Oregon hospital systems reach definitive merger agreement

Nearly a year after they signed a letter of intent to merge, Oregon Health & Science University and Legacy Health have reached a definitive agreement to come together.

Oregon Health & Science University and Legacy Health have reached a definitive agreement to come together. Legacy operates several hospitals, including Good Samaritan Medical Center, and other healthcare sites in Oregon and Washington.

Officials say the two systems will join forces under the banner of OHSU Health.

When the deal is complete, OHSU Health will include 12 hospitals, over 100 healthcare locations and more than 30,000 employees, officials say. OHSU plans to invest more than $1 billion over the next 10 years for needed facility improvements and to expand services.

Danny Jacobs, president of Oregon Health & Science University, said the deal will offer expanded healthcare opportunities for patients. OHSU also touts the potential for greater access to clinical trials, with Legacy joining the academic health system.

“Right now, increased demand and capacity restraints are keeping patients around the region from accessing the services OHSU Health is uniquely capable of providing,” Jacobs said in a statement. “As a single, integrated system, we can better ensure patients receive the right level of care at the right facility without having to travel outside the region, whether it's complex cancer care on Marquam Hill or behavioral health treatment in Northeast Portland.”

The merged organization would have a combined revenue of more than $6 billion, according to reporting by The Oregonian.

Based in Portland, Legacy serves patients in Oregon and Washington state. Legacy has acknowledged that it has been struggling with financial losses and has had staffing shortages.

Legacy said its costs have been outpacing revenues since the COVID-19 pandemic. Legacy has been challenged with patients staying for longer periods even though they are ready to be discharged, since the organization hasn’t been able to find beds in post-acute facilities.

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Charles Wilhoite, chairman of Legacy Health’s board of directors, said the agreement represents “an important milestone toward creating a stronger health system better capable of delivering for our patients, our people and our communities.”

“Following many months of thoughtful collaboration between our organizations, we believe this is the right next step to create significant opportunities to improve the health of our region for many years to come,” Wilhoite said in a statement.

S&P Global Ratings lowered its rating on Legacy Health from “A+” to “A” in November 2023, but said the system's outlook remained stable. Legacy has seen weaker earnings and its cash on hand has dropped, and the system is challenged by stiff competition in the Portland healthcare market with four large hospital systems. But S&P also Legacy had a fairly low debt burden and said the potential merger with OHSU could ease the competition concerns.

Most of Oregon’s hospitals operated in the red in the first half of 2023, according to the Hospital Association of Oregon.

OHSU and Legacy Health said they will seek approval from Oregon’s Health Care Marketplace Oversight program in the near future. The state program reviews healthcare deals to ensure they won’t lead to a reduction in services or higher costs for consumers. The Oregon Health Authority said on its website it hasn’t received an application but will begin its review when the systems submit the paperwork.

While state regulators review the deal, officials said they would work with employees and plan for the integration of the systems.

Two other Oregon hospital systems recently said that they are exploring a merger. Samaritan Health Services and Santiam Hospital & Clinics said last month that they have signed a nonbinding letter of intent to pursue an affiliation. If the deal is finalized and approved by regulators, Santiam would become part of Samaritan Health Services.

More hospital mergers have been taking place over the past 18 months. In 2023, there were 65 announced hospital deals, up from 53 transactions in 2022, according to a report by Kaufman Hall, a healthcare consulting firm.

Among the trends driving deals, more academic systems are partnering with local hospital systems, Kaufman Hall said. Analysts also say hospitals and health systems with financial difficulties are increasingly looking for partners.