At least eight health systems, including some in Oregon, are interested in operating Bay Area Hospital as leaders of the Coos Bay facility look for a partner to help with its longstanding financial woes.
Starting on Sept. 3, executives of the hospital and its board will start evaluating the proposals, though they won’t be made public. Though it is operated by one of several health districts in Oregon, its leaders say they won’t disclose the names of potential partners to honor their desire for confidentiality.
There were, however, some hints.
"We were very pleased that of the eight, most of the highly regarded, high quality brand names in the state of Oregon are participating, and most all are household names," a consultant told the hospital board Tuesday.
The largest hospital on Oregon’s coast, Bay Area Hospital employs more than 1,000 people, making it the largest employer on Oregon’s south coast. It's a government entity, but its leaders say they are confident that their community understands the need for secrecy to ensure prospective partners feel comfortable applying.
“We'll be waiting until that final firm is selected," Brian Moore, the hospital’s president and CEO, told The Lund Report in an interview. “The reason being is we've got non-disclosure agreements in place. And while Bay Area Hospital is a public district, we've got private entities participating that may not have the same ... desires and openness.”
The board will be asked to decide among the competing proposals so select the two or three most appealing alternatives by mid-September. Moore said the board should make a decision by November, calling the timeline “ambitious.” Sometime after a notice of intent is signed by the board, the partner entity will be made public.
Losses driving change
Financial losses, particularly in fiscal year 2022, are driving the change. During the pandemic years when many hospitals struggled financially, the 172-bed coastal hospital was among the worst.
In December 2022 outside auditors reported that the hospital was in such poor financial shape that there was “substantial doubt about its ability to continue as a going concern.”
According to Moore, hospital leaders first asked about the alternatives to a major change “How much can we do our own, pull ourselves up by our bootstraps? And we've had a $53-million turnaround in the last two years. So that's fantastic.”
The hospital has secured improved contracts with commercial insurers that should fuel better financial results in 12-18 months, he said. But the hospital faces a basic cash flow problem: the insurance coverage of its patients, known as the “payer mix,” is dominated by Medicare and Medicaid. The government programs pay lower reimbursements to hospitals and other providers than commercial plans.
Beyond that, “we continue to face pressures where our costs are going up faster than our revenue,” he said. “We're still looking at double-digit labor increases, and labor's more than half of our costs.”
The hospital announced the process earlier this summer while opening up a process to gauge public opinion. A consultant with experience in similar such deals was hired to advise the hospital and contacted 22 prospective partners. So far, eight have expressed interest, the board was told in a meeting on Tuesday evening, Aug. 20.
The board also heard the results of public opinion surveys about the possible move. “The top concern, as you can probably imagine, for the staff, were jobs being lost or reduced,” said Kimberly Winker, the hospital's director of marketing and communications. “Among the physicians, the top concern was that they would lose local control, or local decision making, or have an effect on some of the local clinics in the area. And the public indicated that they were concerned about bringing in someone that was so focused on profits that they might shut down services that weren't necessarily profitable but were still really necessary for our area.”
She added that the next question was whether “staying independent meant reducing health care services. Would you still be in favor of being independent? And 64% responded no. Some people skip this question altogether. But overall, this kind of shows that respondents, value keeping the services local, and they do understand that that might mean not remaining independent.”
She continued: “And the last question was an open-ended question. This received the widest variety of comments ... But again, the themes are they wanted the board to prioritize quality and service of care, and secondly, to prioritize staff retention and keeping benefits also very high from the medical providers.”
“They really felt strongly about reevaluating some of the options,” she said, adding that when asked to list priorities, “all respondents showed that they wanted to provide the quality and safe care. They wanted to expand clinical services ... The benefits they saw were the financial sustainability, service, line growth and access and third, interestingly enough, they really saw no benefit (to the change), or they felt they needed more information to make a decision or see the benefit.”
Board members also heard testimony from members of the public, including concerns about who might be selected to operate the hospital. One expressed concern that a controversial for-profit company like United Health Care might be the choice.
“What will a company like that want as the return on its investment? Right? ... They're going to want payment, and who is going to pay? It's going to be members of this community. So I know that the board does not have a lot of control over day to day operations at the hospital, which it shouldn't, but I do think that there are actions that the board can take other than simply approving an affiliation or not approving an affiliation. So as a member of the community, I really would love to know that the Board is considering all of its options, and not just the one that's on the table.”
Moore, for his part, told The Lund Report the hospital district will be researching all its options and considering the community's concerns. That includes reviewing applicants, meeting with them, even touring their facilities to check whether it could be the right fit.
“It's definitely a balanced approach and not just a financial decision from the board's perspective,” he said.
