WENATCHEE — Within six months, one board of directors may oversee Central Washington Hospital and the Wenatchee Valley Medical Center.

Officials at both facilities announced this morning that they are going forward with a plan to form a not-for-profit foundation that would manage operations at both facilities. The hospital board of directors and the shareholder physicians at the medical center voted on the proposal this week.

Driving the proposal are the hospital’s financial losses. Changing medical practices have shortened hospital stays, for example, prompting layoffs there.

Officials also said they hope the new partnership prevents a competitor from buying the hospital. A new owner could end the two institutions’ close relationship and give the medical center a competitor for specialty services.

Hospital and medical center officials say they worry that a buyout of the hospital by a large health care company could lower the quality of local care and diminish the economic benefits to the community that come from local control.

“Our vision is that people will see a more seamless, more efficient, more cost-effective and higher quality care across the whole spectrum,” said Dr. Pete Rutherford, chairman and CEO of Wenatchee Valley Medical Center. “People won’t be transitioning between one system at the hospital and one system at the medical center.”

“There are tremendous opportunities for efficiencies in this model,” said Ken Martin, vice chairman of the board of directors at the hospital. “It’s a terribly exciting opportunity.”

Both likened the proposed affiliation between the two entities to milestones such as the formation of the clinic in 1940 and the consolidation of local hospitals in 1974.

“I would put this event on that same level,” Martin said.

Sparking talks about an affiliation, they said, are several factors. The economy, shorter hospital lengths of stay, and changing reimbursement practices have put financial stress on the hospital, Martin said.

In late August, hospital officials announced that they planned to lay off 80 employees in the next three weeks as part of a plan to cut $7 million from its $180 million annual budget by the end of the year. That was the second round of layoffs this year. About 20 full-time equivalent employees were laid off in early 2011.

Martin, president of Cashmere Valley Bank and the hospital board’s spokesman, said the new affiliation would save money by reducing duplication of services. Currently, there are two administrations, two personnel departments, two quality measurement departments, two labs, two X-ray departments and two information technology departments.

While acknowledging that there may be some layoffs, Rutherford said, “there will not be some gigantic reduction in force because the work isn’t changing and it still has to be done.”

Rutherford said that all 16 physicians now employed by the hospital would be offered employment at the medical center.

Rutherford said his physicians were concerned that a financially struggling hospital may succumb to a buyout by a health-care organization from a large city, which, he said, could lower the quality of care in the region. That is because that organization may determine that services such as cardiac care may be cheaper to perform in the big city, leaving a void of local services now provided by the medical center.

Without having surgical services tied to their jobs, for example, specialized doctors might make less money and would leave the area, Rutherford said. That would leave local residents not only traveling out of town for surgical services but for certain medical conditions as well.

Martin said the hospital officials have not had any other organizations express interest in buying Central Washington Hospital.

The proposed foundation would manage both facilities but both facilities would remain separate entities. The hospital would stay a not-for-profit organization and the medical center would remain a physician-owned, for-profit business.

The two facilities are not merging, both said, as current laws, and the financial makeup of the medical center, would make that illegal.

“This is not the medical center taking over the hospital, or the hospital taking over the medical center,” Rutherford said. “Nor is it a power play by the Wenatchee health-care community to take over care in some other community that already has their own health-care entity, nor is it an effort to do anything to alter the practicing habits of physicians in this community who are not currently employed by the Wenatchee Valley Medical Center or Central Washington Hospital.”

Under the new affiliation, doctors not employed at the medical center would continue to have the same hospital privileges that they now have, Rutherford said.

The next step in the process will be for both boards to examine the others’ business practices, Rutherford said. He anticipates that it will take four to seven months for officials to write up contracts, which will govern the new affiliation. After that, the boards of both organizations will take final votes on forming the foundation.

The new board would be made up of 15 people, Rutherford said. Nine of them would be community members, and six will be medical center doctors. Martin would be chairman of the new board; Rutherford its chief operating officer. Rutherford noted that he will have to resign his shareholder status at the medical center when the proposal is approved.

Initially, the nine community members would come from the existing 12-member CWH board, of which three members’ terms are about to expire, Rutherford said. The six members from the medical center will come from the existing eight-member board.

Rutherford said that Jack Evans, current CEO at the hospital, plans to retire when this proposal is approved.

Rutherford said the proposed model — between a hospital and a physician group — is not new. Rather, he said, it is one that is growing in numbers because of the changing health-care climate. He noted an affilliation involving Holzer Health Systems in southern Ohio as one example.

Dee Riggs: 664-7147

deeriggs@wenatcheeworld.com