OHSU, Legacy merger would form 10-hospital chain

This article has been updated to incorporate additional reporting.

Oregon Health & Science University and Legacy Health on Wednesday night announced that they intend to combine and form a 10-hospital system with more than 32,000 employees. But the proposal is already raising questions and concerns.

The deal comes at a time when the health care industry nationwide is consolidating rapidly. For months there have been rumors that Legacy was on the block, so the news means that it will go to a local player rather than one of the national hospital industry giants.

But if the deal goes through, it will reduce the number of hospital systems operating in greater Portland from four to three, and shake up the statewide landscape as well.

News of the deal was first reported by The Oregonian/OregonLive, after which OHSU issued a press release on behalf of the two systems. 

Many questions about the plan remain unanswered, and some organizations are greeting the news with caution. Local 49 of the Service Employees International Union issued a statement: “As the largest union representing workers at four Legacy Health System hospitals, SEIU is following this potential merger closely. Our focus remains on how a merger of this scope may impact healthcare workers, patients, and the overall quality of care provided. We look forward to future conversations with OHSU and Legacy Health on how we can work together for the benefit of our members and patients throughout the region.”

Maribeth Guarino, a health care advocate for the Oregon State Public Interest Research Group, said in an email that “This is one of the biggest mergers Oregon's oversight program will have reviewed. OHSU and Legacy are both big entities, and their merger could potentially create one large 'superplayer' in the Portland metro health care market. Although we don't know the details of the merger yet, we do know that consolidation can lead to higher prices as competition decreases.”

The Oregon Nurses Association, the union that has been clashing with both hospital systems, issued a mixed review. “OHSU management should step up with a fair contract for the more than 3,000 nurses at OHSU before undertaking one of the largest health care mergers in Oregon’s history,” stated the group's press release. 

It added that “ONA does not have any faith in Legacy’s management, so a merger with a public institution like OHSU – which will come with more requirements related to transparency and accountability – is likely to be in the best interests of Legacy’s patients and their 13,000 staff members.”

The Lund Report has reached out to OHSU for an interview and will update this article as more information emerges. For now, here’s a broad brush look at the details announced so far:

• The combined system, according to the release, would feature “more than 32,000 employees and 100-plus locations, including 10 hospitals, and more than 3 million patient visits a year.”
• OHSU would issue bonds worth $1.5 billion that would be used to expand and upgrade services at the chain and replace operating funds currently maintained by Legacy.
• Legacy would move its “net cash on hand and investments (above outstanding debt) at closing to a new independent foundation” which would “promote physical and mental well-being and address inequity in health care, including social determinants of health and behavioral health.” The value of the assets shifted is expected to be around $500 million.
• Legacy physicians and advanced-practice-providers, as well as other employees, will remain employees at their workplaces at the time of closing, according to the letter of intent. “Over time, the Combined System will provide opportunities for physicians and APPs to join the Combined System as employed faculty, or through OHSU’s existing non-academic track, as members of system-sponsored or system-owned provider networks, or as fully independent physicians and APPs with medical staff privileges at system facilities.” 
• Employees who are not physicians or advanced-practice providers may “migrate” to other facilities over time to “enhance system effectiveness and operational integration.”
• Legacy's 50% ownership interest in the insurer PacificSource will not be included in the transaction. Instead, it will be shifted to the new independent Legacy foundation created under the deal.

The shift of Legacy cash and investments to a new foundation reflects that the deal would entail OHSU absorbing Legacy's real estate, facilities and other physical assets into its legal entity. OHSU was formed by the Oregon Legislature as a quasi-governmental public corporation in 1995.

The deal also recognizes an increased focus on managed care, according to the letter of intent. “The Parties intend to enhance and accelerate their ability to engage in a broad range of value-based contracting for the benefit of payors, patients and the Combined System, subject to and consistent with the need to maintain the financial viability of the clinical enterprise.”

The merger must undergo “regulatory review,” according to OHSU. Several observers told The Lund Report they expect it will need approval by the Oregon Health Authority program set up by the state’s toughest-in-the-nation health care merger review law. 

“This is one of the biggest mergers Oregon's oversight program will have reviewed,” Guarino said. “It wouldn't surprise me if this goes to a comprehensive review, with a lot of community input.”

The Oregon Association of Hospitals and Health Systems, a lobbying and trade group, has filed a still-pending lawsuit calling the state merger review law unconstitutional.

According to the OHSU press release, “Leadership from both organizations will participate in the strategy development of the combined system. We will be committed to serving our communities as we do today, as we focus on accelerating high-quality care, expanding our community-based and digital care offerings, and training and educating future scientists, advanced practice providers, physicians, nurses and other health care professionals, and creating a work and learning environment where every member feels safe and valued.”

Find the full press release below.

You can reach Nick Budnick at [email protected] or at @NickBudnick on Twitter.

press release: Oregon Health & Science University and Legacy Health combining to better serve our patients, communities

Accelerates shared mission to expand access to high-quality, essential health care services

PORTLAND, Oregon - Oregon Health & Science University and Legacy Health today announced they have signed a nonbinding letter of intent to combine and create a comprehensive, integrated health system that will offer high-quality, essential health care services to patients throughout Oregon, the Pacific Northwest and beyond. The letter of intent, which is the first step in a transaction process by which Legacy will become part of OHSU, was unanimously approved by the boards of directors of both OHSU and Legacy. OHSU is part of the State of Oregon, established in Oregon law as a public corporation with a deeply rooted public mission of teaching, healing and discovery. Legacy is a local, nonprofit health system driven by its mission to improve the health of those in its communities.

OHSU and Legacy’s complementary expertise will create a high-impact health care system driven by a mission of public service. OHSU brings experience serving complex patient needs, administering statewide health care training and education programs, and conducting leading-edge research. Legacy brings deep roots in providing high-quality, community-based care through its comprehensive system of hospitals, primary and specialty clinics, and outpatient facilities.

The combined system — with more than 32,000 employees and 100-plus locations, including 10 hospitals, and more than 3 million patient visits a year — will be the largest employer in the Portland metro area, and will focus on amplifying the region’s leadership in patient- and community-focused health care, education, research and innovation.

Leadership from both organizations will participate in the strategy development of the combined system. We will be committed to serving our communities as we do today, as we focus on accelerating high-quality care, expanding our community-based and digital care offerings, and training and educating future scientists, advanced practice providers, physicians, nurses and other health care professionals, and creating a work and learning environment where every member feels safe and valued.

By joining forces, OHSU and Legacy are committed to attracting, engaging and supporting the region’s best health care workforce through investments in the tools, technologies, and education and development initiatives that are essential for the growth of our team members. We will continue to support our valued employees and learners, all of whom play an important role in delivering exceptional care and service.

“Our mission is to provide good health for our people, our patients, our communities, and our world. By combining with OHSU, we will expand our ability to deliver on our mission,” said Kathryn Correia, president and chief executive officer of Legacy Health. “In addition to ensuring access to high-quality essential health care for patients, the combined system will continue to be the region’s most exceptional place to work and learn, while supporting research and education for the next generation of health care professionals.” 

As part of the agreement, OHSU intends to make a capital commitment of approximately $1 billion over 10 years, financed mostly through bond offerings, to support primary- and community-based services that will be part of the combined system. This commitment will better enable the combined organization to expand services, including clinical programs, sites of care, technology solutions, and new care models, while maintaining and growing essential services, including preventive medicine, population and public health.

 “OHSU has enjoyed a decades-long relationship with Legacy Health, united by a shared commitment to improving the health and well-being of people in Oregon and beyond,” said Danny Jacobs, M.D., M.P.H., FACS, president of OHSU. “Now, we have an opportunity to join together and take a decisive next step that will help deliver on our promise to ensure the best access and care for all who need us, today and in the future. We look forward to our next chapter with Legacy and the exciting potential of our combined strengths and vision.”

To address critical community health care needs and disparities, Legacy will direct its net cash on hand and investments (above outstanding debt) at closing to a new independent foundation.  The new foundation will promote physical and mental well-being and address inequity in health care, including social determinants of health and behavioral health.

The organizations are working toward reaching a definitive agreement in the coming months. The transaction is expected to close in 2024 and is subject to regulatory review and customary closing conditions.