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.
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