Washington state hospital systems complete merger

Months after announcing merger plans, the MultiCare Health System has finalized an affiliation with the Overlake Medical Center & Clinics in Washington state.

The MultiCare Health System has finalized an affiliation with the Overlake Medical Center & Clinics in Washington state.

The two organizations came together on Oct. 1. Overlake, anchored by a 349-bed hospital, becomes the flagship of MultiCare’s new “North Sound” region. Overlake also operates a network of primary care, urgent care and specialty care clinics.

With the addition of Overlake, MultiCare, based in Tacoma, Wash., now operates 13 hospitals and hundreds of clinics, and the organization now has more than 26,000 employees. MultiCare and Overlake first announced their plans to come together in May.

Bill Robertson, CEO of MultiCare Health System, said the organizations “have a shared commitment to improving the health of the communities we serve.”

“Overlake has an exceptional reputation for its culture, clinical programs, medical staff and patient outcomes, and we are thrilled for them to join the MultiCare family,” Robertson said in a statement. “This affiliation will benefit our patients, our communities and our employees for generations to come.”

The systems said the consolidation will strengthen Overlake, which has weathered some financial difficulties in recent years. Moody’s Ratings lowered Overlake’s revenue bond rating to Baa2 from Baa1 in June 2024 and noted the system had $262 million in debt at the end of the 2023 fiscal year.

However, Moody’s also revised its outlook from negative to stable and cited Overlake’s plans to join MultiCare later in the year. Moody’s noted that Overlake’s most difficult challenges are in the rear view mirror and projected the system’s “financial performance will remain stable, but muted for the next two years.”

J. Michael Marsh, Overlake president and CEO, said he’s looking forward to being part of MultiCare.

“This affiliation will strengthen Overlake’s 64-year commitment of providing exceptional, compassionate care to our patients,” Marsh said in a statement. “Together, we will be able to accomplish so much more in service to our mission of providing compassionate care. We will continue to keep high-quality patient care and the community at the center of all we do.”

Based in Bellevue, Wash., Overlake was founded in 1960 and operates 36 clinics. Overlake serves King and Snohomish counties in the Seattle region. MultiCare and Overlake say they plan to invest more in the region. The two systems said they will look at ways to integrate in the coming months.

Overlake Medical Center & Clinics is keeping its name, but MultiCare is being added to the logo to reflect the affiliation. The Overlake Foundation will remain an independent, nonprofit organization, the systems said.

Citing MultiCare’s financial improvement, Fitch Ratings revised the system’s outlook from negative to stable in September. Fitch noted “the system's significant improvement in operating margins over the last two years (albeit from a deep trough).”

MultiCare is the dominant health system in the Tacoma area, holding 48% of the market, Fitch notes. MultiCare's operating revenue was nearly $5 billion in the 2023 fiscal year, while Overlake had nearly $700 million in revenue in 2023.

Hospitals across the country have faced financial challenges, but health systems in Washington state have endured a particularly hard time.

Cumulatively, the state’s hospitals lost $3.8 billion in 2022 and 2023, according to the Washington State Hospital Association. Last year, the vast majority of Washington’s hospitals lost money.