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OHSU and Moda Health Still in Talks to Merge

But its future could be murky given the recent financial troubles by Moda
April 1, 2016

Now that the PacificSouce/Legacy Health merger is on its way toward approval by the Oregon Insurance Commissioner, the next big transaction on the horizon could face a far more contentious outlook.

The marriage between Oregon Health & Science University and Moda Health hangs in the horizon, and OHSU has until the end of 2016 to exercise the option to convert the $50 million surplus note into a 25 percent equity position in Moda Health.

“OHSU is conducting due diligence in consideration of exercising this option, but a decision has not yet been made,” according to Beth Heinrich, MPA, APR, associate vice president of strategic communications. “If a decision is made to exercise the option, there will be an approval process, including approval by the Insurance Commissioner.”

To get a better glimpse of what was happening behind the scenes between OHSU and Moda, The Lund Report requested records of any correspondence between Dr. Joe Robertson, OHSU’s president and Robert Gootee, president and CEO of Moda. But after reviewing our public records request, OHSU only shared one document, maintaining any other correspondence was unconditionally exempt under ORS 192.502(21)(OHSU Sensitive Business Records), according to Heinrich.

That sole document – from mid-January2015 – provided little insight into the discussions between Robertson and Gootee since the important details were redacted. But it did indicate the two leaders were pleased to be working together, with Robertson saying, “This is the beginning of many good things.”

It’s unknown whether OHSU is more hesitant to move forward given Moda’s recent financial tribulations came to light after state regulators placed the insurer under supervision. But OHSU did issue the following statement in late January:

“OHSU is concerned about Moda Health’s recent financial performance and the announcement from the Oregon Department of Consumer and Business Services. We are evaluating the situation as it relates to our relationship with Moda, but more immediately our focus will turn to working with the State to ensure that Oregonians continue to have access to OHSU.”

Since then, Moda appears to have pulled itself out of its shaky situation, by selling assets and agreeing to raise another $179 million. Had that not occurred, the company could have gone into receivership, according to Patrick Allen, director of DCBS.

The OHSU/Moda undertaking has also raised concerns by Jesse O’Brien, policy director for OSPIRG, who told The Lund Report. “The situation merits scrutiny because an unusual arrangement for a public corporation to have that kind of a business arrangement with a commercial entity. I haven’t heard anything like that happening elsewhere in Oregon.”

A consumer group, “OSPIRG stands up to powerful interests whenever they threaten our health and safety, our financial security or our right to fully participate in our democratic society.”

Diane can be reached at [email protected]