If the boards of Highline Medical Center in Burien and Tacoma-based Franciscan Health System approve a final affiliation agreement, Highline would become part of an even bigger new regional healthcare system than first announced last month.

With Highline, the new partnership revealed this month would create an integrated health system in the Pacific Northwest, combining eight Catholic Health Initiatives hospitals in Washington and Oregon with nine PeaceHealth hospitals in Washington, Oregon and Alaska.

Even without Highline, the new organization will include nearly 26,000 employees and about 950 employed physicians serving in hospitals, physician clinics, outpatient care clinics, long-term care facilities, laboratories and private homes across the region.

Highline officials report the medical center and Franciscan are making progress on the proposed affiliation announced in July and plan to complete the due diligence phase in a few months so a definitive agreement can be approved by both boards by the end of 2012.

In a July Highline Times interview, Highline C.E.O. Mark Benedum emphasized the medical center would remain non-religious despite its affiliation with Franciscan, a part of Catholic Health Initiatives.

He said it would be similar to the merger between Sisters of Providence and Swedish.

Benedum noted there is no intention to layoff Highline employees as part of the affiliation.

“This (affiliation) will bring some added capital to Highline, and that gives us the opportunity to develop more services,” Franciscan C.EO. Joe Wilczek told the Highline Times last month. “In the health care field you now have to really grow, and the larger you are, the more you can save costs in purchasing more and greater discounts.”

But an announcement last week means Highline is poised to be affiliated with a health care system much larger than just Franciscan.

Catholic Health Initiatives and PeaceHealth, two nonprofit health care systems, signed a nonbinding letter of intent to create the new regional health care system. The new organization will have annual revenues of almost $4 billion,

“As a part of Catholic Health Initiatives, we believe this partnership will expand and sustain our healing ministry that has been essential to the quality of life in our South Puget Sound communities since 1891,” said Wilczek. “This is exciting news for the Franciscan organization and the communities we serve.”

Franciscan services that will become part of the new regional health system being formed by Catholic Health Initiatives (CHI) and PeaceHealth include St. Joseph Medical Center, Tacoma; St. Francis Hospital, Federal Way; St. Clare Hospital, Lakewood; St. Anthony Hospital, Gig Harbor; St. Elizabeth Hospital, Enumclaw; the Franciscan Medical Group physicians, and professional providers in Pierce, King and Kitsap counties; Franciscan Hospice and Palliative Care; and all other Franciscan programs. Highline’s services would be added to the network after approval of the Highline/Franciscan agreement.

“Catholic Health Initiatives and PeaceHealth share common cultures and values,” said Kevin E. Lofton, president and chief executive officer of Englewood, Colo.-based CHI, the nation’s second largest faith-based health system. “We see this as a natural evolution – a perfect way to share economies of skill and scale, improve health services and reinforce our common mission to create and nurture healthier communities.”

Alan Yordy, president and chief mission officer of Vancouver, Wash.-based PeaceHealth, said, “PeaceHealth and Catholic Health Initiatives have long traditions of serving communities throughout the Northwest and providing health services to all people. Our shared mission and combined strengths will allow us to better serve individuals with safe, high quality networks of care built upon more than a century of service in the Northwest.”

The nonbinding letter of intent is the first step in the partnership process. Leaders of CHI and PeaceHealth expect to form the new system before June 30, after completing the due diligence and approval process. The two organizations will be equal partners in the fully integrated health care system serving the Northwest region.

Officials from both groups said a rapidly changing health care environment that demands a more coordinated, integrated approach to the way health and wellness services are delivered to individuals and communities prompted the affiliation discussions.

The new environment also demands the ability to accept more financial risk in caring for defined populations, such as Medicaid recipients, they noted.

They added the size and scale of the new organization will allow it to form additional collaborations and networks of care that will include physicians, hospitals, insurers and other caregivers, increasing access to high-quality health services while reducing costs. The partners plan to reduce costs by making infrastructure investments more efficiently as a single organization in areas such as information technology systems.

The integration of the two organizations is expected to take place over time.

The new organization will also include two CHI hospitals in Oregon, Mercy Medical Center in Roseburg and St. Anthony Hospital in Pendleton as well as physician practices and related services, in addition to the Franciscan Health System’s facilities and services.

PeaceHealth has hospitals in Bellingham, Longview and Vancouver. A hospital in Friday Harbor is set to open in November.

PeaceHealth operates Oregon hospitals in Cottage Grove, Florence, Springfield and Eugene. Ketchikan Medical Center is located in Alaska.

Catholic Health Initiatives is a national nonprofit health system with headquarters in Englewood, Colo. The faith-based system operates in 19 states and includes 76 hospitals; 40 long-term care, assisted- and residential-living facilities; two community health-services organizations; two accredited nursing colleges; and home health agencies.

In fiscal year 2011, CHI provided more than $612 million in charity care and community benefit systemwide, including services for the poor, free clinics, education and research. With annual revenues of more than $10.5 billion, CHI is the nation's second-largest Catholic health care system.

PeaceHealth is a not-for-profit health care system with services located in Alaska, Washington and Oregon. PeaceHealth operates a large multi-specialty medical group in all three states, laboratories, a Medicaid health plan (Columbia United Providers), and eight medical centers, three which are critical access hospitals.

Founded by the Sisters of St. Joseph of Peace, PeaceHealth has provided medical care to Northwest communities for more than a century. Annual revenues are approximately $2.3 billion, with $192 million provided last year in charity care and community benefit. PeaceHealth clinics have more than one million patient visits annually.