Empire's Big Decision

by DOUG NADVORNICK & r & & r & & lt;span class= & quot;dropcap & quot; & W & lt;/span & hen Barb Davis and her Valley Hospital co-workers have time, they talk about their employer's future. They wonder if the parent company, Empire Health Services, which also operates Deaconess Medical Center and four urgent care centers in Spokane, will change its status from nonprofit to for-profit. Will it merge with or be acquired by an out-of-town company? All of those options are on the table as Empire board members consider ways to help the company meet its "Big Hairy Audacious Goal": by 2015, to be the top-rated hospital in the nation for patient safety, employee and physician satisfaction.





"It's fear of the unknown, mostly," says Davis, a cardiovascular technician. "I've never worked at a for-profit company. This has always been a good job, but it's uncomfortable not knowing where we're headed."





Davis has worked the last half of her 38-year career at Valley; the first half she spent at Deaconess. "A number of the people here [at Valley] have seen the hospital change hands several times, and they say it's always been a good thing," Davis says. "So maybe it'll turn out all right."





& lt;span class= & quot;dropcap & quot; & A & lt;/span & lthough Deaconess is, in many ways, a modern, state-of-the-art hospital, parts of it are showing their age. The main building opened in 1959.





"Our lobby is too small, and it's not very welcoming for patients," says Empire spokeswoman Christine Varela. "We have to send people downstairs to be admitted."





For an example of outdated infrastructure, company officials cite the hospital's old pneumatic-tube system, which uses two-foot-long plastic capsules to shoot fluid and tissue samples and paperwork between floors. The current system debuted in 1962 and has reliability issues. "It's not exactly the most high-tech device, but it's a huge labor saver," says Empire Vice President Becky Swanson, "Without it, our people would spend a lot of time running things back and forth."





The cost to replace the system? $765,000.





Those are just two items on Empire's wish list. Others include: new hardware and software to bring computers to patients' rooms so that doctors and nurses can have instant access to patients' medical records and to other information; state-of-the-art medical equipment; more money to pay and retain doctors, nurses and other medical professionals; an improved physical plant; perhaps even a new building to replace Deaconess.





To do everything on the list, Empire CEO Jeff Nelson figures the company will need up to $100 million. "All kinds of money is out there," says Nelson. The question is "what's the best way to get it and how much will it cost [to get it]?"





"Right now, we can't borrow at a reasonable rate," says Empire board chairman Ron McKay. He says the company's recent financial troubles (a $35 million deficit as recently as 2003) scare investors. With Nelson coming in to lead the firm in 2004, Empire has become profitable again, but "our [profit] margins are small," says McKay. To find better access to capital, the board hired a consulting firm, Cain Brothers, to search for a partner or a buyer.





"We're looking for a good match with our culture and mission," says board secretary Judy Cole. "Maintaining our high level of patient care is at the top of our priority list. We want a partner that has a good relationship with its physicians, that has proven systems for retaining and recruiting doctors. What about their relations with employees, volunteers, chaplains? What's their commitment to charity care? What kinds of investments do they make in their hospitals?"





Cole says the consultant and the board are evaluating several companies. They plan to decide by the end of summer how to proceed. While Empire is a nonprofit company now, that doesn't mean it will stay nonprofit.





That's a scary thought for Deaconess orthopedic nurse Patti Parra: "Will a for-profit company make quality patient care, like we've provided for years, a high priority?"





& lt;span class= & quot;dropcap & quot; & M & lt;/span & any Spokanites hold strong feelings about their hospitals. Some are loyal to Sacred Heart, some to Valley. Northsiders might prefer Holy Family. Those who came to a recent public forum at the Deaconess Health and Education Center were Deaconess fans.





One 76-year-old man boasted that he'd been operated on 21 times at Deaconess and that he'd always received stellar care.





"You've done a fantastic job for me," gushed one woman. "I've had several surgeries here, and my husband had two heart surgeries. The staff was wonderful, and the care was superb."





One man asked about the justification for change. "Why does being for-profit make any sense at all?" he asked. "You'd need to pay property taxes that you don't pay now. You'd have to satisfy shareholders. What's the advantage?"





"Access to capital is probably the biggest advantage," responded CEO Jeff Nelson. "If we had to refinance bonds that we've already issued, we'd probably pay a premium to do that now."





After several minutes of discussion, the man asked again: "Beyond the reason of lower-cost capital, what else is there?"





Nelson argued the hospital could operate much more effectively if it could improve its infrastructure. "We're not trying to raise costs for consumers here. We're just trying to be more efficient."





A woman in the back said, "People, especially seniors, don't understand how this will affect them."





Board member Mike Taylor tried to assuage fears that he and his colleagues would hand Empire to a company that didn't share the community's values.





"Look, I had a heart bypass here. My mother had procedures done here. We want the same things you want," said Taylor. "Changes are coming fast in the medical industry. How do we position this organization so that it can improve the quality of health care it provides to the community?"





& lt;span class= & quot;dropcap & quot; & S & lt;/span & ome of the angst about the board's deliberations is tied to the unique relationship shared by Empire and Providence Health Care, the parent company for Sacred Heart, Holy Family and several other Catholic hospitals in northeastern Washington. While the two compete on some levels, they collaborate on others. "We want to make sure those collaborations remain in tact," says Dr. Brian Seppi, president of the Spokane County Medical Society (SCMS).





Seppi and others are particularly interested in protecting Inland Northwest Health Services (INHS), the nonprofit company the two organizations created in 1994. INHS operates the MedStar medical transport system and St. Luke's Rehabilitation Hospital. It also built and runs the computer systems that allow medical providers in five Northwest states (including Alaska and Montana) to access more than 2.5 million patient records.





"We need to insist our hospitals continue to support a single, community-wide information system," Seppi wrote in a recent SCMS newsletter. "It will be up to providers to keep the pressure on the local hospitals not only to support what is currently in place, but to continue to make investments in information technology."





Tom Fritz, the CEO for Inland Northwest Health Services, doesn't think it will take much arm twisting. "We're viewed as a significant asset," Fritz says. "I think all the parties involved know that we help them to keep their costs down."





Fritz says Empire officials have been very open in discussing their plans with him. "I don't see any red flags," he says. "In fact, I see it as an opportunity."





That optimism is shared by at least one Empire employee.





"I'm not uncomfortable with our looking at options and alternatives," says EHS Contract Coordinator Andrew Rosdahl. "I hope we can continue to be an asset to the community. We need to look at how we can become better at that. I don't know if becoming a for-profit will allow us to do that. If I had a preference, it would be to stay nonprofit."





That's also the sentiment of fellow employee Patti Parra.





"We're concerned about whether we'll still have jobs" in a for-profit Empire, says Parra. "Will we retain our seniority, our sick time, our vacation time? And would we have to take a pay cut? We're just getting back to where we were four years ago," when employees agreed to cut their pay by 9 percent to help keep the company solvent. "We have a pay raise due next check -- a substantial one."





& lt;span class= & quot;dropcap & quot; & D & lt;/span & o employees trust the Empire administration and board to make the right decision? "Absolutely," says Rosdahl. "In my 17 years with the company I've seen the worst administrations, and I'm happy with the current leadership."





"None of us are very trusting right now," says cardiovascular technician Barb Davis. "We want to trust them, but the things that have happened the last five or six years [make us wary]. The company doesn't have the same kind of family atmosphere it did when I started in 1969. There's more attention paid to the bottom line."





CEO Jeff Nelson says he'll continue to meet with employee groups about their concerns. This week he also met with leaders of Greater Spokane Inc. to answer questions from business leaders. Empire board secretary Judy Cole says she and her board colleagues meet almost every day and are taking trips to visit the companies that are interested in working with Empire.





"We know Deaconess has deep roots in this community," Cole says. "And we know health care is one of this community's greatest assets. We have to decide how we sustain and build that asset."