Triad alters hospital mix.

Byline: The Register-Guard

Watching PeaceHealth and McKenzie-Willamette Hospital scramble for position in Eugene-Springfield is like trying to follow a chess match in which half the pieces are hidden from view. Just as an observer begins to get a feel for the game, an unexpected knight's move alters the balance on the board. The knight in this case is Triad Hospitals Inc. of Plano, Texas, which has entered a partnership agreement with McKenzie-Willamette.

Some sort of partnership has long been possible, perhaps even inevitable, for Springfield's community-owned hospital. McKenzie-Willamette was the only independent hospital its size along Oregon's Interstate 5 corridor. Small to midsized hospitals have a hard time surviving on their own, lacking the patient volume to support highly specialized medical services and the capital for investments in buildings and equipment.

McKenzie-Willamette announced Thursday that its partner would be Triad, the nation's third-largest hospital chain. Unlike McKenzie-Willamette and PeaceHealth, Triad is in business to make a profit. Its interest in McKenzie-Willamette is a sure sign that the company sees economic potential in the Eugene-Springfield market.

Triad says it is willing to invest up to $80 million to modernize McKenzie-Willamette, but probably not at the hospital's current Mohawk Boulevard site in Springfield. It's likely that Triad sees its best opportunities in Eugene.

The partnership ensures that patients in the Eugene-Springfield area will continue to have a choice of hospitals - indeed, two new ones, if both McKenzie-Willamette and PeaceHealth carry through with their plans to build from scratch. Competition will be beneficial in many ways: Neither hospital will be able to dictate prices for services, both will have ever-present incentives to keep the quality of care high, and people who work in health care professions will have a choice of employers.

Eugene-Springfield has that type of competition now. McKenzie-Willamette, by virtue of its smaller size, has been at a disadvantage, and in recent years has been fighting for its survival.

Yet Triad believes it can pump $80 million into McKenzie-Willamette and earn a rate of return high enough to justify its investment. The company expects that McKenzie-Willamette's profitability can be improved by a new facility and by the economies of scale that come through linkage with a nationwide health care organization. It also undoubtedly hopes it can claim a larger share of the local market for hospital services, at PeaceHealth's expense.

Triad and McKenzie-Willamette officials insist that PeaceHealth's plans to create a new medical complex in the Gateway area of Springfield did not affect their calculations. That's a credible claim - McKenzie-Willamette began shopping for a partner before PeaceHealth announced that it would move its main hospital operations away from their current location near the center of Eugene. But PeaceHealth's plans will certainly affect Triad and McKenzie-Willamette as they scout locations for their new hospital. They will need 30 to 35 acres for the facility; as PeaceHealth discovered, parcels that size aren't easy to find.

In the weeks to come people in the Eugene-Springfield area will learn more about Triad, and the details of its partnership with McKenzie-Willamette will become more clear. Triad officials say the company has partnership agreements in other states similar to the one with McKenzie-Willamette, but the Eugene-Springfield area has no experience with such arrangements or with for-profit hospital companies. Triad operates one hospital in Oregon, Willamette Valley Hospital in McMinnville, but that has always been a for-profit hospital. It had a second, Douglas Community Hospital in Roseburg, but shut it down.

Until this week, it looked as though PeaceHealth might further weaken an already-struggling McKenzie-Willamette Hospital by moving to north Springfield. Now it looks as though McKenzie-Willamette will obtain the resources to respond to that competitive threat with a new hospital of its own.

And this may not be the last time an unexpected move rearranges the chessboard.