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Oregon Health & Science University is proceeding with its takeover of struggling Legacy Health, making a bet that getting bigger will help them cope with the rising costs of salaries and supplies in the post-pandemic health care industry.
“Building on long-standing collaborations in pediatrics, cancer and behavioral health, OHSU and Legacy Health have signed a binding, definitive agreement to unite as one health system under OHSU Health,” university president Danny Jacobs and chairman Wayne Monfries said in an email to staff obtained by WW.
In a subsequent press release, OHSU said it would spend $1 billion over 10 years to integrate and improve the merged entity. If the deal is approved by regulators, that money would come from selling bonds, the university added.
OHSU announced its intention to purchase Legacy Health in August. The deal faces regulatory scrutiny by the state and the Federal Trade Commission. If it goes through, the combination would create Portland’s biggest employer, with some 32,000 doctors, nurses and other staff, 12 hospitals, 100 other locations, and 3 million patient visits a year.
As part of the process, OHSU must pass muster with Oregon’s Health Care Marketplace Oversight program, a division of the Oregon Health Authority mandated by the state Legislature in 2022 to review “proposed business deals to make sure they will help—and not hurt—Oregon’s shared goals of health equity, lower consumer costs, increased access, and better care,” according to OHA’s website.
Experts say the Biden administration, which has fought large mergers across a number of industries, could be the biggest hurdle. Many studies, including one from the Rand Corporation in 2020, show that health care mergers increase costs for consumers, making them a target for antitrust regulators.
Both OHSU and Legacy have struggled in recent years, losing money as costs rise. In the nine months ending March 31, the university lost $44 million from operations on a $4.9 billion annual budget.
“Expenses have been driven higher by inflation and investments in wages, including new contracts with labor unions and Oregon’s new hospital staffing law,” OHSU said last month. “University leaders are conducting a comprehensive audit to assess all current expenses, projects and roles with a goal of balancing revenues and expenses by the end of OHSU’s fiscal year June 30.”
Concerned about how the OHSU purchase will affect them, doctors, nurses and other staff at Legacy have been joining unions at a rapid clip. Earlier this month, 171 Legacy doctors, physician assistants and nurse practitioners took steps to organize. The group submitted union authorization cards to the National Labor Relations Board, which will hold a hearing and set a date for an election.
The Oregon Nurses Association weighed in on OHSU’s purchase on Thursday.
“Hospital executives have promised to deliver better patient care, greater efficiency, and expanded services, but we know corporate mergers like this often result in higher costs and lower quality care,” ONA said in a statement. “To avoid those pitfalls, OHSU and Legacy cannot leave this process exclusively in the hands of C-suite executives. Hospital leaders must think differently and invite health advocates and experts in the field--including frontline nurses and healthcare professionals at Legacy and OHSU--to the table to ensure this unprecedented merger process is open, transparent, and delivers on its promises to Oregonians.”
As is common in hospital deals, OHSU said it would set up a Legacy community foundation with funds equal to Legacy Health’s cash less its debt and a “negotiated withhold” for “making grants in support of health, health care and health equity in our communities.”