In May 2018, Sunnyside-based Astria Health sought to acquire Trios Health in the Tri-Cities as part of former owner Kennewick Public Hospital District’s bankruptcy. The deal never happened, but Astria CEO John Gallagher made the case that the company’s experience in the Yakima Valley put it in an excellent position to serve Tri-Cities residents.

“Astria has had a strong record of success in turning around, building and growing health care operations, including its recent turnaround of the former Sunnyside Community Hospital (now known as Astria Sunnyside), Astria Regional Medical Center, and Astria Toppenish Hospital,” Gallagher wrote in his statement, which was filed as part of Kennewick Public Hospital District’s bankruptcy proceedings.

RCCH HealthCare Partners, a for-profit Tennessee firm that operates hospitals across the country, wound up acquiring Trios that August. However, Gallagher’s statement is in line with Astria Health’s portrait of itself as a community-minded, nimble and innovative health care system that is better equipped than for-profit companies to provide care for residents in the Yakima Valley and beyond.

Indeed, it was strong growth that helped Sunnyside Community Hospital — under newly formed parent company Regional Health — gain widespread support when it purchased Yakima Regional Medical and Cardiac Center, Toppenish Community Hospital and several clinics in August 2017.

The organization rebranded itself as Astria Health, and now, more than 18 months later, Astria maintains it has made progress on rebuilding the two hospitals.

However, several events in the past year bring into question how much progress Astria Health has made in improving patient care, especially at Yakima’s 214-bed Astria Regional Medical Center, which is much larger than the Sunnyside facility.

Astria Health has made cuts at Astria Regional that have affected patient care. One was the decision to close its rehabilitation unit, which reduced patient access to a service that was already limited in the Yakima Valley.

A decision to end long-standing funding for the Central Washington Family Medicine residency program will reduce the number of residents, who have traditionally provided care at Astria Regional and Central Washington Family Medicine.

And during contract negotiations, two unions representing workers at Astria Regional and Astria Toppenish voiced concerns regarding staffing and its impact on patient care.

Astria Health declined several requests from the Yakima Herald-Republic to make executives available for interviews about the organization’s finances and operations. The organization, via chief marketing and communications executive Dawn O’Polka, provided written statements in response to questions submitted by the Herald in a series of emails.

In those emails, Astria Health officials maintained that while industry challenges have created financial and operational issues at their Yakima and Toppenish hospitals, Astria is headed in the right direction.

“Astria Health has taken many steps to rebuild the two hospitals including hiring world-class primary care providers to support community health and well-being and hiring specialty care providers to strengthen and revamp medical service lines long neglected locally,” the organization wrote.

Astria Health recently announced hires in several areas, including cardiac care, critical care medicine and behavioral health.

Also, the organization’s opening of a new psychiatric facility at the 63-bed Astria Toppenish Hospital has been welcomed by policymakers pushing to increase access to mental health treatment. A bill that would increase the state reimbursement rate for patients at the new facility passed both houses of the Washington Legislature with bipartisan support.

More recently, Gallagher relocated his office from Astria Health’s headquarters in Sunnyside to the Yakima hospital.

“The decision was made so that we could focus system resources to respond quickly to patient and community needs here at Astria Regional Medical Center while ensuring Astria Health continues to provide the benefits of a continuum-of-care across the region,” Astria Health said in a written statement.

Unclear financial state

Sunnyside Community Hospital & Clinics purchased Astria Regional and Astria Toppenish when both were in precarious financial and operational states in August 2017, Astria officials said.

Astria Health said in an emailed statement that a delay in the Certificate of Need lengthened the purchase process. “During that extended period, specific service lines and financials weakened at both hospitals,” the statement said.

The state Department of Health requires a Certificate of Need. The process ensures that new facilities and services from health care providers are necessary for a particular region or community.

Health Department spokeswoman Kristen Maki said that in general, the acquisition of an existing health care facility qualifies for an expedited review. The department decided to conduct a public hearing, one for each hospital, due to “overwhelming” interest from the community. The hearings, which were both completed on July 11, 2017, in Yakima and Toppenish, attracted 150 people and 100 people, respectively.

“The decision to conduct a public hearing converted the project to a regular review timeline,” she said.

Under that timeline, the department completed its decision to grant the Certificate of Need for both hospitals on Aug. 22, 2017 — 20 days before the original target date of Sept. 11, 2017.

Based on their success with Sunnyside Community Hospital, Astria executives believed they could turn around Astria Regional and Astria Toppenish.

Department of Health financial annual statements show that total operating revenues at the Sunnyside hospital increased from $66.5 million in 2014 to $103.9 million in 2017 when it purchased the Yakima and Toppenish hospitals.

The exact financial state of the two hospitals at the time of the Astria Health purchase was unclear in publicly available documents.

Astria Health submitted the 2017 annual report for the two hospitals to the Department of Health in September 2018, five months after they were initially due. Astria Health said the report only accounted for financial data in the four months — September to December 2017 — since purchasing Toppenish and Astria Regional.

According to their respective annual reports, total operating revenues for that period at Astria Regional were $34.5 million. At Astria Toppenish, they were $6.5 million.

After expenses, Astria Regional and Astria Toppenish reported net losses of $6.3 million and $704,827, respectively, for those four months.

Maki said the Department of Health still wants to obtain a full year of data for a hospital’s annual report, even if there’s been an ownership change.

There is no available data for 2018, the first full year of operation under Astria Health’s ownership. Astria Health has not submitted its 2018 report to the state Department of Health; the reports are due Tuesday.

Regional Health, which is the official nonprofit management entity for Astria Health, posted a 990, a required federal nonprofit tax document, for 2017. There, it reported $3.9 million in revenue and expenses of $3 million, for net income of $915,646.

The 990 states that two key Astria Health executives, Gallagher and Cary Rowan, Astria Health’s chief financial officer, are employees of HealthTech Management Services, a Brentwood, Tenn.-based company that provides consulting and management services.

The firm, officially known as HealthTechS3, hired Gallagher and Rowan for the same positions at Sunnyside Community Hospital and Clinics in 2012. According to the Regional Health 990, Astria Health paid HealthTech Management Services $596,144 for management services in 2017.

Astria Health officials noted a few issues that have impacted the hospitals’ finances, including issues with converting electronic health records and a decline in how much it receives for treating Medicare and Medicaid patients.

Both issues have negatively impacted hospitals throughout the state, especially smaller rural hospitals, said Jacqueline Barton True, senior director of Rural Health Programs for the Washington State Hospital Association, a trade organization that represents hospitals and health systems statewide.

Astria Health “is generally pretty dependent on public payers,” she said. “It’s a difficult way to run the business.”

According to a hospital financial statement submitted to the state Department of Health, 638 — or 54 percent — of the 1,180 total admissions at Astria Regional Medical Center during the last four months of 2017, when Astria Health operated the hospital, were Medicare or Medicaid patients.

At Astria Toppenish Hospital, 48 percent of admissions — 181 of 378 during the same four-month period in 2017 — were Medicare or Medicaid patients.

However, Astria Sunnyside Hospital, where 88 percent of its 2017 admissions were from Medicare and Medicaid patients, reported net revenues of more than $5 million in 2017.

Astria Sunnyside is a critical access hospital. Critical access hospitals are small hospitals — consisting of 25 beds or fewer — that federal agencies say are essential to providing care for Medicare patients in rural areas. Hospitals with the critical access designation tend to get higher reimbursements because they are paid based on the actual cost of providing care rather than a designated amount for a set procedure.

Astria Health also cited a conversion to a new electronic health records system for some additional difficulties. “This process has resulted in a protracted revenue cycle process that is taking longer than expected to return to normal,” officials wrote.

Barton True, of the Washington State Hospital Association, said issues with the integration of an electronic health records system may not only cause delays in billing but can prompt inaccuracies in billing that result in the hospital not billing the correct amount for treatment, causing a short-term hit to revenues.

Employees have concerns about Astria’s financial health, said Jayson Dick, nurse representative of the Washington State Nurses Association.

The union represents nurses at both Astria Regional and Astria Toppenish, where members ratified new contracts after a year of bargaining.

Dick said he called the state Department of Health to voice his worries about Astria Regional, including the closure of the facility and member reports about a lack of supplies needed for patient care.

“I’m concerned about the well-being of that facility,” he said.

When asked about the availability of supplies, Astria Health officials wrote, “We are actively managing our supply chain process to ensure we have necessary supplies.”

Expansion plans

While managing the acquisition of multiple hospitals, Astria Health continued to pursue additional expansion opportunities.

Before buying the Toppenish and Yakima hospitals, Astria announced plans for a new $120 million Sunnyside hospital with 58 beds, which would more than double present capacity.

The expansion was announced in October 2015, and Astria had continued to plan the new hospital even while purchasing Astria Regional and Astria Toppenish.

Work on the new hospital was expected to start in early 2017, but that didn’t happen.

In an email, Astria Health wrote, “The hospital is still in the planning stage, and we’ll continue to pursue the replacement facility as the integration of the acquisition matures.”

Astria was also thinking beyond Yakima and Toppenish.

It started talks with Trios Health about a possible acquisition in early 2017. In August 2017, just a few weeks before purchasing the Yakima and Toppenish hospitals, it submitted a proposal for an affiliate relationship with Snoqualmie Valley Hospital in Snoqualmie.

As part of that process, Astria Health executives made a presentation to the Snoqualmie Valley Hospital board in late October 2017, a little over a month after purchasing the Toppenish and Yakima hospitals. In the presentation, which was posted to the hospital’s YouTube channel, Astria Health executives said the organization had already started seeing improvement in the newly acquired hospital under its ownership. The organization also highlighted rapid growth at the Sunnyside hospital.

Both Trios Health and Snoqualmie Valley Hospital passed on Astria Health’s proposals. The Snoqualmie Valley Hospital board ultimately voted to end discussions in early 2018, saying it wanted to affiliate with another organization.

Meanwhile, the Kennewick Public Hospital District ultimately went with RCCH HealthCarePartners — now LifePoint Health.

When asked if Astria would still try to expand, officials replied, “It is possible.”

Services

Despite Astria Health’s assertions of expanded services at its hospitals, the reality is mixed.

In December, Astria Regional suspended operations at its 15-bed inpatient rehabilitation center. Interim CEO Jeff Egbert said it was because of the unit’s significant financial losses. The center offered treatment for patients recovering from strokes, brain injuries, cardiac disorders and other complex medical conditions.

The decision reduced already limited inpatient rehabilitation options in the Yakima Valley.

Astria Health wrote that the unit “continues to be reviewed.”

In February, Astria Regional Medical Center announced it would pull funding from the Central Washington Family Medicine Residency Program. The hospital had split the cost of several residents — each cost approximately $170,000 a year — with Virginia Mason Memorial hospital. As a result, the number of new residents entering the program in the upcoming academic year will drop from eight to five.

With fewer residents, primary care for Yakima Valley residents will be impacted. CHCW officials previously said that residents see patients for about a third of all visits at Central Washington Family Medicine’s clinics in Yakima and Ellensburg.

And in the past few weeks, several medical professionals, who spoke to the Yakima Herald-Republic on background, said there had been questions in the local health care community regarding the status of Astria Regional’s critical-care unit.

Virginia Mason Memorial hospital has seen higher volumes of critical-care patients over the past six months, said Diane Patterson, Memorial’s senior vice president and chief operating officer.

“As a result, we have increased our telemetry bed and critical-care capacity to meet a community need,” she wrote in an emailed statement.

Patterson declined to say if she believed Virginia Mason Memorial’s increased volume was related to changes with Astria Regional’s critical-care unit.

Astria Health, in an April 2 news release, said it had revamped the critical unit and had brought in “an advanced level of intensivist expertise.”

When asked to elaborate on the changes in the critical care unit, Astria Health wrote that it continued operating the unit through its recent transition: “We have improved the level of care by having patients cared for by experienced hospitalists and critical care intensivists working alongside our ER physicians and other specialists.”

Mental health care

Astria has been able to improve revenue prospects for certain services, such as mental health.

Astria Toppenish Hospital opened a new psychiatric facility in response to a statewide push to improve access and availability of mental health care.

When hospital officials said the 10-bed unit would operate at a loss because the current reimbursement rate does not cover costs, state legislators approved House Bill 1534, increasing the daily reimbursement rate for patients in those beds from just over $700 to $1,050 — the median amount paid to other rural psychiatric care facilities in Washington. Gov. Jay Inslee signed the bill into law April 24.

“Medicaid typically reimburses less than cost and starting to provide psychiatric services at Astria Toppenish Hospital is a badly needed service in the Yakima Valley and throughout the state, ” Astria Health said in a written statement.

Changing industry

Washington hospitals are trying different strategies to generate savings and revenue, Barton True said.

“We’re a volume-based business,” Barton True said. “Achieving scale is a way you can achieve cost savings.”

Asked how Astria Health sees itself moving forward, officials pointed to their mission statement.

“Astria Health’s mission and vision remain constant: To build sustainable health care organizations that deliver comprehensive quality care to all people living and working throughout the Yakima Valley,” officials said.

 This story was edited to correct the expense figure in Regional Health's 2017 990 form. 

Reach Mai Hoang at maihoang@yakimaherald.com or Twitter @maiphoang