Financially strapped Mid-Columbia Medical Center in The Dalles is moving ahead with its plan to be absorbed into California-based Adventist Health, a 23-hospital chain that says it will spend $100 million over the coming 10 years upgrading Mid-Columbia.
Mid-Columbia and Adventist, both nonprofits, have jointly applied to the Oregon Health Authority for approval under the state’s new Health Care Market Oversight program, and the state is inviting public comment through Feb. 8.
The proposed deal is noteworthy on several counts. It’s the first hospital acquisition to come up for review since the state launched the oversight program this past spring. Also, Mid-Columbia is one of the few remaining standalone independent hospitals in Oregon.
Plus, while Mid-Columbia is a secular, non-religious institution, Adventist is a faith-based system affiliated with the Seventh-day Adventist Church.
In its application, Mid-Columbia said it is not strong enough on its own to undertake the needed but costly work of refurbishing or replacing its hospital, portions of which date back to 1959. Adventist was the best fit among a number of “potential suitors,” Mid-Columbia said in the application.
Oregon legislators created the merger review program in 2021, in part, because they feared the expansion of faith-based systems would curtail reproductive services. The Seventh-day Adventist Church opposes abortion in all but a few instances, such as health-threatening pregnancies and rape or incest, and it opposes same-sex relationships. But Adventist said it would not require Mid-Columbia to change any of its current reproductive or other services.
The proposed deal underscores the importances of the new review program, said Cassie Purdy, political director of the lobbying group Planned Parenthood Advocates of Oregon.
“No patient should be at the mercy of what large health systems deem are worthwhile services. There are already so few access points to the full spectrum of reproductive and gender-affirming care for rural Oregonians,” Purdy told The Lund Report. Residents in The Dalles area need “the opportunity to understand the impact this transaction could have on their access to essential health services,” she said.
Under the review program, the state can quickly grant approval after a 30-day evaluation and comment period, or it can launch a more in-depth analysis including a public hearing. The state has not yet said which route it will take.
Years of red ink
About 80 miles east of Portland, Mid-Columbia has struggled financially for years, typically hovering at or below the break-even point on operations. Soaring costs and erratic revenues during the pandemic worsened the situation, leading to an operating loss at the hospital of $3.6 million in 2021, and a loss of $4 million in the first quarter of 2022, the latest period for which figures are available.
In their application, Mid-Columbia and Adventist said most of the $100 million would be for facilities improvements, new medical equipment and information technology, as well as expanding Mid-Columbia services.
The state program to review mergers and acquisitions seeks to ensure deals don’t reduce services or patient access, or drive up costs.
Mid-Columbia and Adventist said their deal satisfies all the state criteria.
Adventist said it wants to curb cost increases and improve and expand services to patients.
In becoming part of Adventist, Mid-Columbia would implement Adventist’s community well-being initiatives aimed at improving residents’ health and reducing the length of hospital stays, the application states. Also, Mid-Columbia would use Adventist’s bulk purchasing system to cut supply expenses and use Adventist’s electronic health records system to improve care coordination, the application states.
“No reduction or elimination of health care services is anticipated,” the application states. “Instead, the parties intend to expand existing services and will investigate adding new services.”
“Mid-Columbia will continue to make the full range of reproductive services available to patients, since Adventist Health imposes no religious-based restrictions on medical procedures and services,” the application notes. It was not immediately clear exactly what reproductive care services Mid-Columbia’s obstetrics department currently offers. The department’s website says services include birth control and family planning. As to whether abortions are provided at the hospital, that is up to the physician and the patient, spokesperson Travis Dray told The Lund Report.
The Adventist system as a whole rarely provides abortions.
Adventist Health does not “intervene in decision-making around women’s reproductive services,” Adventist spokesperson Japhet De Oliveira told The Lund Report. “Rarely, medical and surgical pregnancy terminations are necessary in our hospitals,” he wrote in an email.
Adventist board control
The acquisition would entail Adventist taking over all of Mid-Columbia’s assets and liabilities.
In addition to the 49-bed hospital, Mid-Columbia has four federally certified rural health clinics, 18 outpatient clinics and a cancer center. Mid-Columbia would have a local board with some powers, but the entire Adventist system is governed by Adventist’s corporate board.
In the first two years, Adventist would spend up to $6 million buying urgently needed medical equipment, the application said. Separately, a committee of Mid-Columbia and Adventist leaders would draft a 10-year capital plan totaling roughly $94 million, subject to Adventist corporate approval, the application states. Mid-Columbia and Adventist have hired a consultant to help decide whether to refurbish the existing hospital or build a new one, the application states.The committee will present its plan to Adventist leaders within eight months of Mid-Columbia joining Adventist, the application said.
The hospital’s financial condition effectively barred it from securing big loans to build a new campus, Mid-Columbia said in the application.
Mid-Columbia was never able to build up substantial reserves that would have grown with the stock market boom of the past decade. The investment portfolio of Mid-Columbia and its foundation totals only about $19 million, according to the latest figures available.
On the other hand, the hospital doesn’t have much debt either. Its net worth — the value of all its assets such as buildings, equipment and investments, minus liabilities such as debt — was $49 million according to the most recent audit.
In its application, Mid-Columbia said it had used a consultant to search nationwide for a larger entity to join. The consultant contacted 36 health systems and ended up evaluating proposals from six. Mid-Columbia’s board of trustees unanimously picked Adventist, representatives of the hospital said.
Adventist, meanwhile, has gone through its own financial turbulence.
The Fitch bond rating service noted that for the first nine months of 2022, Adventist recorded a $254 million operating loss on operating revenues of $3.9 billion. “This marks the fourth consecutive year the system will record a loss from operations,” Fitch noted.
But Fitch kept Adventist’s bond rating at A on Fitch’s AAA through D scale. Adventist has a healthy balance sheet, Fitch said. Adventist has a net worth — assets minus liabilities — of $2.5 billion including an investment portfolio of $1.7 billion, according to Adventist’s financial report for the first nine months of 2022. Fitch said it expects Adventist’s revenues and net profit to improve in coming quarters as the pandemic recedes.
The Oregon Health Authority asks people wishing to comment on the proposed transaction to email comments to [email protected] by Feb. 8.
I live in Tehachapi CA where our local hospital was very old and could not finance required earthquake proofing laws applying to California medical facilities. Our local hospital is governed as part of a public health district. In our case Adventist provided the capital to build a new 25 bed hospital in exchange for a 30 year lease allowing Adventist to manage the hospital. After a few years it has proven successful. Adventist has also taken over hospitals in other communities including Delano between Bakersfield and Fresno and has built a new headquarters in Roseville just north of Sacramento. While Adventist has made its religious affiliation clear, so far there is little evidence that they are imposing its religious beliefs and values in any kind of heavy handed way. I hope that the Mid Columbia situation will work out as well as our experience here.