Merger saves Oregon hospital from likely closure

An Oregon hospital merger has been approved after officials pointed to the imminent collapse of a rural hospital if the transaction was not finalized.

Salem Health Hospitals & Clinics had initially moved to acquire Santiam Hospital & Clinics earlier this year. But with Santiam on the cusp of financial collapse, the two systems lodged an emergency appeal to state regulators in July to expedite the merger. Without swift approval, officials said Santiam faced the risk of shutting down.

Oregon Attorney General Dan Rayfield approved the merger late last week, saying that the review took place quickly but that the approval was given “on the merits.” It was the last regulatory step needed for the deal to close. The boards of both health systems had previously approved the merger.

“Given the circumstances, Oregon Department of Justice staff worked swiftly, but diligently, to examine this proposed merger,” Rayfield said.

Based in Stayton in Oregon’s Willamette Valley, Santiam operates a 40-bed hospital, six primary care clinics and seven specialty clinics. Salem is acquiring the system in a $61 million transaction.

Maggie Hudson, president and CEO of Santiam Hospital & Clinics, said at a public hearing on the deal Aug. 5 that the rural system’s financial losses had worsened significantly.

The biggest looming problem stems from the need to move to a new electronic health record system in 2027, which Santiam simply can’t afford on its own, Hudson said.

She also pointed to inadequate reimbursements from Medicare and Medicaid, and two-thirds of the system’s patients are covered by those programs. She said commercial insurers were also paying less.

In the second quarter, Santiam’s losses accelerated.

“This year's second second quarter sustained a substantial loss, and our financial projections show continued losses at a pace that is simply not sustainable,” Hudson said at the hearing. “We have worked hard to stabilize, but the reality is clear: without action, Santiam's financial position will continue to weaken.”

While Hudson said the rural hospital has cherished its independence, she said the merger with Salem is essential to the system’s survival.

“Santiam has proudly been fiercely independent. Yet we recognize our true responsibility,” Hudson said. “Our true mission is to be here to provide healthcare in the communities where people live.”

Cheryl Nester Wolfe, president and CEO of Salem Health Hospitals and Clinics, said at the Aug. 5 hearing that the merger was essential to keeping Santiam’s doors open.

“This partnership directly preserves local access to care, ensuring that Sanium Hospital, its network of clinics, and its skilled and compassionate staff and providers serve the people of the canyon for years to come,” Nester Wolfe said at the hearing. “Without this partnership, access doesn't just shrink; it disappears.”

She pointed to the Oregon Health Authority’s approval of the merger due to “Santiam's impending insolvency and the loss of access to care that would follow.”

If the merger hadn’t been approved, Salem would have seen no other alternative but to build additional capacity to treat patients traveling from the Santiam Canyon.

“Additional capacity is not a quick fix; it will take years, and during those years, the people of the canyon will be harmed,” Nester Wolfe said.

Salem operates its flagship hospital in Salem, Oregon’s capital city, and a 25-bed critical access hospital in Dallas, along with a medical group of primary and specialty care clinics. Nester Wolfe said at the hearing that if Santiam closed, Salem’s emergency room would likely see an additional 22,000 patients.

With the merger, Salem is investing $35 million in capital improvements in Santiam, and Salem will also assume $22 million of Santiam’s debt, Hudson said. Salem will also put Santiam on its electronic health record platform, Epic.

“Salem Health provides a viable pathway forward, bringing both the expertise and investment needed to ensure the continuity of care for our patients,” Hudson said at the hearing.

“This partnership does what Santiam cannot do alone. It brings sustainability to our future, protects local access to care, strengthens specialty and primary care services in the canyon, invests in our technology and infrastructure, and honors the talent and dedication of our staff,” she added.

Other Oregon hospitals are struggling to stay afloat. Becky Hultberg, president and CEO of the Hospital Association of Oregon, told Chief Healthcare Executive® in a 2025 interview that some of Oregon’s hospitals are facing serious trouble.

“What we're seeing now that is really concerning is that the performance of Oregon hospitals have diverged from the performance of hospitals nationally,” Hultberg said. “So something is going on here in Oregon that is unique, and that is pushing hospitals to the brink.”