Medical landscape keeps shifting

contributing writerMay 13, 2012 

In the board game of Monopoly, the strategy most likely to produce victory is to accumulate all of the properties of one color, preferably in one of the more upscale colors (Boardwalk and Park Place) rather than those in less desirable, less expensive neighborhoods (“Yes! I got Baltic and Mediterranean!”).

If someone wanted to remake the game with more modern and relevant references, they might swap out some of the street names for real estate of a different type – hospitals.

The recently announced deal in which Tacoma’s MultiCare is acquiring Auburn Regional Medical Center is emblematic of a larger trend that has been reshaping this region’s health care industry for more than a decade.

The days of every community of size having its own free-standing, unaffiliated, independent hospital are about over. All over the Puget Sound region, hospitals are being bought outright, merging with larger groups or tying themselves into various alliances, affiliations and cooperative agreements.

The MultiCare-Auburn Regional deal gets added to a growing list of hospitals joining up with larger organizations, such as Valley Medical Center (Renton) with UW Medicine and Tacoma-based Franciscan Health System acquiring Enumclaw Regional Hospital.

The MultiCare deal won’t be the last. Already on the clock is Bremerton’s Harrison Medical Center, which in January announced it was issuing requests for proposal to area health care organizations for possible affiliation.

Multiple factors are driving the consolidation. Bigger is better, the theory goes, for purchasing, operating efficiencies, cost sharing and negotiating reimbursement deals with government or private insurance. While no one has a good feel for what government policy and spending on health care is going to look like even five years from now, most figure it’s better to deal with change from a position of size.

By creating regional networks of hospitals, emergency rooms, clinics, specialty practices and the like, consolidated health care systems also hope to keep patients, and their dollars, in-house, no matter what treatment they need.

Seen in that context, MultiCare’s acquisition of Auburn Regional makes considerable sense. Take a look at the map. By adding the Auburn market, MultiCare now has a presence in a swath running from Tacoma to Puyallup (Good Samaritan) to Auburn and to Covington, where it has opened an emergency room and plans to build a hospital.

Interestingly, Auburn Regional wasn’t an independent, being owned by Universal Health Services, a Pennsylvania-based company. But Universal doesn’t own any other general hospitals in the region. Lacking the kind of regional network that others have is akin to owning one of the green properties, one of the red properties and two of the orange in Monopoly – nice, but not nearly as powerful as owning all of one.

But trends don’t last forever and this one won’t either, for a simple reason: Eventually the pool of hospitals that could be bought will be drained of candidates.

Then what? And where?

Health care systems can build hospitals, and some, including MultiCare and Franciscan have been or plan to. But that’s an expensive, time-consuming proposition, the unclaimed territories are few and the competition is fierce for what remains (witness the protracted battle between Swedish and Overlake for the Issaquah market).

The alternatives include standing pat, or looking in different directions, south for example, or out on the peninsulas (which Seattle’s Swedish is doing).

Or these regional health care groups could go beyond their regions (Eastern Washington, Oregon, the West Coast). Or they could further consolidate, by joining each other. Or they could join up with national health care systems.

In other words, don’t get too comfortable with how the regional health care scene is now structured, because this is just the beginning. As anyone who has played Monopoly knows, it’s only after all the properties have been bought that the game gets really intense – and interesting.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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