OHSU and Moda Agree to Option to Convert Note to Equity

Part of a larger vision to create an Oregon-based health care system

With a goal of improving the health of Oregonians, Oregon Health & Science University (OHSU) and Moda Health Plan, Inc. have signed a nonbinding Letter of Intent (LOI) to:

1.     Create a joint board committee to explore collaborations that could achieve better health outcomes, improve member and patient experiences and reduce costs. An initial focus will be on high cost, high needs populations in Oregon.

2.     Provide OHSU the option to acquire up to a 25 percent equity position in Moda Health by converting a $50 million surplus note.

OHSU and Moda have been longtime partners. Last year, OHSU agreed to invest $50 million in Moda Health Plan to promote vertical integration of its health care system. The investment was in the form of a surplus note — a common financial instrument in the insurance industry specifically designed to provide capital. The note matures in 2024 with an interest rate of 4 percent.

Under the LOI, OHSU may convert the surplus note into an equity position during 2016. Any final agreement would require approval by the boards of directors of both OHSU and Moda. Any conversion to equity would also require regulatory approval.

Building a Health System for Oregon

OHSU has a mandate from the State of Oregon to improve the health of Oregonians. It does this through its three missions: educating the health care providers of the future, tackling the greatest health challenges through research, and caring for patients. As the only academic health center in Oregon, OHSU provides care that is not available anywhere else in the state.

The health care market in Oregon — and across the country — is consolidating, and health care providers are aligning with health care payers to create health systems.

OHSU is partnering to create an Oregon-based health care system. The approach is unique — partnering rather than acquiring. In the past year, OHSU has announced affiliations with Salem Health and Tuality Healthcare and collaborations with others.

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