A proposed merger between Providence Health & Services, the Renton, Wash.-based parent of Spokane-based Providence Health Care, and smaller California-based St. Joseph Health has cleared a hurdle and appears to have one significant one remaining.

The attorney general in Oregon, where eight Providence hospitals are located, last month waived review of the transaction, so long as Providence complies with a number of conditions regarding the operation of those hospitals. Now, the deal needs only the nod of the California attorney general to proceed, since it doesn’t require regulatory approval in Washington state. 

Liz DeRuyter, a Providence spokeswoman here, says it’s too early to predict what impact, if any, the merger would have on the nonprofit Catholic health care network here, which includes Spokane’s largest hospital and provides services throughout the Inland Northwest. 

What’s clear, though, is that the combined entity, named Providence St. Joseph Health—encompassing more than 50 hospitals and numerous affiliated entities across seven states—would rank as one of the top few largest nonprofit hospital systems in the U.S. It would employ about 110,000 people and would boast annual revenues approaching $20 billion.

Providence hopes to complete the  transaction within the next couple of months.

Elaine Couture, Spokane-based regional chief executive for Providence, was out of town earlier this week and couldn’t be reached for comment about the forces driving the merger or whether she believes it has the potential to enhance the depth and quality of services Providence offers here.

However, an analysis by Kaufman, Hall & Associates LLC, a Skokie, Ill.-based provider of strategic, capital, and financial transaction advisory services, found that the number of hospital transactions announced last year grew 18 percent compared with 2014 and are up 70 percent since 2010.

In 2015, 112 hospital transactions were announced, compared with 95 transactions the year before and 66 in 2010, and the pace of transactions was especially strong in the second half of last year, the company said. 

“Hospitals and health systems are facing extraordinary pressure to reduce costs, manage care more effectively across the continuum, and improve patient engagement and experience,” said Patrick Allen, managing director at Kaufmann Hall, in a press release outlining the study’s findings.

“To achieve these goals,” Allen said, “hospitals and health systems will continue to pursue strategic partnerships designed to achieve clinical alignment, network breadth and depth, operational efficiency, and other critical capabilities.”

The analysis noted that Community Health Systems Inc., the Tennessee-based hospital operator that owns Rockwood Health System here, include Deaconess and Valley hospitals, was involved in eight transactions. 

For Providence, the major question at press time was whether clearing the regulatory hurdle in California will be problematic. The proposed merger has encountered some opposition there, with news reports indicating some interest groups have urged the attorney general there to reject it.

As part of the review process, a series of public hearings arranged by the attorney general’s office were held last month in communities in that state served by the two hospital systems, and newspaper reports about those hearings say testimony was mixed.

The final hearing, held April 25 in Eureka, Calif., drew a big crowd. Merger supporters said the combination of two large hospital systems could help serve rural communities, such as Humboldt County there, the Eureka Times-Standard reported. 

Meanwhile, opponents, including members of the California Nurses Association, said ongoing labor-related concerns need to be addressed before they could support the partnership, the newspaper said. 

The two hospital systems announced last July they had signed a letter of intent to combine into a network that would reach from Anchorage, Alaska, to Lubbock, Texas. In November, they signed a definitive agreement to merge, setting in motion the regulatory review process.

Assuming the merger is allowed to proceed, Dr. Rod Hochman, PH&S president and CEO, would become president and CEO of the new organization, which would have a 14-member elected board, with seven members from each hospital system.

In a recently published interview with the Puget Sound Business Journal, Hochman said, “This is not about getting bigger, but getting better. It’s better care at lower cost with simplified access, and that takes care of everybody. We take care of everyone that walks in the door, particularly the poor and vulnerable populations.”

In a portion of its website that’s devoted to describing and answering potential questions about the merger, Providence cites similar reasons for why the two health systems have proposed joining, also saying it represents a melding of two Catholic systems with similar missions.

“A combined system has the potential to expand community benefit programs, provide greater access to health care services, achieve outstanding clinical care, and improve the patient experience,” the website says.

Among the benefits Providence says it foresees are “a greater emphasis on population health strategies to encourage preventative care” and the potential to bring new services to hospitals and clinics.

It says its intention isn’t to reduce jobs, and it adds “our ministries will continue to provide competitive pay and benefits to the more than 100,000 people our organizations employ.” Citing the hundreds of millions of dollars the two networks have spent on charity care and community benefit programs over the last several years,  Providence says its goal is not to trim those expenditures but rather “to be able to serve even more people in need.”

How it would be able to achieve such service enhancements and potential cost efficiencies remains to be seen. 

The new parent organization, Providence St. Joseph Health, would oversee both systems through what it calls a change in “system-level governance control,” and the two systems—with a few modifications—would operate basically as divisions of the new company. 

However, under the agreement, no money or assets would change hands, no other structural or managerial changes would occur, and each system would retain its own identity, established labor agreements, and so on.

Providence Health & Services is more than twice as large as St. Joseph, with a system that includes 34 hospitals, 475 physician clinics, senior services, supportive housing, and many other health and education services.

It employs more than 82,000 people, and its facilities include a total of 9,311 acute-care beds. Its total net operating revenue last year was $14 billion.

Providence Health Care is the Spokane-based Eastern Washington region of Providence Health & Services. It operates Providence Sacred Heart Medical Center & Children’s Hospital, the Inland Northwest’s largest medical services provider, and also Providence Holy Family Hospital, and smaller, critical-access hospitals in Colville and Chewelah. 

It also provides a range of services through Providence Medical Park in Spokane Valley, three urgent care centers, and home health, assisted living, adult day health and skilled nursing care programs.

St. Joseph operates a total of 16 facilities, with 4,122 licensed beds, and employs about 25,000 people. It has total annual revenue of about $5.6 billion.

Separate from Providence Health Care operations, Providence Health & Services announced five years ago that it planned to consolidate and relocate its billing functions in Spokane, adding that it expected as part of that plan to add more than 150 jobs to its service center here.

Although its headquarters are on the west side of the state, it said it selected Spokane because of the Providence ministries located in Eastern Washington, customer accessibility, availability of labor and community resources, convenient transportation, and lower costs for labor and facilities. 

The Spokane hub of Providence’s Revenue Cycle Management, it said, would focus on billing and follow-up with commercial providers such as Premera, Group Health, and Regence, as well as business functions such as cash posting and patient correspondence.

Providence Health & Services was established formally on Jan. 1, 2006, when Spokane-based Providence Services, the parent company of Providence Health Care, merged with Seattle-based affiliate Providence Health System.

Providence Health Care, originally named Providence Services Eastern Washington (PSEW), was formed in 1998 when six hospitals operating under the Providence Services umbrella joined together formally under a single corporation.