FILE - Oregon Health & Science University. OHSU has dropped its bid to acquire Legacy Health.
Courtesy of Michael McDermott / OHSU
OHSU and Legacy Health have mutually agreed to walk away from a deal that would have combined the two health systems.
Last August, OHSU agreed to acquire Legacy’s eight hospitals and $3 billion in assets, with a promise to spend $1 billion on upgrades to Legacy’s facilities.
“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,” an OHSU spokesperson wrote in an email.
The statement does not detail why the acquisition was called off. Leaders at Legacy and OHSU declined a request for an interview about the decision.
Labor unions had backed the Legacy sale, which included an agreement by OHSU not to cut union positions for two years after the deal went through.
However, the proposed merger faced significant public opposition, primarily over concerns that the combined system would hold a monopoly over high-level specialty care in the Portland metro area.
OHSU leaders previously said that acquiring Legacy would help the organization solve a lack of capacity and space that has led to some of the longest wait times for specialty care in the country.
Last month, a community review board, charged with weighing whether the deal was in the public interest, concluded that it would likely lead to higher prices for care and recommended that state regulators block it. Public comment has also been heavily weighed against it.
Oregon’s Health Care Market Oversight program has the power to review any major health care transactions and can disapprove deals it determines jeopardize access to health care. Regulators were in the middle of a comprehensive review of the deal when OHSU and Legacy announced its demise.
Financial challenges
Hospitals across the state are facing significant financial headwinds. Both Legacy and OHSU have both reported significant operating losses in recent fiscal years and the looming possibility of cuts to Medicaid presents a further challenge. OHSU, the state’s only academic medical center, is also heavily reliant on federal funding that President Donald Trump is seeking to cut.
OHSU has struggled to contain its losses, despite cutting 500 positions last year. The organization is projecting a loss of $95 million in the current fiscal year. As a result, it is delaying some capitol investments, including a plan to expand care for high-risk pregnancies, according to financial documents presented to the board last month.
Meanwhile, Legacy recently reported that efforts at cost containment and cuts have led to improving performance. The health system lost $83 million in the 2024 fiscal year, compared to a $171 million loss the year prior.
At a public hearing in March, Legacy’s Chief Operating Officer Jonathan Avery said their financial situation had improved but was not yet stable.
The core financial problem, Avery said, is low reimbursement rates for patients on government-safety net insurance: Medicaid and Medicare. Twenty-seven percent of inpatient admissions at Legacy are paid for by Medicaid, more than any other health system in the Portland metro area.
Without the OHSU deal, Legacy officials said they would work to obtain rate increases from the state’s Medicaid program to keep pace with rising labor and supply costs.
“This is particularly critical for women’s services and Randall Children’s Hospital.” Anita Iyenger, Legacy’s chief strategy officer, said at the meeting. “Randall Children’s, as we understand it today, is reimbursed less than other hospitals nationally and regionally for the same services.”
The health system would also consider selling unused real estate and cutting services to improve its long term outlook.
In the long term, Legacy needs to raise $300 to $700 million to make capitol improvements, Iyengar said. In a few years, the board might once again look for a strategic partner.
