Pac Med Plan With Swedish Raises Debate

Pacific Medical Center and Swedish Health Services officials were scheduled to vote today on whether to affiliate, a step that could trigger a challenge by Providence Medical Center.

The move, which would greatly expand Pac Med's primary care network and integrate it with Swedish's acute care facilities, represents the latest in a series of alliances formed among the region's health-care providers.

But there's a twist.

Pac Med already has an alliance of sorts with Providence Medical Center. So Pac Med's board will be deciding, in essence, whether or not to switch partners, further complicating an already complex situation.

"It's certainly a first for someone to switch (allegiances)," said Michael Rona, executive administrator at Virginia Mason. "So it raises a number of questions and complications."

Among the uncertainties: What will happen to Providence if the alliance is approved? And what will happen to some of the poor and indigent patients that Pac Med has traditionally served in coordination with Providence?

Less than two years ago, Pac Med signed a 5-year agreement with Providence, naming it as its preferred partner for hospital services for downtown Seattle.

Ray Crerand, chief executive of Providence's Puget Sound operations, said he would wait to see what the final proposal looks like before deciding what action Providence might take.

However, in an internal memo circulated by Providence administrators - including Crerand - to members of the hospital's medical staff in May, Providence officials said, "Providence will have at least a claim for breach of duty of good faith under the agreement - if not a breach of contract."

The memo also noted that Pac Med "is vital to Providence's success" and that "about 100 jobs are on the line" if Pac Med links with Swedish.

Under the proposal being considered, Pac Med would acquire Swedish's primary care network, known as the Swedish Partners Medical Group. SPMG, comprised of 16 clinics and 67 physicians, would bring to 22 the number of primary clinics Pac Med would oversee.

"One of our objectives was to grow our primary care business to provide more services for our patients," said Pac Med Chief Executive Phil Sherburne, adding that Pac Med will likely expand its primary care network even further.

SPMG's board voted unanimously this morning to move forward with the alliance, clearing the way for Pac Med and Swedish's boards to consider the proposal.

Industry observers noted that one of the reasons Pac Med entered into talks with Swedish was that Swedish - a relative newcomer to primary care - was willing to merge SPMG into Pac Med's primary care network and relinquish day-to-day controls.

The same could not be said for Providence, which operates 32 primary care clinics throughout Puget Sound through Medalia HealthCare, a joint venture with Tacoma-based Franciscan Health System, which competes to some degree with Pac Med's system.

In exchange for the primary care acquisition, Pac Med has agreed to refer patients requiring acute care to Swedish rather than Providence, where they have been sent for the past 8 years, according to the proposal.

Sherburne said there was no breach of contract since Pac Med's agreement with Providence is nonexclusive. The deal with Swedish, on the other hand, would be exclusive, said Swedish Chief Executive Richard Peterson.

"What we're doing is forming a relationship where Pac Med will focus on ambulatory care and we will focus on the acute side," Peterson said, adding that it could add as many as 20-30 patients to Swedish's daily hospital census. "It makes more sense to collaborate, focusing on areas in which we each have our strengths."

Peter McGough, president of the Washington State Medical Association and a primary care physician at Medalia, said the move would be a tremendous win for Swedish since it would boost its slumping hospital census while bringing credibility to its primary care operations.

Still, some believe that it would be difficult for two organizations with such disparate histories as these to merge their cultures.

Pac Med was founded as a U.S. Public Health Service Hospital in 1933, primarily serving merchant seamen. Beginning in 1971, the hospital, perched atop Beacon Hill, began accepting referrals from a local network of community clinics.

Included among the referrals are a number of poor and indigent residents. Pac Med and Providence have a long history of treating this group, while Swedish does not.

"Certainly, there is some concern," said Julie Boden Schmidt, executive director of the Puget Sound Neighborhood Health Centers, which represents about six community clinics.

"We've spent many years working with Providence and their physicians, building a relationship and building trust," she said, noting that a number of clinic patients that are referred to Pac Med require hospitalization at Providence. She added that Providence provides a comforting environment for members of the region's immigrant population, since it provides a full array of interpreter services and has a diverse staff.

While she doesn't dispute the fact that Swedish has improved its community care in recent years, she said it would take time to build a similar trust with Swedish.

Peterson said Swedish is willing to let clinics that work with Pac Med choose whether to go to Swedish or to stay with Providence. But clinic officials said their concern wouldn't be quelled until language is secured in the alliance guaranteeing community clinics the right to refer their patients to Providence for the long-haul.