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Thursday, November 20, 2003 - Page updated at 12:00 AM

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Group Health, Overlake announce new alliance

Seattle Times Eastside bureau

Group Health Cooperative patients on the Eastside will be going to Bellevue rather than Redmond for hospital care by 2007, under a new alliance between the health-care cooperative and Overlake Hospital Medical Center.

Group Health will shut down its Eastside Hospital near Microsoft's headquarters and allow its members to get hospital care at Overlake.

Group Health also will build a $110 million outpatient complex on Overlake's campus, cementing a relationship between the two companies and significantly boosting Overlake's presence in the region.

The deal announced yesterday morning is a landmark for both health-care companies.

Major step for cooperative

For Group Health, it is a major step in the effort to shed its inpatient hospital holdings, which have proven a drag on the organization's budget.

For Overlake, it is a coup over Seattle rival Swedish Medical Center, which had made an offer to buy the Redmond hospital and hoped to establish a stronger presence on the Eastside.

"It creates this location as the epicenter for medical care on the Eastside," said Ken Graham, Overlake's president and CEO.

Under the new arrangement, Group Health will buy land on Overlake's campus near downtown Bellevue and build a new 255,000-square-foot medical center specializing in areas such as outpatient surgery, urgent care and radiology.

Overlake plans to build an adjacent 80-bed inpatient hospital costing $85 million to $115 million to handle the additional demand for overnight stays.

The two sides have signed a letter of intent but must still negotiate the details over the next three or four months.

Group Health physicians will be able to apply to practice at Overlake Medical Center, and some other Group Health workers will be able to move to the new Bellevue facility or other Group Health operations, said Cheryl Scott, the cooperative's president and CEO.

It's not clear what will happen to inpatient nurses at Eastside Hospital, Scott said. The hospital now employs 1,100 at its campus.

Union representatives for some hospital staffers have lobbied to keep the Redmond hospital open.

"There are going to be many people who will be out of jobs who will not have an easy time finding other jobs," said Chris Barton, secretary-treasurer for Service Employees International Union District 1199 Northwest.

The deal shutting the Redmond hospital will also reduce patient choice, she said.

The inpatient-hospital portion of the Redmond campus will close in 2007 under the plan. Other Group Health services are there, such as doctors' offices.

Group Health plans to rebuild the offices of primary-care doctors either on a small segment of the Redmond campus or elsewhere on the Eastside, Scott said.

Scott said she doesn't know what will become of the other Redmond facilities.

Group Health in 2002 announced it might sell the 26-year-old Eastside Hospital, which Scott said soon will need a major renovation.

Several offers considered

It considered offers to sell to Swedish Medical Center, Overlake or Evergreen Hospital Medical Center in Kirkland. Evergreen withdrew from negotiations earlier.

The cooperative has worked to get out of the inpatient-hospital business, and the closure of Eastside Hospital would leave only Central Hospital on Seattle's Capitol Hill.

The nonprofit group formed an alliance with Virginia Mason Medical Center in 1993 and all but stopped taking overnight patients at its Capitol Hill facility.

Group Health is a combination health insurer and health-care provider based in Seattle, with approximately 560,000 members in Washington and Idaho. Group Health has more than 85,000 members in East King County.

Swedish Medical Center was widely considered the leading contender to take over the Redmond hospital.

Swedish was interested

Swedish CEO Richard Peterson in a May interview said the company would rename the hospital the Swedish Medical Center Eastside campus, double staff numbers and more than double the number of patients treated every day.

Peterson was not available for comment yesterday. In a prepared statement, Richard Keck, vice president of business development for Swedish Medical Center, said Eastside residents and physicians have asked for a bigger Swedish presence.

"The Group Health partnership was one of a number of options we have been pursuing to try to meet that demand, but we will continue to look at other opportunities."

Overlake's Graham said his company approached Group Health about the idea of joining forces in Bellevue rather than selling the aging Redmond facility to Overlake.

Scott declined to discuss details of the Swedish offer but said the Overlake deal was deemed a better fit for the cooperative.

Overlake officials, meanwhile, say the new arrangement will enable the hospital to add a wider array of services, making it a regional destination for medical care. Roughly half of Eastside residents now go to Seattle hospitals, Graham said.

The new deal is expected to bring an additional 6,292 inpatients and 16,462 outpatients to Overlake annually, Graham estimated.

The hospital now has 20,000 inpatients and 134,000 outpatients annually.

Warren Cornwall: 206-464-2311 or wcornwall@seattletimes.com

Copyright © 2003 The Seattle Times Company

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