Deal that would have reshaped health care in Oregon had been in the works for 18 months.
A plan to merge two of Oregon’s largest health systems was quietly abandoned this week.
OHSU announced plans to purchase Legacy in August 2023. Both systems experienced operating losses since the pandemic. Cuts to Medicaid, discussed by the Trump Administration, would further eat into their budgets.
A joint statement released Monday states both sides agreed to end the proposed transaction but does not provide a reason.
“After careful consideration of the evolving operating environment, the organizations have determined that the best way to meet the needs of the communities they serve is to move forward as individual organizations,” reads the statement. OHSU and Legacy will remain focused on each health system’s individual strategic objectives, with the goal of remaining well-positioned to continue supporting their people, patients and communities. OHSU and Legacy Health will continue to promote the health and well-being of people in Oregon, Southwest Washington and beyond.”
Neither side will pay a termination fee.
Legacy, a nonprofit, maintains eight hospitals with $3 billion in assets and a $1 billion plan to upgrade its facilities, according to Oregon Public Broadcasting. Legacy has struggled with low reimbursement rates from Medicare and Medicaid but officials have said the system had improved its financial position in recent years, losing $83 million last year compared to $171 million the year before.
Officials with OHSU, a public medical research and teaching center, have said the plan would solve a capacity issue that has lengthened wait times for patients. Due to rising labor and equipment costs, the school last year cut 500 positions and has a projected loss of $95 million this fiscal year.
Under the deal, OHSU, already Portland’s largest employer, would have overseen 32,000 doctors, nurses and nonmedical staff. Reporting by Willamette Week describes the OHSU that walked away from the proposed merger as a far different entity than it was three years ago, when it started to explore purchasing Legacy. In that time, OHSU had been hamstrung by mismanagement and subject to threats by Trump to cut federal funding, among other issues.
The proposal drew fierce public pushback over concerns that a monopoly would control specialty care in the Portland area and raise prices. Critics include former governor John Kitzhaber, a former medical doctor who went to medical school at OHSU, who wrote on his blog in November that the proposed acquisition “raised more questions than it answered.”
“First and foremost is that, to date, there has been no clear articulation of why this transaction will be in the public interest — not only in the interest of Oregon consumers, but also in terms of addressing the larger challenges facing Oregon’s health care system: the escalating cost of premiums and deductibles, the lack of access to behavioral health, and the crisis in primary care,” Kitzhaber writes.
Many concerns were echoed by a community review board convened by the Oregon Health Authority that ultimately recommended against the plan.
The Oregon Nurses Association was “cautiously optimistic” about the plan when first announced. But OHSU nurses also said the abrupt announcement of the plan helped fuel a strike vote against the hospital system in September 2023. Nurses at three Legacy hospitals voted to join ONA in February.
“While we are disappointed with their decision to terminate the deal, this will not impact ONA’s ongoing work to organize frontline caregivers and fight for fair contracts that prioritize workers and patients over profits,” read a Monday-morning statement from the union.
OHSU had hoped the deal could fund improvements like care for at-risk pregnancies.
Legacy will now look to cut services, obtain rate increases from the state’s Medicaid program and sell unused real estate.
An April report by the Oregon Hospital Association paints a dark picture for Oregon’s hospitals. As the country’s hospitals continue to rebound from the pandemic, half of Oregon’s lost money in operating revenue last year. And many of those that made money posted “negligible” amounts, i.e., less than 3% of their operating costs. According to the report, since the pandemic, increasing labor and supply costs have not kept pace with declining reimbursements from government programs.
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