A 2020 photo of Legacy Good Samaritan Medical Center. The merger deal between Legacy/OHSU is under review by regulators at the Oregon Health Authority.
Courtesy of Legacy Health
Top executives from OHSU and Legacy Health gave testimony under oath Wednesday to an advisory board charged with reviewing whether OHSU buying its chief competitor is in the interest of Oregonians.
If the deal moves forward, the state’s only academic medical center would acquire Legacy’s eight hospitals, $3 billion in assets and $1.4 billion in debt. OHSU also would invest an additional $1 billion in upgrades to Legacy’s facilities.
The deal is under review by regulators at the Oregon Health Authority. The agency’s Healthcare Market Oversight program, HCMO for short, has until June to complete a review of the proposed deal and approve it, impose conditions or block the transaction.
The public hearing was held by a community review board, a group of six volunteers that is helping HCMO evaluate the deal. HCMO is also soliciting public comments online and by email.
In the first hour of the meeting, executives from the two health systems took questions from the review board.
OHSU’s leadership skirted the central question policy experts and members of the public have repeatedly raised about the deal: Will a supersized OHSU with a larger market share in the Portland area raise its prices, increasing costs for insurers and driving up premiums and copays for the public?
Oregonians already pay unusually high out-of-pocket costs for health care, according to the Oregon Health Authority.
Research, while mixed, has suggested that hospital system consolidation can drive up costs without improving quality or access to care.
OHSU Chief Medical Officer Dr. Renee Edwards told the review board that the merger will make it easier to get people into specialty care and reduce wait times for appointments. Those waits are currently among the longest of anywhere in the country, according to Edwards.
Edwards said the proposed deal has different implications from consolidation in the for-profit health care world, because of OHSU’s unique status as a quasi-public institution.
“OHSU is a statutorily required to be a transparent and accountable health care system with a mission that mandates it to improve the health and well-being of the people of Oregon,” she said. “This integration will create an even larger publicly accountable state health care system that will improve health care for Oregon.”
OHSU has proposed using 25 metrics to publicly track its performance after the acquisition, Edwards said.
Those metrics, included in documents OHSU has submitted to regulators, do not appear to hold OHSU to any additional guardrails around patient costs.
Only one of the metrics is related to cost.
That goal, “sustainable average cost growth,” is an existing measurement established by the state Legislature and currently regulated by the Oregon Health Authority. The state’s cost growth target for health care has been 3.4% a year. In documents filed in support of the Legacy deal, OHSU reported that its annual increase in patient care payment rates averaged about 3.3% prior to the pandemic, just below the state’s target.
In its filing, OHSU reported to regulators that it expects its future costs to increase by “roughly 4.6% on average,” exceeding the state’s target due to rising labor costs and other inflationary pressures. The health system noted that acquiring Legacy will not change that projected cost growth increase.
OHSU didn’t publicly provide the basis for its calculations. It has heavily redacted most detailed financial information, including future cost projections for the combined health system, from the public version of its HCMO filings.
OHSU has redacted many financial details from public documents describing its proposed purchase of Legacy Health. The redactions include detailed projections of how costs will change following the transaction.
Amelia Templeton / OPB
During the public hearing, Legacy officials testified that their financial performance has improved, with projected operating losses of $83 million in the current fiscal year, compared to a $171 million loss in 2023. The health system was recently rated financially stable by Moodys.
If the OHSU deal is nixed by state regulators, Legacy would make deeper cuts to services in the short term and look for another buyer or partner in the long term, executives said.
Legacy would also need to immediately seek rate increases from Oregon’s Medicaid insurers.
A key driver of Legacy’s financial troubles, executives said, is that they are the largest safety net hospital system in the Portland area. Legacy cares for more inpatients on Medicaid than any other health system, amounting to 27% of Legacy’s inpatients.
Following the hospital executives’ testimony, there was just a half hour remaining for public testimony.
Steve Stadum, the current interim president of OHSU, signed up and spoke for two minutes during the public comment period, further shortening the time available for members of the public to speak.
Animal rights activists signed up for most of the remaining testimony time. They urged the advisory group to require OHSU to close the Oregon National Primate Research Center, a Hillsboro facility that houses thousands of monkeys and baboons used in scientific research, as a condition of approving the Legacy acquisition.
In the end, just two representatives of the public addressed the broader implications of the deal
Anne Tan Piazza, executive director of the Oregon Nurses Association, urged the board to support the acquisition. Legacy needs a bailout, Piazza said. The only other likely options,- a for-profit buyer or private equity investor – would be more disruptive, she said.
Charlie Fischer, with the nonprofit public interest group OSPIRG, urged more skepticism of the deal, which he said would reduce competition and patient choice.
“Lack of market competition raises prices. There’s a lot of evidence to support that.”
Correction: A previous version of this story stated the wrong date for the OHSU-Legacy merger hearing. OPB regrets the error.
