Continuous change in the health care industry served as the driving impetus for Group Health Cooperative as it started pursuing a partner a few years ago.

That pursuit culminated at the end of last year when Oakland-based health insurer Kaiser Permanente reached a tentative agreement to acquire Group Health for $1.8 billion.

“The health care industry is changing drastically,” say Kelly Stanford, Group Health’s Spokane-based vice president of operations and marketing for Eastern Washington.

“We had to sit down and ask, ‘Do we try to stay independent or join a larger network?’ At our size, what we saw is that it would become tougher and tougher each year to stay competitive with other providers without passing the costs on to the customers,” she says.

Stanford adds, “From information technology upgrades to the use of specialty drugs, it was only going to get more costly as an independent health care provider. We’ve worked hard to get to a point of greater financial strength than a few years ago. But that has meant losing jobs, and we’ve lost members.”

Group Health Cooperative’s board had to choose between keeping prices lower and investing in clinics, equipment and new tools. Given those trends and stiff competition from large national companies, the board had to evaluate its position as a regional health care organization, Stanford says.

“We asked ourselves if we could continue to deliver great care, offer the services we do today, and keep prices down if our enrollment and revenues continued to decline while drug and other medical costs increase,” Stanford says. “In examining our alternatives, our board determined joining with Kaiser Permanente presents the best way to preserve our values, approach to care, and our care teams, all while addressing the serious challenges we face as a regional health care organization.”

Group Health’s nearly 130,000 members in Eastern Washington, 65,000 of whom are located in the Spokane area, won’t be negatively affected by the proposed transaction, she says.

 “One of the biggest questions from our customers is, ‘Am I going to be able to keep my doctor?’ ’’ Stanford says. “The answer is yes.”

“Under the proposal, Kaiser Permanente is acquiring what already exists—our facilities, medical and administrative staff, everything,” she says. Kaiser Permanente does not have a presence in Washington in the areas where Group Health operates, so there won’t be duplications of services anywhere in the state. Everything will continue to remain the same, she says.

While Kaiser Permanente repre-sentatives referred most media inquiries to Group Health administrators, Kaiser Permanente executive Donna Lynne said in an email response that if the acquisition is approved, Group Health “over time” would become known as Kaiser Permanente Washington.

Both Group Health Cooperative and Kaiser Permanente were founded in 1945 and both are nonprofit organizations.

Following the December acquisition announcement, more than 1,600 Group Health subscribers, staff and members of the general public gathered at The Westin Seattle last month to discuss the acquisition. The meeting included information, debate, and questions and answers from leaders and clinicians from both Group Health and Kaiser, Stanford says. 

The meeting also included an advisory vote of eligible voting members, with 1,094 people in favor of the acquisition, 179 opposed, and 51 abstaining. The results of January’s advisory vote will be included in a voting guide with a vote-by-mail ballot sent to other eligible voters across the state. Final vote results are scheduled to be announced March 12, Stanford says.

Since then, Kaiser Permanente and Group Health officials have been hosting town hall-style meetings across the state, including in rural communities, to answer questions and provide additional details about the proposed acquisition, Stanford says.

Stanford says if the acquisition is approved by Group Health’s eligible voting membership, the transaction would then be reviewed by the Washington Office of the Insurance Commissioner. The transaction also may be reviewed by regulatory officials in California and with the federal government. The entire process is expected to take up to a year or more.

Kaiser Permanente currently operates in California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia and Washington, D.C. Group Health currently has a total of nearly 590,000 enrollees. If the acquisition is completed, Kaiser will insure about 11 million people who will have access to about 18,700 physicians at about 680 medical facilities in eight states and the District of Columbia.

“Our customers are going to have better access to care because of Kaiser’s resources,” Stanford says.

Also under the terms of the acquisition, Kaiser Permanente says it will honor all existing contracts that Group Health currently has in place and all collective bargaining agreements with staff members and other personnel, Stanford says.

Group Health has offered health plans in Spokane since 1977. The organization currently has 90 physicians in Eastern Washington, serving 20 Washington counties and two in Idaho, according to data provided to the Journal of Business for its latest Health Care Plans list, published in December.

Stanford says the $1.8 billion in proceeds from the transaction will go toward establishing the Group Health Community Foundation, which would be focused on improving health for Washington’s families and communities.

Stanford says Group Health Cooperative administrators began exploring the idea of becoming part of a larger network two or three years ago.

Kaiser Permanente has pledged to commit $1 billion over the course of 10 years for capital improvements in the Washington clinics and facilities and $800 million over the same time frame in individual community benefits, Stanford says.