Washington state hospital systems plan to merge

Two health systems in Washington state are planning to come together.

Overlake Medical Center, above, and its clinics are planning to join the MultiCare Health System in Washington state. Officials hope to close the deal later this year.

The Overlake Medical Center & Clinics is poised to become part of the MultiCare Health System. The health systems announced this week that they have signed an affiliation agreement.

Under the deal, Overlake and its clinics would become the flagship health system of MultiCare’s new “North Sound” region.

Regulators must sign off on the deal, but the systems said they hope to complete the transaction in the second half of 2024.

Based in Tacoma, MultiCare operates 12 hospitals across the state of Washington, along with 300 clinics offering primary care, specialty care, pediatrics and urgent care. Overlake, based in Bellevue, operates a 349-bed hospital and a network of clinics.

Like plenty of hospitals and health systems nationwide, Overlake has faced some financial challenges in the wake of the COVID-19 pandemic. In March 2023, Moody’s Investors Service downgraded Overlake’s bonds from from A2 to Baa1 and projected a negative outlook, citing outstanding debt of $295 million.

J. Michael Marsh, president and chief executive officer of Overlake Medical Center & Clinics, said joining MultiCare will ensure Overlake’s stability and future prospects.

"For more than six decades, Overlake Medical Center & Clinics has served the Eastside and Puget Sound communities, and I am confident that this is the right next step for our health system," Marsh said in a statement. "In fact, one of our reasons for pursuing an affiliation with MultiCare was to ensure the ongoing fulfillment of our mission for decades to come.”

Bill Robertson, chief executive officer of MultiCare, said he was looking forward to Overlake joining the system.

"MultiCare's mission is partnering for healing and a healthy future," Robertson said in a statement. "In Overlake, we have found a like-minded partner that shares our interests in advancing the health status of King County and beyond.”

MultiCare and Overlake said there would be significant investments to improve healthcare in Overlake’s service area in King and Snohomish counties in the Seattle region.

Overlake’s leadership team, board of directors and staff structure will remain, officials said. In addition, Overlake will retain its brand, but the systems said MultiCare’s name would also eventually appear on buildings and signs when the deal is done.

The Overlake Foundation will also continue as an independent organization, officials said.

Overlake said its patients will continue to see their own providers and they will continue to have the same locations they have currently. Patients will also continue to be able to use their own MyChart patient portals.

Hospitals across Washington state have faced serious financial difficulties over the past two years.

The Washington State Hospital Association says the state’s hospitals lost $3.8 billion in 2022 and 2023. Most of the state’s hospitals are losing money, and some have had to cut services and reduce the number of beds. Cassie Sauer, president and CEO of the Washington State Hospital Association, outlined the difficulties of Washington’s hospitals in an online form last month.

“What we really see is that the state of Washington's hospital system remains very fragile after experiencing more than two years of significant losses,” Sauer said. “And these losses are now being compounded by delayed payments from insurers and the impact of the cyberattack on Change Healthcare.”

More residents in Washington are relying on Medicare and Medicaid, Sauer noted. Fewer people are using commercial insurance, which typically provides better reimbursements to hospitals.

More hospital mergers have been finalized or planned over the last 18 months, and analysts expect to see more deals in the near future. Some of those deals are being driven by hospitals that are struggling financially and looking for partners.