Providence, Kaiser partner up
A plan by Providence and Kaiser Permanente to build a new medical center in the High Desert region of California is the latest example of leading hospital chains seeking market advantage.
They intend to spend up to $1billion to build a hospital in Victorville, a city of about 123,000. The site is only 11 miles from a hospital Providence already owns, and plans to close, in the adjoining city of Apple Valley.
The new site is next to the 15 Freeway, a major artery that cuts across a swath of the Mojave Desert and through the San Bernardino mountains toward the more populous cities of Fontana, Riverside and San Bernardino. That location should help ratchet up market share in an area whose population has skyrocketed over the past four decades. Victorville’s population has nearly doubled since 2000.
The unusual pairing of very different health care giants — a Catholic chain and an HMOonly model — will result in a facility available to both systems’ patients. But Kaiser Permanente members won’t be able to get certain reproductive services, including abortion, at the hospital because of Providence’s Roman Catholic affiliation.
According to a filing with the state, the new hospital will be fully functional by 2028. KP will contribute 30% of the capital to build it, and Providence 70%. Providence and KP hope to win state approval for their plan and sign a definitive agreement by year’s end.
The new facility will help the partners take on their two main Victorville competitors — Desert Valley Hospital, owned by Prime Healthcare Services, and Victor Valley Global Medical Center, owned by KPC Health. Prime is a large national health care system, though not as large as Providence, which is the nation’s 10th-largest. Kaiser Permanente, which is both an insurer and provider, has 39 hospitals and 724 medical offices across eight states and Washington, D.C. (KHN, which produces California Healthline, is not affiliated with Kaiser Permanente.)
A key part of the plan is for Renton, Washington-based Providence to close its 65-year- old St. Mary Medical Center in Apple Valley. It says costly upgrades required under looming state earthquake mandates don’t make economic sense.
“Retrofitting the current hospital would cost close to the same amount as building the new hospital, but you’d have to do it while operating the hospital,” said Erik Wexler, president of Providence South, which includes the group’s operations in California, Texas and New Mexico.
The Providence-KP deal is as much about competition as it is about earthquake readiness. Even if hospital lobbyists persuade state lawmakers to soften the requirements, there’s no turning back on the project, Wexler said.
Though Providence has 51 hospitals in seven states, associating with KP can burnish its credentials. KP, for its part, would get a local hospital where its approximately 110,000 members in the region can go for more than just emergency care.
That makes the deal advantageous for KP members. At present, they can use St. Mary, Desert Valley or Victor Valley Global for emergency services. But for any nonemergency hospital care, they must travel to the nearest KP hospital, 40 miles away in Fontana.
If the proposal goes through, they will have a hospital for almost all their needs much closer to home, said Bill Caswell, a senior vice president at Kaiser Permanente.
That means reduced spending on emergency care for KP members at other hospitals in Victorville — including the one owned by Prime Healthcare, with which KP has a history of mutual hostility.