After two years of discussing, analyzing and planning the purchase of Legacy Health, you’d think executives at Oregon Health & Science University would be on the same page as their counterparts across the bargaining table.

And you’d be wrong.

OHSU and Legacy have been discussing a deal since December 2022, when OHSU leaders pitched a plan to buy Legacy and infuse it with cash it needed to pay for $25 million in deferred maintenance and fill other gaps created by a decline in patient volumes that worsened during the pandemic, according to documents filed with the state.

Legacy considered other suitors and then chose OHSU, which has promised to inject $1 billion of borrowed money into the combined hospital system. OHSU and Legacy inked a binding agreement in May and have been negotiating details ever since. The product of their work is a 60-page electronic document filed last week with the Oregon Health Authority’s Health Care Market Oversight program, which can nix the deal if it doesn’t promise to improve the lives of Oregonians.

Despite all that collaboration, it appears Legacy was surprised at the finish line by a key consideration: how Legacy’s non-union employees would be treated. Unionized workers at OHSU and Legacy got a comforting guarantee: none of them would lose their jobs in the first year after the merger closed, according to a copy of the agreement.

Non-union workers weren’t so lucky, and that irked Legacy chief executive George Brown, who sent an email to staff last Thursday, when OHSU and Legacy filed their plan with the state. It should have been IVs of Champagne all around. Instead, Legacy employees got an exasperated message from their boss.

“I would also like to address a labor agreement that OHSU included as part of the HCMO filing,” Brown wrote after a few paragraphs of praise for the deal. “This agreement stipulates that some union employees will receive more benefits than other employees, including 12 months of guaranteed employment following transaction close, while other Legacy employees will only be guaranteed 6 months.”

Legacy, Brown wrote, “was not consulted on this new agreement, which deviates from what was outlined in the definitive agreement relative to job protections for all employees.”

You might think, oof. But anyone following OHSU over the past two years knows its top executives, led by president Dr. Danny Jacobs, have botched seemingly simple management decisions, forcing them to backtrack time and again to keep disgruntled professors, doctors, nurses and so many other employees from open rebellion (see sidebar below).

OHSU’s latest blunder—surprising Legacy’s CEO with an unbalanced labor plan—arose from efforts to please its own unions. More than two-thirds of OHSU’s 21,300 employees are unionized, making them a powerful force at the university and in state government. HCMO takes comments from all comers as part of its evaluation of the Legacy deal, and union members are likely to have thoughts about their treatment, especially after this year, when OHSU eliminated more than 500 full-time positions.

The fact that Jacobs signed a labor agreement that surprised his counterpart at Legacy (and Jacobs’ signature is literally on it) came as little surprise to Dr. Jeffrey Jensen, a vice chair at OHSU’s medical school and a vociferous critic of Jacobs.

“This is classic for Danny Jacobs’ leadership style,” Jensen said in an interview. “He’s done nothing but create an environment of distrust and suspicion at OHSU. Danny’s policies are divisive and lead to mistrust.”

The guarantees OHSU made to unionized workers appear to have purchased a lot of good will from labor. Five of the largest unions on Pill Hill voiced support for the Legacy deal in a statement they put out on the day of the HCMO filing.

“From a political perspective, they have the unions on their side,” says an expert in Oregon health policy who declined to be named when talking about OHSU. “If the unions didn’t like this, they would be talking to the governor.”

OHSU spokeswoman Sara Hottman declined to comment on why Legacy may have learned about the labor agreement at the end of the filing process.

“OHSU has longstanding and productive relationships with labor organizations that represent health care workers across the state,” Hottman said in a statement to WW. “We value and appreciate the support these organizations provide their members in service to our patients and communities. Represented health care workers are part of the backbone of hospital care in Oregon.”

Unionized workers at Legacy would get the same post-merger protections as their counterparts at OHSU. But Legacy is mostly a non-union shop. Just 22% of Legacy’s 14,000 employees are unionized, despite a push over the past year that saw hundreds of doctors and nurses organize.

That means most of Legacy’s workers would be at risk of job loss just after the deal closes, and OHSU and Legacy have overlapping businesses that may catch the eye of cost-cutters aiming to return two money-losing health care systems to profitability, as the merger intends. They both have robust children’s hospitals, to name one.

Worse yet for all Legacy workers, they will become employees of the state, just like OHSU workers, but they aren’t guaranteed a popular perk: participation in Oregon’s Public Employee Retirement System. All workers at OHSU are eligible to choose between PERS and OHSU’s pension plan. About 4,000 employees (or 22% of the workforce) are enrolled in PERS, OHSU says, and 78% are in the pension plan.

“The OHSU Board may consider adding opportunities for employee participation” in PERS, OHSU said in the HCMO filing. The same is true for the OHSU pension plan. Legacy workers will stick with their own pension system until further notice, Hottman said.

The question, then, is why did the unions (the Oregon Nurses Association and the American Federation of State, County and Municipal Employees, among them) give such a full-throated endorsement to the deal? One union official, speaking anonymously, says any other suitor for Legacy would be worse. The unions would rather see Legacy go into the hands of a local, nonprofit, largely union shop instead of getting taken over by a cost-cutting out-of-state private equity firm.

“This is the best option,” the union official says.

And things can’t get much worse at Legacy, says Anne Tan Piazza, executive director of the Oregon Nurses Association. OHSU is almost certain to improve operations at Legacy, which closed the birthing center at its Mount Hood Medical Center in Gresham in March 2023 only to reopen it later that year after state regulators launched an investigation and said Legacy hadn’t gotten the necessary approvals.

“We’ve seen significant failure from Legacy,” Piazza says. “We have no faith in their management.”

The HCMO filing paints a similarly dark picture of Legacy Health, a storied institution that started as Good Samaritan Hospital in 1875. Between 2016 and 2023, total inpatient volumes at all of Portland’s 16 hospitals declined 5%. At Legacy, they fell 21%.

Nor can Legacy attract enough staff. About 90 surgical beds aren’t in use, and 11% of its operating room capacity is going unused because of the lack of personnel.

OHSU, meanwhile, is overcrowded, the filing says. Patients in need of acute care beds often get parked in hallways. The average wait in the emergency room for an inpatient bed is 19 hours, and 50 to 60 patients seek those beds each day.

And HCMO should act fast, OHSU and Legacy say, because Legacy is hemorrhaging money faster than a blood bank on the Fourth of July.

“While Legacy Health made significant strides over the past two years to address its operating deficits, those efforts have not been enough to achieve financial stability,” the filing says. “Delay would especially hurt the system’s ability to retain providers and staff and would further endanger patient access to care.”

The Oregon Legislature set up HCMO, a uniquely tough agency among the 50 states, in 2021 to evaluate claims like those in deals like these.

Now a leadership team with a spotty track record must face a regulator with a fresh mandate to protect Oregonians from harm, be it from ineptitude or otherwise.

Jacobs’ Ladder

OHSU struggles with basic management decisions.

OHSU president Dr. Danny Jacobs and his top brass have repeatedly kicked a hornet’s nest by muffing personnel decisions.

In September, Jacobs announced he would bestow $12.5 million in “President’s Recognition Awards” on 2,000 non-union workers. His senior staff got the largest bonuses, which were untethered to their performance. Unionized workers protested, and Jacobs rescinded awards to his topmost executives, saying the money had run out after disbursing a total of $15 million to eligible lower-level workers.

A month later, OHSU discontinued health care coverage for domestic partners and then restored them the same day after staff, including Dr. Brian Druker, developer of blockbuster cancer drug Gleevec, raised an alarm. And in May, OHSU dismissed its head of human resources, Qiana Williams, after she said in a meeting with OHSU’s newly formed Culture + Climate Advisory Group that the hospital had a “culture of complaint” and an investigator said her claims about a sensitive firing didn’t line up.