October 21, 2009 in City

Rockwood agrees to sale

Deaconess owner reaches deal to buy clinic
By The Spokesman-Review
 

At a glance

Rockwood Clinic

Founded: 1930

Employees: 940, including 133 doctors

Clinical locations: 32

Community Health Systems Inc., the owner of Deaconess Medical Center, has struck a deal to buy the Rockwood Clinic, the Inland Northwest’s largest specialty medical provider.

Terms of the deal were not announced Tuesday, but the transaction is expected to shake up the region’s health care industry as more of the venerable clinic’s 160,000 patients a year are likely to be steered to Deaconess and to Spokane Valley Hospital for further care rather than the competing Providence Sacred Heart Medical Center.

Dr. Craig Whiting, the interim chief executive of the for-profit Rockwood, said the clinic’s 10-member board of directors voted Monday night to enter into a nonbinding letter of intent with Community Health to form an “integrated health care delivery system.”

A broader vote by the clinic’s 77 shareholder-physicians will happen later. Financial terms of the pending transaction have not been disclosed.

The acquisition of Rockwood would inject fresh optimism into Deaconess and Valley and stir the rivalry with Sacred Heart.

Dr. Courtney Clyde, the physician president of the Spokane County Medical Society, said the surprising announcement would present Rockwood doctors with major decisions.

Rockwood has deep ties with Sacred Heart, Clyde said. The clinic’s general surgeons, obstetricians, urologists, plastic surgeons, neurologists and others have offices in the Sacred Heart doctors building.

“What will they be asked to do?” Clyde asked. “This marks a dramatic shift.”

Whiting said physicians and patients would not be pressured to choose any particular hospital for treatment.

Others doubt it would be so simple.

“Hospitals love to tie up referral sources,” said Janet Monaco, chief executive officer of the county medical society. “That’s probably one of their motivations.”

Dr. Andrew Agwunobi, chief executive of Providence Health Care, said he didn’t learn about the deal until Tuesday.

“We didn’t receive any notice from Community Health or Rockwood about this transaction,” he said. “We’re still learning about it. There’s not much I can say at this point.”

The hospital systems have been sparring over major issues during the past year, including expansion plans by Sacred Heart that were rejected by state regulators at the urging of Community Health.

Based in Tennessee, Community Health owns or operates 122 hospitals in 29 states. Most are in smaller, one-hospital communities where relationships with local clinics have been cemented for years.

But its $156 million deal to buy Deaconess and Valley last year was different. The two-hospital system instantly became one of Community Health’s largest properties. Adding Rockwood and launching an integrated care system is an exciting prospect, said Community Health spokeswoman Rosemary Plourin.

Community Health has spent millions on equipment and upgrades. The hospital operator also has drawn the ire of unions for tough and drawn-out contract negotiations and left many in the community worried as services such as trauma care and a popular Parkinson’s disease clinic get cut.

But the addition of Rockwood could begin to change those dynamics.

Whiting said Rockwood, which has had its own financial problems, would benefit, too.

Two years ago Rockwood curtailed parties, gifts and administrative bonuses amid a mild budget crunch.

The clinic’s revenues two years ago totaled about $100 million and its operating margin – the profit left after all the salaries and expenses were paid – totaled about 1 percent, or $1 million.

Whiting and Rockwood CEO Kevin Sweeny declined to disclose Rockwood’s current finances.

If purchased by Community Health, Rockwood Clinic would maintain its brand while aligning itself with one of the country’s largest and most successful for-profit hospital companies, Whiting said.

“The physicians of Rockwood Clinic believe that to best serve the community, we must align ourselves with a nationally recognized health care system and offer our medical services more fully across the continuum of care,” Whiting said in a prepared statement.

While such a transaction caught the medical community by surprise, many health care officials foresee integrated health systems as efficient models for patient care.

“When you look at health care reform ideas, integrated care emerges as one of the more viable models,” Clyde said. He pointed to the success of the Mayo Clinic in Minnesota and Geisinger Health System in Pennsylvania.

Rockwood and Community Health envision providing an integrated system encompassing hospital care, primary care and specialist services, ambulatory surgery centers, urgent care, outpatient physical therapy centers, and outpatient imaging, infusion and radiation therapy.

Sweeny, a physician who also serves as president of the Rockwood board as well as CEO, said patients would not be affected by the financial transaction, but stand to benefit from the integrated care model.

Sweeny and Whiting said there are no anticipated changes to Rockwood’s staff.

The transaction as described Tuesday appears to be outside the scope of state regulators, said Donn Moyer, spokesman for the Washington State Department of Health. License transfers and other items may need state approval, he added.

While an exact timeline has not been settled, William Gilbert, Deaconess’ chief executive officer said both Community Health and Rockwood officials want a deal by the end of the year.

Whiting said Rockwood could become a not-for-profit subsidiary of Community Health. Under such an arrangement Rockwood’s medical guidance would be led by a board of directors made of doctors.

Rockwood and Community Health have been engaged in talks for about six months.

“We’re still very early in this process,” Whiting said.


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