hearing attendees want to see buyer’s plans for charity care in writing
By The Spokesman-Review

Taking over Deaconess Medical Center would be a big task, even for Community Health Systems Inc., a deep-pocketed corporation admired for its management skills and profitability.

That’s because Spokane expects the company to reinvigorate Deaconess while honoring a century-old legacy of aid to the downtrodden and ill.

“This is not a mere business transaction,” said the Rev. Phil Harrington, of Central United Methodist Church.

His words captured the spirit of a public hearing Wednesday night as dozens of people urged state health officials to approve Community’s $156 million offer to buy Empire Health Services, the parent company of Deaconess and Valley Hospital and Medical Center – with conditions.

Many residents want assurances written in plain, legal language that Community Health will discount medical treatment for the poor and even write off some bills.

Jim Dunn wondered how Community Health plans to win back patients from Sacred Heart Medical Center and earn back the $256 million it will have spent on its Spokane venture.

And some people came simply to tell stories about Deaconess and Valley.

Dorothy Sackville-West talked about her late husband, Jack, who was born at Deaconess in 1918 and died there in 1995.

“Toward the end of his life, he could tolerate frozen yogurt better than anything, so the nurses let me keep a container in their freezer for him to enjoy at any time,” she said.

“One midnight I left his room to get some for him, singing very softly to keep my spirits up. Gently a voice behind me joined in, and it was his nurse, who had come to check on him. By the time we reached the freezer, there were four nurses standing in a circle with me softly singing ‘Because He Lives.’ The love and support I felt made my heart rejoice.”

Her account underscored the crowd’s expectations.

One man talked about the treatment program that helped his mother overcome alcoholism. Nurses shared in the grief of a young couple over a stillborn baby. A patient with Down syndrome underwent successful, subsidized heart surgery.

“Operating Deaconess is a sacred trust,” said the Rev. Deb Conklin, of Liberty Park United Methodist Church, and a member of the Protect Our Hospitals Association.

Nick Straley, an attorney for the association, said he was worried about what he called vague language regarding the continuance of essential services. He pointed out qualifying language found throughout the application that would let Community stop offering services based on financial performance, its inability to recruit and retain enough physicians, or government policies that make services “unduly burdensome … to maintain.”

Community Health division President Bill Hussey said the Franklin, Tenn., company intends to succeed in Spokane.

Hussey, who will oversee the chief executives of Deaconess and Valley, said the $100 million investment in buildings and technology will help the hospitals expand services rather than cut essential offerings.

And Community Health’s charity care policies begin for people living within 300 percent of the federal poverty level. That net would apply to about 45 percent of people in Spokane County.

Although charity care expenses, along with unpaid bills and shrinking Medicare reimbursement rates, are blamed for losses at Deaconess and Valley, a report prepared for state officials by accountant KPMG LLP pinned some of the woes on aggressive spending by competitor Sacred Heart.

Spokane’s dominant hospital has a 47 percent market share. Deaconess has fallen to 21 percent. A 20 percent slice goes to Holy Family Hospital, which, like Sacred Heart, is run by Providence Health & Services, the Catholic hospital system with facilities from California to Alaska.

Although the hospitals compete, Dr. Andrew Agwunobi, chief executive of Providence’s Eastern Washington operations, said his organization supports Community Health’s acquisition. However, he wants Deaconess and Sacred Heart to have similar charity care standards.

A KPMG analysis determined that if Empire’s financial trends continue, interest payments on older debts would consume all available cash by 2010.


Deaconess recently borrowed $10 million to comply with its bond covenants. If the Community deal falls through, the KPMG analysis predicts losses of $9.4 million in 2009; losses of $12.2 million in 2010; $15.1 million in 2011; and $17.9 million in 2012.

Deaconess and Valley would be among 118 hospitals owned by Community Health in 29 states. With 388 beds, Deaconess would be among the largest hospitals in the corporation, a fact local business leaders seized upon in offering support to the sale.

Rich Hadley, chief executive of Greater Spokane Inc., said health care is a $4 billion player locally, adding that it’s better for Spokane to have competing hospitals than a monopoly. Dr. Jim Perry, along with other physicians, the Spokane Medical Society, and Washington State University President Elson Floyd, backed the sale as critical to patients, employees and the economy.

“Spokane is best served by two hospital systems,” Perry said.

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