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Salem Health Ends Affiliation with OHSU Partners

At the same time, Salem remains a partner of Propel Health, a seven-member hospital alliance fostered by OHSU, while Moda Health has left the alliance. Salem Health and OHSU are re-negotiating a new agreement
June 6, 2017

Nearly two years ago, Salem Health joined forces with Oregon Health & Science University to create OHSU Partners LLC, and combine their clinical and financial operations. They intended to help transform healthcare throughout Oregon by creating an integrated health system.

The 40-year agreement called for Salem Health and OHSU to retain their own governing boards and their own work force. At the end of each quarter, they shared their financial risks and rewards.    

When OHSU Partners was formed, Bob Wells, then the chairman of Salem Health, told the Statesman Journal, "We’re looking for partners to more efficiently deliver patient care at a reduced cost.”   

In May, Salem Health announced it had called off the affiliation, saying “the structure wasn’t working in the way originally intended, and, as a result, both organizations have mutually agreed to end the joint management agreement and renegotiate a new agreement," according to a statement that appeared in a Salem Health bulletin from Cheryl Wolfe, president and CEO, and Dr. Ken Graven, medical staff president.

Neither OHSU nor Salem Health revealed any details about why their affiliation went awry.

Wolfe said it had been a new and untested model. “Innovative approaches to healthcare require regular assessment and course correction,” she said.

OHSU and Salem Health are working on a new affiliation, which should be announced in early July, according to Tamara Hargens-Bradley, associate director of OHSU Communications. “It’s premature to speculate on the changes that will be reflected in our new agreement,” she told The Lund Report.

Until then, Salem Health will continue working with OHSU on several endeavors, including its pediatric specialty clinic, pediatric hospitalists, and its relationship with the Knight Cancer Institute, as well as on a procedure known as transcatheter aortic valve replacement, for people diagnosed with severe symptomatic aortic stenosis who are at risk for open heart surgery.     

Tuality Health continues to remain part of OHSU Partners, with OHSU managing its clinical operations, and Adventist Health is expected to join later this summer. But it remains unknown how the organization will continue with the loss of its major partner, Salem Health, and also the recent departure of its CEO, Peter Rapp who returned to his home state of Virginia. Earlier he had been executive director of OHSU hospital and clinics.

Worth noting: Salem Health appears to be the most financially strong of the major entities that have been part of OHSU Partners, according to the most recent hospital financial data available, which covers the first nine months of 2016, while Tuality Health continues to lose money.

Salem Hospital’s profit in the third quarter of last year was $23.1 million, reversing a net loss of $6.6 million in the third quarter of 2015. OHSU Hospital’s Q3 2016 profit was $17.2 million, down from $28.4 million a year earlier. Tuality reported a net loss in Q3 2016 of $1.1 million, an improvement on its deeper $2.8 million net loss a year earlier. And Adventist reported a $334,509 net loss in Q3 2016, after reporting a $1.1 million profit in the third quarter of 2015.

Norm Gruber, who led the affiliation effort before stepping down as president and CEO of Salem Health, had been expected to assume responsibility for the transition to an integrated system. He retired as president of OHSU Partners in 2016.

Before Gruber announced Salem Health would partner with OHSU, he told the Salem City Club that six other large healthcare systems along the West Coast had been under consideration, but did not share any names.  . 

When asked about future leadership, Hargens-Bradley dismissed any concerns that the fate of OHSU Partners was in jeopardy, saving, “The other five individuals comprising the management company have been offered roles within OHSU Partners.”

She also hinted that other hospital systems might join OHSU Partners, although there currently are none to announce. “We believe the insights we’ve gained will help us improve our value to current and future partners,” she said.

Physicians Initially Shared Dismay over Partnership

When the affiliation was announced in 2015, the physicians at Salem Health were concerned about the impact on their medical practices. "We have, in our own little world, made tremendous strides," Dr. Maurice Collada, a Salem neurosurgeon, told the Statesman Journal in 2015

Collada also said physicians were becoming anxious because information wasn’t filtering down to them.  "We don't really know what OHSU's interests are,” he said at the time. “We don't know what OHSU's pressures are — their goals and aspirations. Suddenly this is all sorts of questions and doubts and people don't know where they stand, and they're sort of left wondering. What's really going to happen for medical practice here?"

Dr. Thomas Tsai, a research associate at the Harvard School of Public Health, also weighed into the discussion. In 2014, he had co-authored an article for The Journal of the American Medical Association, which posed the question, "Is Bigger Necessarily Better?"

In an interview with the Statesman Journal in 2015, Tsai said such an affiliation could have “real negative consequences, which could lead to an increase in prices, with an unclear benefit. Consolidation is not actually clinical integration of care. It doesn't reduce the fragmentation of care." Just because a health system is larger doesn’t mean quality of care improves, he added.  

At the time, OHSU and Salem Health insisted their new partnership would improve care coordination and integration, increase efficiencies through economies of scale and give each health system the ability to offer specialty services.  

How About Propel Health?

OHSU and Salem Health say they aren’t contemplating any changes in their arrangement with Propel Health, which was formed in 2014 to accelerate the move toward value-based care.

Propel’s members include Asante, Bay Area Hospital, Mid-Columbia Medical Center, OHSU, Salem Health, Sky Lakes Medical Center and St. Charles Health System. Aaron Crane, formerly chief financial officer at Salem Health, is the CEO.

Founding member Moda Health, however, left the partnership in December 2016, and Propel has its own self-insured plan.  

“As the founders continued their drive to develop a clinically integrated network, together we all realized it might be more appropriate for the partnership to focus on a range of ‘provider-exclusive’ initiatives,” said Moda Vice President Jonathan Nicholas. “Though we exited the partnership, we continue to work with Propel on a series of quality and cost strategies.”

This year, Propel is offering self-insured ERISA plans to its hospital partners with the help of individual third-party administrators. Propel is also working with its physician partners to improve patient care by reducing hospital readmissions and manage chronic medical conditions, Hargens-Bradley said.  

Criticism of OHSU

People familiar with what’s going on inside OHSU fault top leaders, who, they say, are making decisions that have had bad consequences to staff while wasting money repeatedly on poorly constructed relationships and business deals, while no one is being held accountable.

OHSU, they believe, should protect patients better, provide the highest quality of care, engage in transparency and strive for excellence.

They pointed to other relationships that have floundered under OHSU’s leadership during the past several years.  OHSU had to abandon its relationship with Moda Health when the Oregon Department of Consumer and Business Services issued a supervisory order saying it had inadequate capital to continue operating in 2016. Earlier, OHSU had agreed to convert a $50 million debt to acquire a 25 percent interest in the insurance company

Another failed relationship was the affiliation between OHSU Partners and the Oregon Health CO-OP, which had the goal of expanding members’ access to providers. Two months after signing the agreement, the CO-OP went into receivership and was unable to recover about $5 million from the Centers for Medicare and Medicaid Services as part of the federal government's risk-adjustment program. Instead, the feds informed Oregon's Health Co-op that it owed $900,000 to the agency.  

OHSU also has had several leadership changes in the past few years, with the resignation of the provost, the administrator of the cancer center and the CEOs of OHSU Foundation and Doernbecher Children’s Hospital, all of whom left without any explanation. Since then, those positions have been filled. In a comment, Hargens-Bradley told The Lund Report that one CEO, Keith Todd, served both foundations, and stepped down.


Diane can be reached at [email protected].