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Silverton Hospital Chooses Legacy Health Over Providence

Late last year, Silverton was on the move to affiliate with Providence but pressure by community members and physicians about the influence of the Catholic Church ended those discussions.
March 17, 2015

Legacy Health has emerged as the big victor in the bid to purchase Silverton Hospital, outmaneuvering Providence Health & Services, which was considered the front runner until a few months ago. In the end, it boiled down to the rigidity of the Catholic Church, according to physicians and community members who spoke to The Lund Report in confidence.

Everything came to a halt after local physicians and community activists made it quite clear they strenuously objected to a Catholic presence in their hospital. Up until then, Silverton had been sharing its financial books and record-keeping with high-ranking Providence officials.

“Providence is overseen by a board of bishops,” said one resident, “and people have had serious concerns about the type of care that would be offered in Silverton. We’ve been a secular hospital for nearly 100 years and are concerned about reproductive rights, contraception, tubal ligation and physician counseling on death and dying issues – none of which is allowed in any of the Providence hospitals.”

Negotiations with Providence had been going on for over a year. Now a letter of intent between Legacy and Silverton is on the fast pace and should be signed within the next two months to 90 days, according to Gayle Goschie, who chairs Silverton’s board of directors. “We are excited about what this means for the future of Silverton Health. We understand how difficult this waiting time has been, and are extremely thankful to all of you for your support throughout this process.”

Legacy Health operates six hospitals in the Portland metropolitan area and Vancouver area. This is its first move into the hinterlands.

Recently, Legacy also filed a certificate of authority with the Oregon Insurance Division, allowing it to enter the insurance market. It runs a self-insurance plan for its 15,000 employees and dependents through a third-party administrator, UMR.

No other details about the pending transaction were available at press time. According to Rita Baiocco Kester, marketing and communications director:

“Both our Governing Board and Legacy leadership are declining interviews at this time as there isn’t more to say other than the board voted to begin discussions regarding the creation of a Letter of Intent with Legacy Health. There are still many details to work out and the Letter of Intent is just the first step of many prior to finalizing an agreement between both healthcare systems.”

Providence Has History with Silverton

In a statement released to The Lund Report last July, it seemed all but certain that Providence was in center field. At that time, Gary Walker, Providence spokesperson, said, “Last year

Silverton Health and Providence Health & Services signed a memorandum of understanding to begin discussions about working more closely together for better efficiencies and services. These discussions continue as we look at everything from new or expanded clinical and non-clinical services, to a management services agreement, to affiliation.

“Silverton Health and Providence Health & Services share similar values and complement one another’s culture of care. We are excited to explore these new opportunities to provide high-quality, coordinated and comprehensive health care services.”

When Silverton’s board started looking for affiliation partners, its CEO Rick Cagen told The Lund Report: “We looked at five large systems [Providence, Legacy, PeaceHealth, Salem Health, and OHSU] and developed about a dozen criteria including whether they were an integrated health system or not, their mission statement and core values, financial security, annual report, affiliations, geography in the community, history with Silverton Health, how they are managed and governed—a whole bunch of things. And the board decided on moving ahead with Providence.”

Cagen has a history with Providence, working there in leadership roles during the early 2000s, and has told his board he favors an affiliation. “I think that we need to do this and my counsel to the board has been to look at this. But the decision is far from being made. The board is still gathering information.”

According to the latest financial information shared with the Oregon Department of Justice, the hospital put in place a 90-day austerity program in January 2012, which included a hiring freeze and furloughs for management, as well as layoffs. That same year it suffered a $2.9 million net loss, compared to a $2.9 million profit the year before; its net patient revenue was $96.7 million in 2012, down 0.9 percent and its reported charity care charges were $10.1 million, down 14.1 percent, while its profit margin was negative 2.8 percent compared to positive 2.9 percent in 2011.

Cagen received total compensation of $380,416 in 2012: $304,000 in base pay, $60,250 in bonuses and incentive pay, $13,083 in nontaxable benefits and $3,083 in other compensation.

The hospital has 49 beds, with an occupancy rate of about 50 percent. Its health system includes about 200 physicians, roughly 40 percent of whom practice telemedicine and are not on-site. Of the remaining 110-120 active staff, about 80 are independent physicians and about 40 are directly employed by Silverton Health.

To survive, smaller hospitals across the country are affiliating with larger healthcare systems, which has been occurring long before healthcare reform. Recently, The Lund Report did an analysis of hospitals struggling to remain independent.

Diane can be reached at [email protected].