Yakima Regional was first in taking hospital consolidation plunge

Sept. 08--YAKIMA, Wash. -- The Yakima Valley is no stranger to hospital consolidation. Yakima Regional Medical and Cardiac Center is now on its third owner since it was first started by the Sisters of Providence more than a century ago, providing a prime example of the shifting health care landscape.

Regional started as St. Elizabeth's in 1891. The Sisters of Providence grew into Providence Health and Services, now a large nonprofit hospital chain spread across the Pacific Northwest.

In 2003, after losing $23 million on the two facilities over the previous six years, Providence sold Regional and Toppenish Community Hospital (then called Providence Yakima Medical Center and Providence Toppenish Hospital) to Naples, Fla.-based Health Management Associates, a stockholder-owned company. The company agreed to pay off Providence's debt and invest $20 million in capital improvements in five years, including new advanced cardiac and robotics technology.

HMA also pledged to donate $1 million a year for 10 years to the Yakima Valley Community Foundation, which it did.

Now, Regional and Toppenish are owned by an even bigger corporation: Franklin, Tenn.-based Community Health Systems, which bought out HMA earlier this year in a $3.9 billion deal and now owns 207 hospitals in 29 states, making it the second-largest publicly traded hospital chain in the country.

The main benefit of a larger owner is the clout it brings to any given market, said Regional CEO Veronica Knudson, who came on as interim chief in February and took over the permanent title in March.

"The beauty of CHS is that it is a large organization with a lot of resources," she said. "There's a lot of support. In a large organization, (you have) the ability to contract, and the buying power you have for getting good rates on things, purchasing things -- there's a real advantage to that, as well."

If Regional needed a new CT scanner, for example, she said the hospital would talk to the appropriate contact at headquarters, who knows exactly how many other CHS hospitals are looking for CT scanners and can work with the vendors to get a deal on several machines at once.

Knudson said she is in regular communication with the CEOs at CHS hospitals in Spokane, Deaconess Hospital and Valley Hospital, and says CHS will be looking to centralize for efficiencies. Several business office functions from the Yakima hospitals were already consolidated under Health Management Associates.

The jury's still out on how the power of corporate centralization will improve services for Yakima patients. Staff members at Regional say they have seen reductions in nursing services in certain departments as the parent company seeks efficiency through cost-cutting.

Nationwide, turning around some of HMA's more problematic hospitals might prove a bigger challenge than CHS originally thought, some market analysts said earlier this year.

The most recent news for CHS has not been positive. A few weeks ago, the company was the victim of a massive data breach by what are believed to be Chinese hackers, who stole personal identification information on 4.5 million CHS patients -- including some in Yakima and Toppenish who received services at hospital-affiliated clinics and physician practices within the past five years. Letters are still being sent to affected parties to alert them of the hacking and offer free identity-theft protection services.

The first week of August, the company paid more than $89 million in a settlement to the federal government over a three-year investigation into fraudulent billing practices. Though the settlement didn't include any finding of improper conduct by CHS or any admission of wrongdoing by the company, the case was similar to another Department of Justice investigation into HMA: Both companies were accused of billing for more expensive admissions than were medically necessary. The $89 million was to cover CHS's share of the federal insurance claims.

Shrinking insurance reimbursements in health care are a concern for massive for-profit corporations, not just nonprofits, Knudson said.

"We have to continue to figure out how to provide a high level of quality care, safe care to our patients, with less dollars," she said. "That is a challenge."

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