Facing some opposition, Oregon hospital systems drop merger plans

Nearly two years after their intentions to come together to create Oregon’s largest hospital system, Oregon Health & Sciences University and Legacy Health have dropped their plans to merge.

OHSU and Legacy Health won't be merging after all. The two systems have decided they will remain independent.

The two organizations announced this week that they are going to remain separate entities. The move comes after OHSU and Legacy Health announced a definitive merger agreement last June, and they first disclosed plans to join forces in August 2023. The systems had planned to operate under the banner of “OHSU Health.”

In a joint statement, OHSU and Legacy Health said they both decided against coming together. Legacy also noted in a message to patients that “the environment in which we operate has changed significantly” since they announced plans to merge almost two years ago.

“The organizations have entered into a mutual agreement to terminate the transaction,” the health systems said in their statement. “After careful consideration of the evolving operating environment, the organizations have determined that the best way to meet the needs of the communities they serve is to move forward as individual organizations.”

OHSU and Legacy Health received support for the deal, including from the Oregon Nurses Association.

But a state-appointed review board voted unanimously last month against the planned merger of OHSU Health and Legacy Health.

Under state law, the Oregon Health Authority appoints a community board to weigh in on planned mergers, and the five-member board cited concerns about higher costs after the completion of the deal.

“Key concerns included increased commercial prices and health care costs that could be passed along directly to consumers, decreased choices for health care (from two systems to one), and workforce issues, including decreasing job choices for health care workers in Oregon,” the review board stated in a letter.

The board’s members said they were especially concerned about consumers facing higher prices with the closure of the deal, which would produce Oregon’s largest hospital system. The board said higher prices would reduce access to care and could damage health outcomes and health equity.

The Oregon Nurses Association expressed disappointment in the deal being dropped.

The group said “we believed it would lead to better working conditions for frontline caregivers and high standards for patient care.”“While we are disappointed with their decision to terminate the deal, this will not impact ONA's ongoing work to organize frontline caregivers and fight for fair contracts that prioritize workers and patients over profits,” the association said in the statement.

Legacy has said it was pursuing the merger in part due to its financial difficulties, but said in a message to patients that the system can survive on its own.

Legacy said it intends to move forward as an independent organization but would be willing to find a partner “that is aligned with Legacy’s not-for-profit and community-based mission.”

“Legacy faced significant financial challenges following the height of the COVID-19 pandemic – and we still face challenges today – but we have made progress to improve our financial position,” the system said in its message.

S&P Global Ratings reaffirmed Legacy Health with an “A” bond rating last month, citing the system’s “sound economic fundamentals, and a relatively stable business position.”

Legacy had a 0.6% operating margin in the 2024 fiscal year, which represents an improvement from 2023 (-6.6%), Fitch Ratings noted.

Based in Portland, OHSU is Oregon’s only academic medical center and enjoys a leading position in many services and strong fundraising, Fitch Ratings says. But Fitch also revised OHSU’s outlook to negative last October, citing mounting operational pressures.

The two health systems said they would concentrate on serving their communities.

“OHSU and Legacy will remain focused on each health system’s individual strategic objectives, with the goal of remaining well-positioned to continue supporting their people, patients and communities. OHSU and Legacy Health will continue to promote the health and well-being of people in Oregon, Southwest Washington and beyond,” the systems said in their joint statement.

So far this year, only a handful of hospital mergers and acquisitions have emerged. Only five hospital mergers were announced in the first quarter, compared to 20 in the first three months of 2024, according to Kaufman Hall.

With President Trump’s administration looking to cut federal spending and volatility in the markets, hospital analysts say the uncertainty could lead to fewer hospital mergers and acquisitions in the coming months. Hospital executives and boards may be more cautious about pursuing deals for the time being, analysts say.